100 bursts

101 ways to skin a cat

nice thread

Lars---I 100% agree with you.

I am in the philly area. In 89 i bought a townhouse. In 91 sold it at a small loss. In 91 bought a big house. I sold it in 98 (after divorce)10% higher than I purchased it but must have put 100k into it--so I lost.

But both my x and I bought townhouses at the end of 98 beginning of 99 and were both up 2.5 times what we paid.

The other side of this equation was the stockmarket made a fortune from 89-98 and this is when real estate was at a standstill. Real Estate jumped from 98 till today and the stockmarket has taken a bath..Now its time for the reverse to happen...

I am back in the market now and I expect it to be big for the next several years. I don't know if the nasdaq will hit 5000 again by 2010 but I'd bet it will closer to 5000 then 2000. Its time to buy good profitable tech stocks again. Be smart and don't allow any losses over 20% and sell them when u have too and do not ever fall in love with any 1 company. I use a service call Cabot since the late 80's and they made me a fortune until the market dived and I started thinking that I new everything and started listening to myself. Pick a broker that u trust or a stock picking service that u trust and just listen to them....

Like any market, the bubble popping, if indeed it does, will take out some of the excess in the housing market. People who were truly stupid (bidding against each other above the asking price, buying houses unseen, etc.) could get hurt.

But most single family real estate sold in the U.S is owner occupied. I signed a contract to for a house in Flordia, and am not worried. I negotiated the hell out of and did the research. What is driving the growth in that area is an influx of baby-boomers and retirees. They are running out of land, and as new development becomes impossible, the existing real estate goes up. I don't think its possible to come up with a forecast where Florida stops growing. Its just not possible to manufacture area to live with Florida's most valuable commodity - sunshine.

The reason real estate never shaves off 50 or 60% as stock markets occasionally do is simple - you don't have to sell during the downterm, if you occupy the house and aren't in over your head. I've waited out at least two real estate downturns in my life and came out fine, so I am not worried about this one either.

Japan is a totally different case. Totally fucked up banking system and corruption killed their econcomy off.

we just switched out 401 k over to a real estate fund and that bitch is making mad money the past three weeks.


My friend who bought a house on the beach in florida a few years ago for 110k, it's now worth 215K..

I wonder what my house is at at the moment.

I made millions and will continue to. There will not be a crash but taking insanly huge profits may stop.. fine with me.

Your home is only an investment if you sell it. Always remember that.

i THINK IT'S ALMOST OVER......

Of course you couldn't care less, you bank $20 million per picture you're in. :Oh crap

Bubbles eventually burst just like chewing gum. But the good thing there's always new packs of gum in the economic pipeline for us to all blow up again.

:1orglaugh

http://www.antiquegumball.com/classi...lassic_bgm.jpg

Yup when all the News is screaming about how your mising the boat the end is near..


when the stock market was rocking it was on the front page of newspapers many times right before th end.. how often do you see the stock market on the front page of the newspaper.. when ya go to a party of average joes.. all you hear about is how they are getting rich or want to get in.... and how they are suddenly experts.. I have not heard talk of the latest IPO or the next hot .com in along time.. but I do hear real estate real estate.. this means most people are already in or just about to take the final plunge...


It will be interesting to see hwo things unfold in the next year.

:) nice good tips.. In santa cruz I have always ahd to buy stuff ata rageing 12-15 times monthly rent.. today you can not find anything with better than 10.. meaning nothing is worth buying here.. And I dont want to move and I like to be a little hands on on the properties.. Thats prolly cost me some money over the years.

hahaha nice one. Are you a current buyer of real estate ? Last 6 months ?

yes, i made my first big money in SF bay area real estate in the late 70's and 80's. i understand what you are talking about.

the problem with the bay area (and many other highly gentrified areas in the usa) is that rental values do not support mortgages and other landlord costs so the carrying costs are too high, and the leverage is not good.

add to that a semi-socialist mindset on the part of the general electorate (rent control issues fucked up berkeley for me big-time) and you will see a MUCH greater ROI is areas like kansas, indiana, SD, MN, MI, WI, etc etc.

good luck to you, SC is a great town, but i will never pay a cool million to live next to a bunch of jigs or pot smoking renters. that's the prob with the bay area---it's a quality of life issue.

and the Southwest - New Mexico is hot right now

yes, very true.

The stock market blows for most

Quality of life is why people move there. It's just that your definition of "quality" and theirs must be different. :)

True. But their main worry won't be so much the mortgage payments they are paying but the erosion of the value of their property. If there are fewer buyers coming in later to push the price of existing inventories up, the prices will begin to stagnate or even fall. This usually puts the fear into some real estate holders because they become UPSIDE DOWN on their loans -- (ie., payments are worth more than the value of the property). Hence, they sell--thereby triggering another round of price erosion.

These will be the first group of people that suffer. Unfortunately, even fixed rate guys will suffer as well once base property value begins eroding due to inflation-based rate changes.

Right now I have over 550k in equity in my primary residence which is right on the coast over looking the bay and ocean. I have a fixed interest rate on my mortgage of which is under 2k per month or roughly 8% of my gross monthly salary. If this so called bubble occurs, I could care less because I have no intentions of selling in the next 10 years. Why would I? I consider San Diego to be in the top 10 places to live relative to climate.

Even if prices fall, they won't fall more than 10%-12% and especially not on the coast and if they did, I still have plenty of leverage against my home if I needed it.

As for my other rental properties here all within 4 miles of my residence, the rents I collect are enough to cover my mortgage.

As for this new place I picked up down the street, I have an equity line of credit against my home available to me anytime. I pump 120k into this dump and now my investment is still well below the comps in this area even if the market was to drop here. I could turn around and sell it below the comps and still put an easy 150k-200k in my pocket before capital gains.

Why would I sell it though? I won't. I'll collect 85% of my mortgage thru rents. Sounds like I lost right? Not at all. Remember my personal residence mortgage accounts for only 8% of my gross monthly income and My rents received covers my other mortgages.

There is this thing the lender always factors in when deciding what loan amount you can qualify for. It is called Debt-to-Income Ratios. This ratio usually can't exceed 32% of the front end ratio and 38% on the back end ratio. Simply put. Your payment on a home loan can't exceed 32% of your gross monthly salary and your debts such as auto loans, Credit cards etc...can't exceed 38% of your gross monthly income.

At 8%, I'm well under the standard of 32% therefore meaning I have room to play if I am upside down on a property through rents received. The extra 20-24% of play (disposable income) I have is then used to pay off that equity line of credit I used to improve this new property. Once it is paid off in a short time usually before or within 2 months of or after completion of the improvements, I just have to repeat the cycle.

The problem with most is they exceed their means and leverage everything they have and when a small hicup or crisis occurs, they are screwed.

The key to real estate is to buy smart and know what to buy. The time to buy is anytime. Those who are waiting for the right time are the same people who have always been behind the power curve their entire life.

Great post

Hey smart guy

There was no immigration in the 20's 30's and first half of the 40's because of a moratorium due to the excessive Ellis Island immigration at the turn of the century

You're the one that needs an education

Don't confuse illegal immigration with LEGAL immigration... They produce completely different results

Lars,

I totally agree with you and I've been preaching this for almost a year now. Georgia property has increased less than most states in the nation. I feel ok about my house because I bought the cheapest one in the very best neighborhood. Also, I don't have a mortgage at all. ;) That said, I'd be nervous as hell buying a home in New York, Florida, California, Arizona, Hawaii or Nevada right now. If you are buying a home in one of those states and are doing an interest only mortgage, you can't say we didn't tell you so.

Well said Rich.

I was looking at Georgia and found CHEAP land BUT if I were a renter ( which I will NOT do ) I would never buy in Georgia. Far too many depressed income areas.

Renting is a nightmare nowadays UNLESS you have specified clientele ( aka college students/alum/faculty/employees ).

Reason being is people get irresponsible, stupid and you end up with no life of your own.

I buy outright. No mortgages etc. I buy the land, build on the land, own my shit and fuck mankind.

If I buy a property it's because I'm going to hook that fucker up so cool I will have upscale buyers lined up as far back to the borders of the Klingon Empire.

Gee, I hope you don't have any black people as tenants or employees now or for the rest of history cause if they saw this post and wanted to take you to court for discrimination purposes you'ld have some 'splainin' to do.

Listen to Highroller. That's the voice of practical, professional wisdom speaking.

I agree yet see a wee bit more of a not-so-happy scenario. You have to add into the equation disasters of man made and nature. New presidential election coming up in 3 years and the heat is going to be on. The scariest factor is going to be seniors who are debt ridden and baby boomers retiring or trying to retire and are debt ridden. Their kids getting out of college are debt ridden before they enter the work world.

That's the scenario of the near future boys and girls. The only way to resolve it is families teaming up again.

ABC News is just now covering what I'm talking about! Global diseases ( watch that bird flu thing ) and senior citizen's pensions. Guaranteed retirement plans in W. Virginia $5 Billion in debt! One thing we ain't running out of is old folks. 40+ states are in a quarter trillion $ hole for retirement. Who's gonna pick up the slack for these retirees?

Mark my words, listen to what Highroller just laid out too.

For some of us who saw the light and are making money via the web there's a glimmer of hope as we can network and make great dough and stash it away. Some of us are webmasters, some artists, some marketers etc. Making crazy money constantly. WE will not fall off but I guarantee you in a year or two people will be looking up to us to rescue their asses. Especially us who have low overheads and high ROIs. If shit hit the fan I always know I have numerous other pals in pornmeistering I can work with. Likewise to them.

We can't trust the governments to rescue our asses, we have to do it ourselves.

Unless there's a major breakthrough in energy or medicine we're gonna be doomed.

That's the big scary scenario for the powers that be, energy revolution and it's coming fast!

According to the California Association of Realtors, the percentage of households in California able to afford a median-priced home stood at 18 percent in March. 18%! I figure if the market can't support the prices, they have to come down. Right? RIGHT?!?!

*prays for act of god - earthquake, lottery, whatever*

Source: http://www.builderonline.com/industr...ticleID=127167

The percentages are THAT high??? I'm not being sarcastic either.

In santa cruz only 15% can afford a home.

Gezzze every fuckign magazine and newspaper is touting the fucking housing market and how its the next greta way to get rich quick... the END IS NEAR ~!

Hmmm, even Bob Toll says there are 4 years left in the current bubble before prices begin to subside. Granted he may be biased in that he runs one of the biggest residential building corps in the country but he has typically been on point when it comes to predicting the market.

By the way if anyone is interested in getting big into real estate investing

here are most of the largest message boards:


Creonline.com
RealEstateInvesting.com
TheCreativeInvestor.com
Naked-Investor.com
REIclub.com
RealEstateTalks.com
Forum.richdad.com/forums
Dealmakerscafe.com


And you can probably look on reiclub.com to find
local real estate clubs in your area with other investors.


If you start to get into it, you will get addicted, I promise
once you learn all the big deals people are making, how
much of an increase foreclosures have and are
the great tax laws in favor of real estate owners.

you can contact me at ron at onewebsite.com

I bookmarked this gem. Will retrieve it in 3 years and check housing pricing at that point :)

Always has been a solid investment

Wait till interest rates rise and there's a mad stampede of bankrupt ppl fleeing the city.

You're not the only one.

Xenophobia was basically what i was getting at which held no water then and holds no water now.

i shouldve been more specific. sorry about that.

best post for anyone wanting to get info on what it takes to get started in real estate.

tons of info.


high roller- thanks for the email but i forgot what the hell i was going to contact you about :1orglaugh it was real estate based but in what regard arghhhh

I'll bump it.

One of my bookmarks.

http://patrick.net/housing/crash.html#links

Now, has there have been hundreds of such articles on a "bubble" and it turned out there wasn't one? My experience has been that when the talk turns to "bubble" there is one - and it does burst.

Tonight ABC Evening News ran a segment on 'Interest Only' home loans. Basically for a few years all you do is pay the interest on a mortgage for a few years and then you start paying your mortgage and interest. Their profile showed a scenario where the home buyer pays $1,200 per month instead of $1,600 and then when the honeymoon is over that jumps to $1,800 for a $300k house.

$1,800 for a $300k house isn't bad. That's lunch money. Taxes and water bills etc. after blows that up a might but still that's the kind of money you can make at McDonalds or something. If you live near a college and rent you're in the clear.

What the problem is is that 65% of California home owners are 'interest only' and they all assume their homes are going to grow BUT.....

Can you see the possible disastrous scenario?

they also forgot to mention that usually the rates on interest-only loans can change as often as every month, yr to yr, or may be fixed for a 10-year period.

this is whats going on now and in a few yrs your going to see people losing their homes.

Ohh very interesting thanks so much ! :thumbsup

an interest rate hike will spark this - then i'll buy property like mad

here is another good article that i just found


http://biz.yahoo.com/bizwk/050601/nf...480_db042.html



MASHED IN MASSACHUSETTS. That's why economists -- even Federal Reserve Chairman Alan Greenspan -- are worrying lately about "froth" in the housing market. It's not that they expect home prices to plummet across the country or mass foreclosures to ruin banks (although, if things were to get really bad, that's a possibility in some regions). Rather, they see that an almost inevitable retrenchment in home price appreciation will act like rain on the economy's real estate-fueled parade.

"Housing has been a huge support for the economy ever since the 2001 recession," says Dean Baker, co-director of the Center for Economic & Policy Research, in Washington, D.C. "If the housing bubble bursts, it basically flips in reverse." If people lose jobs and can't pull cash out of their homes by refinancing, they will also feel the need to save more. While increased savings is a good thing over the long run, it can slow the economy in the short run.

That's what happened in Massachusetts in the early 1990s, when the economy slowed and tech companies that had spurred regional economic growth retrenched. Peter Cohan, a management consultant and author in Marlborough, Mass., remembers his angst in 1992 when, expecting his second child and wanting a larger home, he put his house on the market, only to find it was worth 10% less than he paid for it four years earlier. He and his wife decided to stay put, adding onto the house instead. The value of the house didn't return to the 1986 level until 1995, he says.

If you can't invest it in GFY, venture it in real estate men!

:-)

Lars, I know you'll like this one. Looks like there will be a good hedge coming.

---

Robert Shiller knows bubbles, and he might have just the solution.

The Yale University finance professor ? and author of "Irrational Exuberance," a book that deftly called the dot-com bubble ? is a lead figure at Macro Securities Research. The New York research group has developed financial instruments ? called "MACROs" ? that will be tied to a housing index that tracks property values in certain cities. By purchasing Up MACROs or Down MACROs, investors would be able to place bets on whether a property market is going to keep rising, or whether it's going to fizzle.

In effect, speculators could play the bubble: They could short the City of Angels and go long on the Big Apple, or vice versa. Homeowners in bubbly markets could hedge against a pop. They could stand to gain if the value of their homes go down. If property values keep rising, of course, the homeowners lose on their MACRO investments -- but at least their homes would be worth more.

These days Mr. Shiller is convinced the U.S. housing market is rife with bubble-like behavior. Home-buyer psychology today "fits in with the model of a bubble," he says. "It's a wishful-thinking atmosphere that develops the idea that everything is going to be all right, and there's the sense that you have to get in at any cost because prices are going to keep going up."

Robert Hartwig, chief economist at the Insurance Information Institute, says the MACRO securities may be the best -- and only -- way homeowners can protect the value of their homes. Speculators, including hedge funds, could help add liquidity to the market, he says.


MACRO Securities has filed plans for the new securities with the Securities and Exchange Commission. The company intends to roll out its MACRO securities later this year and, in its filing with the SEC, said it hopes to list the securities on the American Stock Exchange. It also has a deal to develop housing-price-indexed futures with the Chicago Mercantile Exchange.

I have some properties in Vegas if anyone is looking.
Real Estate is awesome if you can afford them if the market crashes.
If you can't afford to carry them on market crash seasons, then your Fucked.

But, if you are interested in a house in Vegas, I have a few left.

We can work out some kind of deal. I think one has a pool.