| CA Real Estate (#2)
Posted: 9/16/2009 9:18:55 PM |
Where's a safe place for old people to invest these days?
I'd pay 12%, backed by income producing real estate, that I own free and clear. Win-win for everyone ;-) | |
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| CA Real Estate (#2)
Posted: 9/19/2009 11:00:19 AM | Awww...renting v. buying is at question? Why not do both -- it's a good time to pick up rentals if you plan on holding for 7-10 years. Mortgage can be paid by renters if credit worthy in the current market. Not to say that rentals don't have their drawbacks and 'work' attached.
Golf -- what do you think about holding rentals in the current market? :-)
Safe investments?
Dudensess is correct...and a refreshing music to my ears [hardly broken record] in reading your previous entry.
There is a 3.75 (now 3.5%) CD with the troubled bank (Citi), but it has a hold of 5 years with a 6 month penalty for early withdrawal.
CA bonds currently are high due to CA's financial diffculties...so you might want to consider ratings reflecting safety.
With bonds though, you are in a situation where interest is non-taxed...so as dudeness states...you can get a return of 5-8% on your investment, however this is equivalent to more when factoring in that the interest is non-taxed. It is also wise to learn about bonds before plowing in (go off the ytm [yeild to maturity] ratio--not the coupon price and consider par for resale, since unlike CD's if you sell at the price paid or any premium...you will not suffer penalty and could even make more if selling above your price paid. Par is 100 [which is actually 1000 -- try to stay away from buying at too high of a premium with interest rates so low and with only one way to go, which is up]).
Tax breaks does affect more than the wealthy. Currently all income including interest is taxed at 25% if over 35k. <--this affects most middle-class individuals...including plumber Joe. *wink* | |
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| CA Real Estate (#2)
Posted: 9/20/2009 4:22:45 PM | mermaid I don't claim expertise in California real estate, rather know the global rules (rent should be 1 % of value, value should be 100x's rent, etc.). A significant part of my net worth is like many of us in our homes.
For myself, I've done exceptionally well in specialty metals, energy and gold (email me for names of funds if interested). Specialty metals, those used in aircraft for example have incredible upside. The numbers from memory are something like this, current commercial aircraft in the world = 28,000 of which 10,000 will be retired over next 10 years while 20,000 new aircraft will be added to the fleet bringing the total to 48,000 aircraft worldwide. Until boeing announced good news on their Dreamliner this month there was much concern about surplus's of these metals but that disappeared in a flash.
Energy is obvious, gold I believe is a fear play which has got to skyrocket with THE ONE at the controls lol.
One could always invest in the print media, bailouts on the way lol. How about separation of press and state libtards? | |
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| CA Real Estate (#2)
Posted: 9/20/2009 10:39:23 PM |
Why not do both
Because rent & property value are dropping? So, it's easy to get stuck with a rental you're upside down in, can only rent for less than your mortgage + tax + insurance + repairs... | |
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| CA Real Estate (#2)
Posted: 9/22/2009 10:04:16 AM |
rent should be 1 % of value
That is a very general rule that really needs to be adjusted for each specific market. Normally CAP rates are being used. So, if you know the CAP rate in your market, you can then see how your property compares to it.
For example, if you have a property that's worth 100k and you get 1k in rent, it fits the rule.
But if you look closely, you might have monthly mortgage payment of $ 800, taxes and insurance of $ 210.00. The systems are 7 years old and due to the neighbor having a barking dog, the property turns over every year and you have a 1 month vacancy in between. It doesn't look like such a good deal, especially, if the market is still declining, as we have now. If it was increasing, then it wouldn't be considered investing, but speculating, because the owner is speculating that there will be profit, once the market improves.
You can figure out a basic cap rate (without going into a detailed analysis) by using 75% as NOI on a SFH. SO NOI = $ 9,000.00 - divide that by value $ 100,000 = 0.09% = 9% CAP rate.
So, you can set ahead of time what kind of CAP rate you want and look for properties that are fitting that profile in a particular area. They vary very much in different California markets. | |
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| CA Real Estate (#2)
Posted: 9/22/2009 10:19:56 AM | Well I agree Varinia with your refinements, however, all of that discussion is in a "going concern" or stable market. California RE, at least the coastal markets have always been extreme outliers to this rule thus elevating another rule...they don't make more beachfront ....so it'll always rise.
In this market, in these times, one has to imagine that the 1/3 of 1% rental observation will be moving toward a more traditional rule of 1%, with two moving parts, increasing rents while falling property valuations.
Financing discussions while important in the specific, are irrelevant in the global question...is California real estate a good investment? Brother in law deals are beloved but unpredictable. | |
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| CA Real Estate (#2)
Posted: 9/22/2009 3:11:28 PM |
because the owner is speculating that there will be profit, once the market improves.
It's important to note, speculation is what got us into this real estate crisis to begin with. | |
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| CA Real Estate (#2)
Posted: 9/22/2009 5:47:19 PM | .speculation is what got us into this real estate crisis to begin with.
You're correct! I'm amazed how many people I've met since I'm here who still have that mindset. They're ok with potentially buying something that breaks even (for rental), because eventually the value will go up and the tenant will have paid down the mortgage. They don't want to see, that there are other expenses that can come up (repairs, vacancies, bad tenants) that will have them upside down in a heartbeat. I guess the Bay area R E Market had been so inflated, that a break-even is seen as a great deal.
BUT, that's why it's all relative and up to the market. Many people only look at the local situation and the comparison they use is that of time. It's too narrow a focus in my opinion. | |
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| CA Real Estate (#2)
Posted: 9/22/2009 6:51:29 PM | | Remember people were buying zero down negative amortization loans - and thought that was a great deal. Never underestimate the power of Marketing + Greed. | |
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| CA Real Estate (#2)
Posted: 9/22/2009 8:02:11 PM |
people were buying zero down negative amortization loans
and those are the ones that are coming home to roost this year, as 2009 is the first year of adjustment for them. Those Pay-option-Arms are leading the pack of the next wave of foreclosures. | |
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| CA Real Estate (#2)
Posted: 9/25/2009 4:17:35 PM | This is from Mr. Mortgage/Mark Hanson's Blog, who's very much on top of the CA RE market http://mhanson.com/blog
In July 09 there were 460K single family homes sold nationwide, of those only 12K , 2.5% had a purchase price of over 500K. In California alone last month, there were 12K NOD (Notices of default) on properties over 500K.
That's pretty telling about the future. | |
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| CA Real Estate (#2)
Posted: 9/25/2009 9:41:28 PM | Average LA home prices, I did this figured this on a peak home value of 550K.
http://comguy.org/stocks/LA_House_550K_Max.png
Prices have been in a non stop nosedive till last month, well it cant keep falling forever your house would be worthless by next year if it kept up.
How many times yearly income (Nominal GDP) to buy a house in the LA Area
http://comguy.org/stocks/Times_Yearly_GDP_Cost_of_LA_Homes.png
By this it definitely looks like home values are normalizing a little more room to the downside but not too much.
Just remember things go up a lot slower than they fall. So there is no big hurry wait for the dust to clear and of coarse prices to stop falling. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 7:11:54 AM | I'm going to let my inner contrarian come out and play this morning and swim upstream in conventional wisdom.
1. Does it really matter if the down payment is zero?
2. Does it really matter if the mortgage allowed negative amortization?
3. Does it really matter if it's an ARM as opposed to a fixed loan?
No. No. NO. The issue is giving loans to the clueless and assetless. I could have obtained a zero DP loan and never shown up on a banks troubled loan list. Negative amortization, I think my old loan had it, never used it, got it for free, so what.
Sophisticated investors continually make interest plays and length of loan plays where they figure money is too cheap, or too dear. My old mortgage was a 30 ARM, it was purchased at 6.5% vs. a 8.5 fixed that required more points. For the 20 years I held this ARM the interest never went above 6.7, nor went below 5.9%. I once computed it saved me nearly $100K to adopt this approach.
Our problems have to do with people. Dumb people make dumb decisions. Lenders were incentivized to make no doc, no qualifying loans to deadbeats. People who purchased houses that were 10 times their annual income at teaser rates (1% adjustable unlimited in 5 years). Your government, primarily the Democrat party via CRA supported these risky loans to unsophisticated and clueless people. The system crashed, our societal response was to vote them in across the board and now we're bailing out the dopey lenders the Dems promised to bail out if they provided loans to their clueless constituency.
Glad to clear that up. If any of you Dems have a dream about how if we all jump in a big healthcare bucket it'll work just as well, pinch yourself and call the nervous hospital and advise them a nice man from the internet said it's time again. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 7:37:56 AM | There should be no problem offloading any unwanted properties. Just contact your local Chinese tour operator and they'll put you on the list. The Chinese are buying up America at fire sale prices.
Quoting a Beijing Atty: ""It's a good time to buy property in the U.S.," he said. "I have confidence in U.S. real estate market. I think I will get a return."
Feeling optimistic? The Chinese can't be wrong can they?
Hey gc, I got some ideas where you can invest that $100k. Have your people call my people. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 7:57:25 AM | Anytime a problem is incorrectly characterized, the wrong medicine is sure to follow.
Actually in addition to the Chinese, rumor is banks are sitting on tons of money AND tons of distressed properties awaiting the recovery so they can score a double, make upside money on previously distressed properties, loan cheap money (we're talking .25% these days the banks are paying) at 5% (today if you qualify).
In terms of the Chinese, or anyone who holds the countries paper...I recall the failure of the 7 Asian Tigers in the 90's. Thailand needed an IMF bailout of several billion $, their collateral was their vast forest holdings. Perhaps the Chinese are secured in our housing for all I know. I know several who post here thinks my house and me getting on the magic healthcare program could solve a few problems.
We're seeing a crash landing of a country. We've spent on deadbeats for decades to ensure Dems are in power, now it's over, except for the acknowledgment of the crash. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 8:13:45 AM |
banks are sitting on tons of money AND tons of distressed properties
Actually, this is what scares me the most. When the banks dump those REO's on the market, well, there won't be much "market" left.
Scary. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 8:58:25 AM | | Right now in LA houses are running about 6.5 times GDP they were 12.5 a couple of years ago. The question is how much lower. It hit 5 times GDP in 1997 . I think you could see that and maybe a little bit more. I would think at 5 times GDP a buying frenzy would kick in. For me the best scenario is the prices continue to drop a little more then for some reason the FED is forced to raise interest rates up significantly. This could push prices lower maybe even 3 times GDP. Wow a fantastic time for me to buy. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 9:26:56 AM | | Something interesting the previous housing downturn had an up tic at nearly the same point 6.5 GDP. What does that all mean I think more down side, if you house was worth 550 at the peak it will likely bottom at 220 at 5 times GDP at 2009 dollars. I think I was dreaming for a 3 times GDP price but 4 times is not beyond the realm of possibility. That would put your 550 home gem down to 176 that's my house now ha ha. That could happen if we get a one two punch with higher interest rates. Because I have cash I will just wait. Just remember real estate never goes down. O and the stock market is too dangerous to invest in, just buy CD's. I am up only 70% so far this year. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 11:11:19 AM |
Quoting a Beijing Atty: ""It's a good time to buy property in the U.S.," he said. "I have confidence in U.S. real estate market. I think I will get a return."
I work at a public university with graduate students and visiting scholars and meet people from all over the world. This fall, it seems that the majority of the students are from China. There is nothing wrong with that, but it seems that the pool of qualified American students is dwindling.
I am not xenophobic, but if we don't get our shyt together as a country (both economically and educationally), the Chinese will own most of our real estate and we will be at their mercy for employment.
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| CA Real Estate (#2)
Posted: 9/26/2009 3:22:01 PM |
it cant keep falling forever
True.
your house would be worthless by next year if it kept up
False. It would just have less value than it does today.
By this it definitely looks like home values are normalizing a little more room to the downside but not too much.
I disagree. The impact from negam loans are right around the corner, unemployment is on the rise, and the government that thinks the solution to our problems is to spend more money we don't have (read: severe inflation). But, anyone that wants to buy... go fer it. I'll wait 'till the bottom actually hits, so I'm not sitting upside down in my loan.
Our problems have to do with people. Dumb people make dumb decisions.
Our problems were the banks that lent money to people who should not have qualified for that money. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 3:52:45 PM | Our problems have to do with people. Dumb people make dumb decisions.
Our problems were the banks that lent money to people who should not have qualified for that money.
By that logic all knives should be butter knives. Banks were told to lend money to all comers, people have a responsibility to spend wisely, at least Republicans have that burden. You childish Dems blame someone or something else for all your problems. | |
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| CA Real Estate (#2)
Posted: 9/26/2009 6:03:14 PM |
Banks were told to lend money to all comers
Even if this were true (evidence please), if I have a resource you want to borrow, and I lend it to you - who's taking the greater risk? Me for lending it to you in the first place, or you for taking possession, and promise to repay / give back? If you don't give me the item (or cash equivalent), what recourse do I have?
Answer: I have the burden of only lending the resource to people who are likely to repay / return.
And, I don't recall the banks being told to lend money irresponsibly. Would be interesting if you proved me wrong. | |
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| CA Real Estate (#2)
Posted: 9/28/2009 6:02:01 AM | S&P Case-Shiller HPI on this Tuesday at 9:00 AM ET, that is the home price index. That is how you could have known the home price market was crashing before most other people.
The housing price crash is already over 80% done, now comes the aftermath and opportunities.
http://fidweek.econoday.com/byshoweventfull.asp?fid=438836&cust=mam&year=2009#top | |
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| CA Real Estate (#2)
Posted: 9/28/2009 6:26:56 AM | Nerd I have no inclination of disabusing you of your ignorance of 33 years of CRA practices. CRA, in fact you DEAR LEADER, sued financial institutions for not loaning to deadbeat ACORM/Dem/lowlifes. I'll bet you'r the kind of guy who thinks McDonalds is responsible for fat people also. Banks and mcD's are responsible, not the users. A society as messed up as ours had to have reached a critical mass of people incapable as you.
We should just move all you Dems into some assisted living facility, hire some social workers to make sure you don't screw up and be done with it. | |
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| CA Real Estate (#2)
Posted: 9/28/2009 7:59:29 AM |
We should just move all you Dems into some assisted living facility, hire some social workers to make sure you don't screw up and be done with it.
If you make this a political discussion and keep flaming, I bet this thread is going to get deleted again. Why not discuss Real Estate now and future, instead of getting hung up on who's at fault in your eyes. Living in the past is never a good thing. | |
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