Sure, let's just not see real estate as an investment that you can live on in your later years through a reverse mortgage.
Let's forget about the fact that real estate forces people into saving.
Let's ignore all the information out there that suggests people really are happier mowing lawns because the lawns are their own.
Let's forget all about the American Dream.
Let's turn a blind eye to the reality that most millionaires either made their millions in real estate or hold their millions in real estate.
Let's not hedge against inflation.
Let's feel uneasy about the safety of our own real estate investments only because 2 - 3 people out of 100 have had their homes forclosed.
Let's just let fear run the real estate market, shall we?
Suits me. If you want to rent my houses for 30 years, I might just let you!
Sunday, July 8, 2007
Do NOT Buy That Home!
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46 comments:
Can't figure out if you are serious or a failed attempt at humor.....either way, your delivery is quite offensive and condescending.
Yeah, people who save their money are idiots! How dare they have money in case of an emergency, we need those granite countertops right now, god damnit.
You all have to remember that Indians are very superficial people, adhering strictly to appearance and very proud of their backward Caste system. I expect nothing more from this Indian.
I am intrigued by
"Let's forget about the fact that real estate forces people into saving."
If a person has an Interest-only or Negative Amortization loan, how does this force them to save?
When did the begin to allow untouchables to post on the internet?
the dude,
It's called S-A-R-C-A-S-M. Look it up!
agent #777,
Actually, if someone has an Interest-Only on Neg Am loan, they'd be helped even more by saving. The incentive (that I hope most people take) is that they can make at least one extra mortgage payment a year that goes directly to the principal.
If not, most people make their mortgage payments before they spend the money elsewhere. This makes them live in their savings account. A home is an appreciating asset (save a few market downturns that should be ridden out).
Way better than frittering money away on cars and big-screen TVs!
I'd gladly rent one of your houses, because right now I can rent it for less than half the cost of owning it. That's very nice of you to subsidize my rent.
... Let's attack where someone was born now. It really helps further the dialogue about real estate. Very intelligent.
tesla,
You're my ideal tenant. Let's talk.
Too bad all of you greedy RE agents and loan agents who are sales people working of a percentage commission of the sales price did everything in your power to drive prices higher and higher to the point where most people can't afford to buy a home and now the market needs to crash to make the needed adjustment. ALL OF YOU RE AGENTS ARE BLOOD SUCKING VERMIN.
Laughable. Can you quickly calculate how can one save more by buying a house for 200*rent?
Don't worry, that wouldn't prevent sheep who believe in drivel you just wrote from buying a house.
Well actually, real estate agents don't do much to send prices high or low, anonymous. It's Economics 101. Price is where supply meets demand.
Unfortunately, real estate is not a perfect market and greed and fear drive it just as equally.
I'm not saying all agents and lenders are honest, but enough of us are to refute your comment.
"Sure, let's just not see real estate as an investment that you can live on in your later years through a reverse mortgage."
Would this possibly leave your heirs with debt instead of an asset to distribute when you die? I don't know, just curious.
"Let's forget about the fact that real estate forces people into saving."
Debt isn't savings. HELOC isn't a savings account. Appreciation (normally slightly below inflation) of a home isn't something you should count on. Let's talk about maintenance, taxes, insurance. There's many costs involved with owning.
"Let's ignore all the information out there that suggests people really are happier mowing lawns because the lawns are their own."
LOL now that's funny. I hope that wasn't meant to be a serious comment.
"Let's forget all about the American Dream."
The American dream isn't about owning crap. It's about freedom. That's just sad, this is why some cultures hate us with a passion.
"Let's turn a blind eye to the reality that most millionaires either made their millions in real estate or hold their millions in real estate."
I'm sure they didn't make their millions buying at the peak of a speculative bubble.
"Let's not hedge against inflation."
How is burning cash at 6-7% or more on borrowed money that was used to buy an overpriced "asset" a hedge against inflation? You'd need wild run-away inflation just to sort of break even.
"Let's feel uneasy about the safety of our own real estate investments only because 2 - 3 people out of 100 have had their homes forclosed."
That's the tip of the iceberg my friend. Best case scenario for you is prices don't go anywhere, and you lose any "gains" to inflation.
"Let's just let fear run the real estate market, shall we?"
We just did, "buy now or you'll be priced out forever" Now the new fear is "Buy now and be in debt forever" What's the difference? Direction.
I think you should adjust your stance a bit. There are much better investments out there. Not many can invest since they don't have any money. Debt fueled this "housing boom" Tell me who actually won during this time? I'll answer my own question, real estate agents/brokers, Mortgage brokers, and the smart few who bought in the 90's and sold in the mid 2000's. People who bought (retail) in the later stages will find that they're just barely breaking even after all the mortgage interest payments/commissions/price reductions/repairs etc.
Yah, let's not forget that buying at the top of 2-300% appreciation, the biggest housing bubble in US history is the smart thing to do!
Pass the kool aid around!
wow... anonymous! I'm impressed and mean this in the nicest way possible - if you spent the same amount of time it just took you to write replies to everything I said into actually researching real estate investing, you'd be a millionaire.
You have the potential; you just need focus.
Can you answer my questions? By the way, i'm not here to toot my own horn, but i'll say that I own one business that keeps me very busy (later in the day not now obviously lol) Real estate investing isn't for me. I prefer to move in and out of investments quickly (In other words I don't like to invest, I like to "flip stocks" so to speak ;) ) , so i'll stick to the stock market. I am looking to invest in commercial real estate in the future when the numbers make sense.
Believe me, i'm not trying to create trouble here, just wanted to have a discussion about real estate with someone from the "other side". I've read a bit of your blog and you have some posts I do agree with.
Just another comment, I understand that there is money in real estate besides appreciation. My father has 5 seperate properties that he rents out. He owns all of these properties free and clear. I see what he has to go through with tennants, i'd rather not have to go through the same things. I continually invest my money into something that makes money for me...my own business. If you have what it takes to be a landlord, more power to you. I, on the other hand, do not have the desire to do this. You may say "hire a property manager!" I still say my money will make a better return invested into something that actually makes a profit.
Another Sacramento blog paints a slightly different picture.
http://flippersintrouble.blogspot.com/
This is not the time to buy.
Let's just let fear run the real estate market, shall we?
Why not?? We let greed run the market for about 5 years, I think 3 years of fear is only fair. I hope you have a diversified skillset, as I see the glut of Realtwhores competing for a rapidly shrinking sales pie.
A Blog about Sacramento Real Estate, Investment Properties, Market Updates and Real Estate Trivia
Here's a little Real Estate Trivia for you Purva. When is NOT a good time to buy?
I'm not planning on renting for 30 years. Just one or two more until the current market turns around. If we'd bought that nice house up on the hill for $750K last year, we'd be wailing now that the others are selling for $600K.
Real Estate is -often- a good investment, but like any market it has it's ups and downs. This is a rare down, and only fools "invest" in a market when it's doing the dip part of it's cycle. That's not hard to understand.
Anonymous,
Okay, I’ll answer. But only since you’ve been nice ☺
The reverse mortgage doesn’t leave people with debt any more than a mortgaged home does. And it’s nice when retired people can reap benefits of what they’ve worked hard for, isn’t it? The heirs can do their own work – they have the same opportunities.
Debt isn’t savings – I agree. It’s like this quote – on the way to becoming a millionaire, it’s not what you have but what you become. Savings is like that. Sort of.
Actually, the part about mowing lawns isn’t funny. To me, renting IS throwing money away. And people are happier owning their own homes. There’s a study somewhere about it – I’ll see if I can dig it up.
About the American Dream, I can’t agree more. It is NOT about buying crap. A home isn’t crap. A wisely invested rental isn’t crap. And the cultures that hate us with a passion don’t have the incentives (or the opportunities) we do to change our lives for the better. I know a lot about those cultures, having been born in one of them.
Millionaires probably didn’t buy at the top of a “bubble.” But we’re not in a “bubble” now. We’re bouncing around the bottom. I’m arguing about buying now.
The rate of appreciation in California is higher than in most places in the country. “Overpriced” is such a relative word. People that bought in the 50s thought the homes were overpriced. I know – I’ve spoken to them. Yet, they bought them for about $25,000. That’s not all inflation. I’m wary of the term “overpriced.”
By the way, I DON’T think you should mortgage your life to buy a home. I’m just saying the opportunity to become financially free is there and it’s now. If you’ve prepared for it (and want to) take the plunge. If not, at least prepare for the next wave.
Like I just heard John Maxwell say, “I’m responsible TO you, not FOR you.”
Thanks for all the great tips, I will follow them all to a tee.
There's usually not a bad time to buy if you have the right property. There are bad situations, bad sellers, bad properties. But if you have the right property, it's always a good time to buy.
There's the answer to the trivia question.
Just for the sake of my strange interest, what are the current assessed values, taxes, and rents received for 7710 25th Avenue and 4900 79th Street, as well as both total and heated SF and year built? Also the estimated repairs needed for 25th?
If you want to post a link to the listings, that would be great! Thanks.
Renting is not throwing money away in this environment. My wife and I are now happy renters, after selling our house at the top of the market two years ago in San Diego. Are we happier now renting than when we owned our home? You bet!!! Our liberated $300K+ equity that we realized is now earning us a safe 5+%, while the house we sold is now on the market with an asking price that is 20% less than what we sold it for (it's been on the market now for 5 months, and continues to sit). If we had not sold the house, our "investment" would be worth about $100,000 less now. My math tells me that we're up about $35,000 now as renters, but as a homeowner we would be down $100,000 or more.
There are times when it is not a good time to buy, but I doubt you'll ever hear a realtor admit that. Also, this market correction is not over, we are not even close to the bottom yet. Do some of your own extensive unbiased research and you will undoubtedly come to the same conclusion. One thing you'll find is that in the long term, housing appreciates at the same pace as inflation. And 2 to 3% of homes going to foreclosure is enough to bring this market down, pricing is set on the margins. Unfortunately, I believe we're going to see more than 3% however...
This is the anonymous that left 3 comments and questions. I figured I should make a screen name to avoid confusion. Thank you for answering my questions..now for my rebuttal ;)
"Okay, I’ll answer. But only since you’ve been nice ☺
The reverse mortgage doesn’t leave people with debt any more than a mortgaged home does. And it’s nice when retired people can reap benefits of what they’ve worked hard for, isn’t it? The heirs can do their own work – they have the same opportunities."
Actually I have to agree with the last part. I do agree that they should reap the benefits of what they've worked hard for 100% I'll have to do more research but from the name I have to come to the conclusion that you borrow against your home that is payed off and when you die you must sell it or someone takes over paying off the borrowed money to take control of the home? Don't bother answering i'll do a search to find the answer in a bit :)
"Actually, the part about mowing lawns isn’t funny. To me, renting IS throwing money away. And people are happier owning their own homes. There’s a study somewhere about it – I’ll see if I can dig it up."
Ok, seeing the difference between some owners and some renters first hand, yes there is a difference most of the time. Usually, renters yards are littered with garbage and they generally don't give a *bleep* about anything. However, take me and my next door neighbor for example. Their front yard consists of dirt and various weeds that survived the desert like environment. My front yard has a nice healthy lawn that's always mowed. I love renting right now as it's not only allowing me to save money on a monthly basis (equivalent house is 2x rent, the house where i'm at is "valued" at 450,000, and I rent it for 1700), But it's allowing me to get a taste of the neighborhood and my various commutes without being stuck. I'm in the norco, southern california btw.
"About the American Dream, I can’t agree more. It is NOT about buying crap. A home isn’t crap. A wisely invested rental isn’t crap. And the cultures that hate us with a passion don’t have the incentives (or the opportunities) we do to change our lives for the better. I know a lot about those cultures, having been born in one of them."
Well if you put it that way, I have to agree with you; a wisely invested rental is definitely not crap. But if this rental is not cash flow positive, then in my opinion it is definitely 'crap'. I feel safe assuming any investor that has a brain can agree with that.
"Millionaires probably didn’t buy at the top of a “bubble.” But we’re not in a “bubble” now. We’re bouncing around the bottom. I’m arguing about buying now.
The rate of appreciation in California is higher than in most places in the country."
I cannot agree with that blanket statement for California. I believe we're in a bubble, especially where i'm looking to buy. The reason I have is that home prices are not in line with incomes. I would have to pay close to 3000 per month to live in the same place I do now. Although I can afford the payments I feel paying almost double to live here is a waste of money especially since I believe home prices will adjust to meet with average income levels in the area.
" “Overpriced” is such a relative word. People that bought in the 50s thought the homes were overpriced. I know – I’ve spoken to them. Yet, they bought them for about $25,000. That’s not all inflation. I’m wary of the term “overpriced.” "
If most people simply cannot afford a starter home with a conventional 30 year mortgage, then it must be overpriced. We're not talking about being uncomfortable, we're talking flat out don't make enough income to make the payments even if the person did not eat.
"By the way, I DON’T think you should mortgage your life to buy a home. "
Thank you.
"I’m just saying the opportunity to become financially free is there and it’s now."
If you can find a cash flow positive investment property in and around Norco,ca right now, please let me know.
I appreciate your responses, and I realise that in the market you work in, everything you say may very well be the case. But in my area, no way..period.
thanks again Sacramento Real Estate Gal.
"wow... anonymous! I'm impressed and mean this in the nicest way possible - if you spent the same amount of time it just took you to write replies to everything I said into actually researching real estate investing, you'd be a millionaire.
You have the potential; you just need focus. "
So, it takes 5 minutes of research to get into real estate investing and become a millionaire? sign me up! LOL
Sorry I couldn't resist, i'm sure it wasn't meant to be taken literally ;)
Damn, lady. Someone takes the time to make some valid points hoping for an educated response and all you can come up with is "if you spent the same amount of time it just took you to write replies to everything I said into actually researching real estate investing, you'd be a millionaire."?
Wow. Way to build some credibility there. "We're bouncing around the bottom" in a later post. Your reply to Agent 777 made absolutely no sense. I don't think you understand the long term consequences of NegAm loans or why people take them in the first place (hint: it's because they can't afford the house). It just gets better and better. I'd ask for some of whatever you are smoking, but it's probably highly illegal.
Actually, other anonymous (jeez, post your names for God's sake, what are you scared I won't sell your home?) I DO understand a neg-am loan. I also understand that with a neg-am loan you can make extra payments that go directly to your principal, thereby reducing your principal much faster than with a conventional loan which applies the extra payments to your interest first.
I don't think it's for everyone, though. And it is especially NOT for people who can only afford the minimum. I have NEVER said that.
Also, I have always believed you should do your own research! I think as humans we tend to believe what someone else says or does a bit too much -it's the same thing that fueled the real estate mania.
I really don't care if you think I'm smoking something illegal as long as you take responsibility for what you do. At least a10100101... has that going. I respect that. That's why I said I meant it in the best possible way.
Sorry A1 - I have dibs on the 2 properties I asked her about specifically!
I don't want us to get into a bidding war over those properties - that would be so 2005 of us to do.
I am still waiting to hear the specifics on those though. :-)
4900 79th St is here
7710 25th Ave is here
Taxes are assessed at 1% of transfer value.
Both places would rent for between $1250 - $1300 per month.
Estimated repairs for 25th Avenue - $45,000 (yup, you read that right!) There's been beetle damage to the subfloor under most of the home.
agent#777: LOL don't worry, my bottom feeder mentality won't allow me to get involved in bidding wars :)
Mrs Brown: All I can say is we seem to be in agreement that this life should be about doing your best in an honorable way. As Ray Kroc said "Take care of the customer, and the business will take care of itself". Please remember this next time a gullible buyer walks in/calls in eager to get into a home they can only get into with an interest only loan and can only pay the minimum each month. Thank you for your time.
Ms. Brown,
My "fault" for your sudden attention. Blame me. Well, blame me and blame your association with John Lockwood but that's another story.
Taxes are assessed at 1% of transfer value.
That would be an extraordinarily rare property. No ther encumbrances vthat show up on the biannual tax bill?
Actually, other anonymous (jeez, post your names for God's sake, what are you scared I won't sell your home?
Ask my underaged daughter.
Millionaires probably didn’t buy at the top of a “bubble.” But we’re not in a “bubble” now. We’re bouncing around the bottom. I’m arguing about buying now.
Even among the very most optimistic PAID advocates will no longer claim this. Do you perhaps have a friendly bet as to the bottom of either the national or Sacto markets?
SAC EW Gal said:
I also understand that with a neg-am loan you can make extra payments that go directly to your principal, thereby reducing your principal much faster than with a conventional loan which applies the extra payments to your interest first.
I've gotta call BS here!
I pay 2k a month to CFC over my mortgage, and the extra funds go directly to the principal. My house will be free in 7 yrs. I bought it last yr for 330k.
The previous owner paid over 400k for it BTW.
I DO understand a neg-am loan. I also understand that with a neg-am loan you can make extra payments that go directly to your principal, thereby reducing your principal much faster than with a conventional loan which applies the extra payments to your interest first.
Bawahahahahahaha. Puh-leaze lady. People with Neg Am loans are not paying extra on their mortgages. They are paying the minimum until the loan reaches a reset level (115% LTV??), then loan turns into a fully amortized loan, the payment skyrockets and they default. This is happening all over the place. You make a few good points, and I hope to own a nice, modest home some day. We are just getting started in the downturn. Love the humor though.
Since no one claimed it, I will:
First! Murst!
"Suits me. If you want to rent my houses for 30 years, I might just let you!"
I just might: $0.5M 401K, $0.45M savings and investments. And I'm not stupid enough to commit to a $500K+ loan for a home that is not worth it.
"Let's forget about the fact that real estate forces people into saving."
It's not saving for these artificially and criminally priced homes. It's called INDENTURED SERVITUDE.
Check out the problems in Sacramento, babe. That place is TOAST.
I know this is a blog and not a piece of serious journalism, but:
"Sure, let's just not see real estate as an investment that you can live on in your later years through a reverse mortgage."
You can live just as easily off of a 401k. Don't forget that historically stocks have appreciated at 10% a year and real estate at 3% a year.
"Let's forget about the fact that real estate forces people into saving."
I agree that for most people their largest asset is their equity. That's more of a statement on the sad state of American finance than a rave about the fortunes of real estate. But proably the best point you've made.
"Let's turn a blind eye to the reality that most millionaires either made their millions in real estate or hold their millions in real estate."
The Millionaire Next Door disagrees with you, and they have some hefty statistics to back them up. Do you have any source for this claim?
"Let's not hedge against inflation."
The problem with your "hedge" is that it really doesn't gain you any money in the long term either. Housing appreciates at about the same rate as inflation, therefore you aren't really making money when a house grows in value.
"Let's feel uneasy about the safety of our own real estate investments only because 2 - 3 people out of 100 have had their homes forclosed."
Forecloser rates have been climbing rapidly, but more importantly many average people are struggling with their payments. Does this worry you? Wouldn't your time be better spent encouraging people to be careful with their debt obligations than just to buy?
"Let's just let fear run the real estate market, shall we?"
What's slowing the market isn't fear, my dear. It's, as you put it, simple economics 101. When housing appreciates at 20% a year for 5 years, a new couple can't buy a "typical" $400,000 home on their $45,000 salary.
Amusing post, but too much of what you say rings un-true. Your problem here is that you are a person who benefits when a house is sold. And you are heavily encouraging people to buy houses. Do you see where there might be a credibility gap?
Neg Am loans have nothing to do with paying additional payments on your mortgage. As someone stated, you can do that with most loans - just designate where the money goes.
Neg Am loans are for two types mostly:
1. Very sophisticated investors who can use the additional money they do not pay on their mortgages to make higher returns/more money elsewhere.
2. Someone who earns money sporadically throughout the year who will pay the minimum for several months and then when the cash flow comes in (a bonus maybe?), has the discipline to pay down the principal correspondingly that was let go for the previous period.
Not many have the ability to do #1 or the discipline to do #2, making Neg Am loans unwise for most.
Sorry SREG, those properties just don't meet my parameters, but at least they are getting close to reasonable.
I sold my house when comps got to 250k, and rentals were only 1300/month. I was a little past the peak, but considering I almost sold when the comps were 180k and then 210k, I feel ok in getting out when I did.
Let me know if those get down to 100k and 145k though ;-)
1- It's not a "home", it's a house. More accurately, it's a slowly rotting plywood box left in the rain.
2- A house is not an appreciating asset. It's a depreciating asset. It is prone to wear and tear, needs fixing and maintenance. If you're lucky, the land on which the house is sitting may appreciate in value.
But guess what - all those new developments in Sac don't have any land! You're buying a depreciating asset at high cost, high interest rate, and high tax rate.
Rob Dawg,
Thank you for all this attention. If I get to all your fellow bloggers so much that they must discuss whether my "glamor shot" was a tax write-off (it wasn't, by the way - that pic was taken by my husband on our home camera) John and I must be doing something right.
Us, doing something right? Besides working in a company with 10 open escrows to six agents (at present)? Besides not living in mom's basement, playing with our Wookies, and pinning up on our web site the picture of the first woman who's talked to us since we stopped taking showers?
Nahhh... We're bringing the whole real estate profession down by our unethical behavior. I for one am so unethical that 2/3 of the open escrows I'm personally working on are with people I've known longer than 10 years.
You see, here's how I do it. First I hypnotizes them using my Broker Brain Ray, and then I eats their children with a spoon, and after that I start on the really evil stuff.
(...Like not letting trolls on my website.)
Perhaps if I can convince you of the benefit of that, I'll let you use my Broker Brain Ray to hypnotize your own victims while I'm on vacation. :)
Being a renter is not a bad idea. Here is an idea: Rent a home that you want to live in due to proxity to work or the style / design of the home or perhaps it takes care of some short term needs you have. Whose to say you can't buy investment homes to hold or to repair and flip while actually living in a rental home that you really like. Perhaps you are saving money for a large down payment on the perfect home there is nothing to say in the meantime you can't own rentals.
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