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Thread: you have to wonder how many more of these guys are out there !

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    Banned Melonie's Avatar
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    Default you have to wonder how many more of these guys are out there !

    (snip)"Yes, I did buy some of the houses at a discount enough to make a profit. However, I juiced up all of the equity on most of them right away by getting cash at close. So every time I bought one there was a “CHA-CHING” sound and my bank account got fatter. This gave me a false sense of profit and kept me going.

    Well, everything went wrong. The rehabs were way behind schedule and grossly over budget. I was too busy flying around the country visiting each job. No time to manage details. I couldn’t sell the houses fast enough. I did sell one in Albuquerque on a round-robin auction. But I got stuck with the rest.

    The holding costs on 6 houses is what started killing me. Paying about 15,000 per month in mortgage payments and utilities can really drain ones’ reserves. All the cash I pulled out at close is now gone. And the houses are not selling fast enough to keep me afloat.

    As the last resort I went for one more cash-at-close deal. It’s another builder lease-back house in New Mexico from the same builder. The builder and I have become friends and we structured a pretty good deal. I told him I will close with no problems.

    I went to get financing figuring I will get it just like before. However, this time my credit score took a dive because of all the maxed-out credit cards. I still pressed on and tried different loan programs and loan brokers. Finally I find the right program and was set to close. A few days before the close the bank denies the loan. Why?

    They Googled me! Its ironic/funny/embarrassing. They found one of my early blogs where I was talking about flipping houses. It was pretty hard to find too. It was supposed to be hidden from the search engines.

    Flipping (or quick turn investing) is not bad or illegal. What’s bad is applying for an owner-occupant loan but having no intention to live in the house. I have been doing this for most of the deals in order to get better rates and/or 100% financing. It’s actually pretty common and many mortgage brokers will encourage you to do it (along with stated income loans). But it’s plain lying! So the bank denied the loan.

    That was the last straw.

    Since that deal fell through I started falling behind on payments on all the mortgages. I ran out of money to finish the rehabs. No money to even buy groceries.

    I may have to get back to a full-time job just so I can pay basic bills."(snip)

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    God/dess Deogol's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    Ouch!

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    God/dess Deogol's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    That is an interesting blog - thanks for turning me on to that.

    There was an interesting comment:

    This doubly worries me as we discussed earlier how lots of seemingly ordinary commercial paper is merely laundered MBSecs. A careful analysis of what assets or supports are actually behind the loan market would probably dictate caution and lightening up on anything with exposure.

    I wonder how far into the stock markets, etc. this cancer is going to reach into. I mean the housing builders and lenders are easy picks. The stores dependent on housing are in the yellow lights but I wonder about the others that have bought housing loans and are plain fucked.

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    Veteran Member StuartL's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    I don't mean to be unsympathertic, but it is hard to be anything but when you read stories like that. What an idiot! I quit my job and went into a profession full time that I know very little about and have no experience of...

    Re your comment, Deogol. The structuring of mortgage debt is becoming a biggie in all sorts of places. Since it is 'low risk' you can bet that pension funds are up to their eyes in it. It is becoming fashionable in the UK, but the US has a big head start on us. I'd guess there will be a lot of pain to come for many funds / index / shareholders and property investors.

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    Featured Member lunchbox's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    About 10% of the homes around me are for sale/lease. Each one has reduced the price. It is a very popular area for flipping, and even has a handful of tear downs.

  6. #6
    Sitri
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    Default Re: you have to wonder how many more of these guys are out there !

    It's like watching a bunch of rockets on the 4th of July. They launch with a loud roar and sparks and then they burn out and crash.

    No sympathy for the get rich player here.

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    Banned Melonie's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    I wonder how far into the stock markets, etc. this cancer is going to reach into. I mean the housing builders and lenders are easy picks. The stores dependent on housing are in the yellow lights but I wonder about the others that have bought housing loans and are plain fucked.
    Well there are basically two categories of companies besides the homebuilders and mortgage lenders that are likely to see some fallout. The first is producers of basic items that wind up getting purchased / replaced when a house is built / remodeled. These are the durable goods companies that make stoves, refrigerators, freezers, dishwashers, water heaters, air conditioners, sinks & tubs etc. (and of course the retailers that specialize in selling these sort of products).

    The second is the basic commodity industries that provide raw material to both the homebuilders and to the durable goods producers. This means concrete, lumber etc. used by the homebuilders and more importantly copper, aluminum, vinyl/PVC etc. which are used by both the homebuilders and the durable goods producers.

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    Banned Katrine's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    I want to show this article to my "real-estate investor future millionaires" client. Fortunately, I am seeing less and less stars in eyes now that the mass media is finally reporting the decline. I saw it ages ago. Real estate boomed more than any other asset class ins 2003 and 2004, over 36% average ROI in '04. But all good things must come to an end. In 1990, real estate returned an average of -23%.

    Btw, these stats are from my memory of charts I use at work. I could be off by a percentage point or 3, but not much.

    Hate to say I told ya so!

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    Banned Melonie's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    what really disturbs me about this is that one single high-risk 'flipper' is going to be responsible for SIX mortgage defaults, SIX additional houses dumped on the market at auction for whatever price they will bring etc. Thus it doesn't take too many guys like this one to exert a whole lot of negative effect on mortgage lenders and real estate market prices !

    Keep in mind that the market price of properties is based on the actual price that the most recent sales took place at. At the moment, market prices are being 'held up' by the refusal of many would-be sellers to accept purchase offers that are substantially lower than the price they are 'dreaming' that their house is still worth - thus sales volume of houses is way down but market price appraisals are still fairly high. But mortgage holders are not going to share this mindset, and are going to auction properties they are stuck with at whatever price the market will bear. Every auction will provide actual reduced sale prices which appraisers must then use to recalculate the value of surrounding houses. Those reduced appraisals will then affect homeowners attempting to sell or re-fi, and will affect future purchase offers (i.e. causing them to be further reduced). This could lead to a snowball effect.

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    Banned Melonie's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    damn ... I should have listened to my own advice ! ... Eagle Materials is a big player in cement and 'sheet rock', and took a big percentage move today.

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    Veteran Member azcustomer's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    You knew there was a housing bubble when the hairdresser at Supercuts was telling me about "this great way she's making money flipping houses."

    Unfortunately, there's A LOT of these people out there. Here in AZ, where communities sprout up like weeds, there's more than a few newer communities full of houses without cars in the driveway, yards full of weeds with two signs up: "For lease" and "For sale".

    Now the trollers are setting up 1-800 numbers to help you manage your auction to avoid BK.

    Ahhh yes, it's going to finally be a normal market again after this correction.


    "Life is not about the number of breaths you take.
    It's about those moments which leave you breathless."

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    Default Re: you have to wonder how many more of these guys are out there !

    Quote Originally Posted by Melonie
    damn ... I should have listened to my own advice ! ... Eagle Materials is a big player in cement and 'sheet rock', and took a big percentage move today.

    Well, look at it this way - I had one stock that I bought at 43. Then one day I checked things out and it was worth 4 bucks. I was like "Damn! Schwab's computers have a data error! Damn! Yahoo does to!" I finally had to admit it dropped 40 buckaroos. Luckily I didn't have to many rounds of it but still it was a multi-thousand dollar loss.

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    Banned Melonie's Avatar
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    Default Re: you have to wonder how many more of these guys are out there !

    ^^^ well, I had already commented that building material companies were likely to get caught in the real estate downdraft. If I had listened to my own comments and bought some put options on Eagle Materials I could have doubled my investment in two days on the stocks abrupt 10% decline in share price !!!!! However, I'm sure that there are many other building materials companies who haven't reported quarterly reduced earnings / future profit warnings yet who are also ripe for some put option action !

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