Real Estate Crash thread

[Benny Profane]

Neither is Benny, other than he's happy folks who over leveraged themselves got fucked and imploded a housing market he never had the means to get into even if he wanted, so he bagged on it more from a sour grapes perspective rather than having any intelligent foresite as to what was coming. As it all comes crashing down, Benny does nothing more than search the interwebz for data to back up a big old "I told you so". According to Benny, RE will never ever go up, ever again, so everyone is just going to become renters in the future, which if true, is all the more reason to go out an buy income property now.

Jeez, underwater much?

[4matic]

I can get 6.99 with a few clicks on the computer every now and then. .

Nonsense. No way you get that interest rate without principal risk.

[Benny Profane]

Nonsense. No way you get that interest rate without principal risk.

Who said interest? You know all too well equities and commodities are on a roll. And there's a ton of principal risk in real estate right now.

[cramer]

I can get 6.99 with a few clicks on the computer every now and then. No plumbing problems, roofing problems, tenant issues, property taxes. And that's not a "Fortune".

well this day and age if you arent buying a house with a tile roof, which lasts 50 years, thats your own stupidity. i pay 600 a year for a home warranty so i dont have to worry about plumbing, heating, a/c, appliances, etc. So i wont be getting hit with a big bill and pay 50 a month to have that piece of mind. Property taxes are lumped in with the monthly, so once again, not worried about those i'm already paying them. Tenant issues, ya, dont rent to section 8. As for previous owners, actually, their credit was stellar until they made a bad decision to get in way over their heads. Ive got 2 peers at work, one in fresno and one in vegas who someone bought their home and rented it back out to them. I know what kind of money they are making and their house payment just got cut in half. Actually, its a great idea to do that as a buyer. Bought a house, they been paying XXXX amount of dollars for a few years. YOu know they can afford alot lesser payment.

i'm still not clear on how throwing money away on rent is better than throwing money away on a house you own. It seems to me the one you own is a long term savings account. The one you rent you are just paying into the owners long term savings account. I choose to pay into my own.

[grapedrink]

these rent vs own arguments are idiotic, there are plenty of scenarios where renting makes more sense, and plenty where owning makes more sense. same for for real estate vs equities argument.. what does powder11 care if real estate values stall or drop for a few years if he's got a 25 year plan, and the rent pays the bills? what does the renter who decided to put the money he was saving by not having a mortgage, home insurance, property taxes, repairs, maintenance, etc.. into equities with a 25 year investment horizon care that stocks lost 50%+ of their value between 2008-2009?

the guy that gets burned in a real estate market crash is the flipper not the investor. the guy that gets burned in a stock market crash is the trader not the investor. benny you focus on the short term entirely too much, i predict you missed the bottom on the stock market and most of the rally, in fact you're probably thinking about getting back in right about now. here's my advice to you if you're looking to buy real estate in the US, and it's somewhere you plan to hold for a long time, start looking.

[Benny Profane]

25 years?? Why anchor yourself for that long? Is your job and marriage that secure. You'll never ever have to move, even for a career change? Shit, in the past ten years I've moved four times chasing better career oppurtunities, and I'm way older than most here.
And I didn't have to catch the move back up in stocks because I got out at near the top. It's all about capitol preservation for BP. But I've been back in the game for a few months - the market is immune to bad karma, it seems, when the Fed is on it's side.
Real estate has to be the most illiquid place to put your money these days.

[grapedrink]

well 25 years was just an example, it could be 10, 15, 20, whatever.. the longer your investment horizon, the smaller the bumps in the road. but what does it matter if you move? i'm talking about an investment property, you seem to be talking about a primary residence. i think that's the mistake a lot of people make, they think of a home as an investment, when it's really an expense. if you move every 2-3 years it doesn't make sense financially to be constantly buying and selling homes, unless you feel the lifestyle benefits of home ownership are worth the added expense, risk, and illiquidity (that even a word?).

[liv2ski]

Benny, I am with GD and the other guys on this one, in that I would encourage anyone to buy a modest home with as little down as possible for home 1. Live there long enough to save up a down payment, buy a slightly bigger/nicer place to move into, rent home 1 out. Keep playing this moving up game with the lenders until you have acquired a number of rentals.
As the rents go up, either save the positive cash flow to buy another rental at some point, or like me, just pay them off quicker. I feel a lot more comfortable dealing with rental properties than I do a ponzi rigged stock market. My home is paid off, my rentals will be in a few years and now I am looking in areas outside of So Cal where maybe you can buy a nice place for $50-$70k. I don't think those prices are going to get smoked down much further. No, it is likely the high end areas like I live in, that have held their own so far, that will come tumbling down.

[4matic]

pay them off quicker.

Why would you pay off an illiquid and depreciating asset that has tax advantages?

[liv2ski]

Why would you pay off an illiquid and depreciating asset that has tax advantages?

Pffft, tax advantages. For every dollar paid on a mortgage, maybe you get .20-.25cents tax credit. Your still down. I would rather have the place paid off, cash flowing as I am sick of working.

[cramer]

what does the renter who decided to put the money he was saving by not having a mortgage, home insurance, property taxes, repairs, maintenance, etc.. into equities with a 25 year investment horizon care that stocks lost 50%+ of their value between 2008-2009?

where do you live that you are saving money on rent? I threw away 250K in rent the last 10 years here in the bay area. I'm going to go out on a limb and say that where you are only paying 1000 bucks a month, houses are probably available for 100K. Which = to less a month with property taxes, etc included then you are paying in rent. Unless you are shacking up with other people renting a house, then ya, you are saving money. But at this point, my house payment is cheaper than i was paying in rent. And my house payment included PMI and my property taxes lumped in. Ive always had my own place for the most part due to having a wife and kid. I guess if you are in a position to do the roommate thing, then ya renting is the way to go. But if you are paying 1000 a month to rent a place or in my case, almost 2000, rent was a complete waste of money with the prices of housing now. It may be different in other areas, i dont know. Ive only been in one area the last 15 years give or take. But it doesnt take rocket science to know that house payments and rent are right on par now in most areas.

[grapedrink]

where do you live that you are saving money on rent? I threw away 250K in rent the last 10 years here in the bay area. I'm going to go out on a limb and say that where you are only paying 1000 bucks a month, houses are probably available for 100K. Which = to less a month with property taxes, etc included then you are paying in rent. Unless you are shacking up with other people renting a house, then ya, you are saving money. But at this point, my house payment is cheaper than i was paying in rent. And my house payment included PMI and my property taxes lumped in. Ive always had my own place for the most part due to having a wife and kid. I guess if you are in a position to do the roommate thing, then ya renting is the way to go. But if you are paying 1000 a month to rent a place or in my case, almost 2000, rent was a complete waste of money with the prices of housing now. It may be different in other areas, i dont know. Ive only been in one area the last 15 years give or take. But it doesnt take rocket science to know that house payments and rent are right on par now in most areas.

i live in canada, in a city with rent controls, we don't have tax deductible mortgage interest, and we are at the peak of our real estate "bubble". renting can be significantly cheaper than owning in my case. if i lived in the states i would buying everything i could right now.

[cramer]

i live in canada, in a city with rent controls, we don't have tax deductible mortgage interest, and we are at the peak of our real estate "bubble". renting can be significantly cheaper than owning in my case. if i lived in the states i would buying everything i could right now.

damn canadians ;> Ya, SF has rent controls too. But i wasnt lucky enough to be like a couple of my buddies who control flats right now and basically pay no rent and charge everyone else. So in your case, point taken. Obviously alot better choice to rent. I'm sure there are plenty of examples of that in the states too. I was just tired of throwing money away for someone elses long term savings account. Why not throw it into your own if you can get a loan and its what you are already paying. I mean whats the worst that can happen? I lose the house and have to rent again? Shitty credit? I already had shitty credit and was already renting. Oh knows, back to shitty credit and renting life.

[grapedrink]

damn canadians ;> Ya, SF has rent controls too. But i wasnt lucky enough to be like a couple of my buddies who control flats right now and basically pay no rent and charge everyone else. So in your case, point taken. Obviously alot better choice to rent. I'm sure there are plenty of examples of that in the states too. I was just tired of throwing money away for someone elses long term savings account. Why not throw it into your own if you can get a loan and its what you are already paying. I mean whats the worst that can happen? I lose the house and have to rent again? Shitty credit? I already had shitty credit and was already renting. Oh knows, back to shitty credit and renting life.

i'm not disagreeing with you, in the states where you can put very little down, interest is tax deductible, prices are at ten year lows in many places, cost of ownership is near the cost of renting, and you can easily walk away if it all goes to shit? i would be buying.

[powder11]

here is the bottom line:

you all know nothing

[cramer]

here is the bottom line:

you all know nothing

hehe, pretty much. But its fun to act like we all know everything. Gotta love us know it alls on the intraweb.

[Tuckerman]

I'm kind of a noob but if real estate is not doing that great right now why is Nuveen Real Estate Secs I (FARCX) doing so well with Overall Morningstar Rating of 5 stars?

[4matic]

I'm kind of a noob but if real estate is not doing that great right now why is Nuveen Real Estate Secs I (FARCX) doing so well with Overall Morningstar Rating of 5 stars?

Rents are strong. Asset price doesn't matter that much in an income investment.

[Tuckerman]

So as long as people are renting office space FARCX will do well?

edit and people right now are more likely to rent then buy?

[4matic]

So as long as people are renting office space FARCX will do well?

edit and people right now are more likely to rent then buy?

It's index based so it has a broad holding of assets. Check them out:

http://finance.yahoo.com/q/hl?s=FARCX+Holdings

NAV is still below it's 2006 peak.

[Tuckerman]

thanks........

[Tuckerman]

NAV is still below it's 2006 peak.

Is that good or bad?

[skier666]

Rents still increasing on the Silicon Valley apartment front...

For ex, Sunnyvale - 1X1's at a basic complex now at $1195-1395.

[Benny Profane]

Are there any good residential only REITs out there? I think there's too much commercial space, but I would put my money behind apartment builders/operators.

[4matic]

Is that good or bad?

Both. Because NAV is set by the market and can change with market conditions not related to underlying assets.