Why So Many Cash Offers?

[ocrenter]

let’s take someone who previously had $500k of saving in CDs.

BofA High Yield CD is at 1.2%, or $6000 interest per year.

$166k buys you a 1000 sqft condo in RB or San Marcos and so on… rent is $1300/month, minus $600 for property tax and HOA and property management fee, $700/month.

split the $500k into three, and you can buy 3 of these things in cash generating $700/month, that’s $25200/year, or a 5% return on your money.

$6000 a year vs $25200 a year, seems like pretty easy math to me.

[SD Realtor]

Hawk I am not so sure I believe that. Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home. No way the guy is going to have 22 homes and a lender is gonna let him do this.

In my opinion after the second or third home it doesnt work. So what I think he may be doing is somehow concealing the homes by putting them in a corp or something of that nature. That way when he goes through underwriting it doesn’t show that he has all those homes.

Still your point makes sense. However alot of the investors we see at the sales are simply lackeys paid by the group of investors to make the offers. They get authorization to purchase for the corp. These corps are backed by lots of investors. These cases are cases of buy and flip as opposed to buy and hold. Not to say what the ratio is of new money to old money but I am sure there is a healthy mix.

[SD Realtor]

Hawk I am not so sure I believe that. Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home. No way the guy is going to have 22 homes and a lender is gonna let him do this.

In my opinion after the second or third home it doesnt work. So what I think he may be doing is somehow concealing the homes by putting them in a corp or something of that nature. That way when he goes through underwriting it doesn’t show that he has all those homes.

Still your point makes sense. However alot of the investors we see at the sales are simply lackeys paid by the group of investors to make the offers. They get authorization to purchase for the corp. These corps are backed by lots of investors. These cases are cases of buy and flip as opposed to buy and hold. Not to say what the ratio is of new money to old money but I am sure there is a healthy mix.

[SD Realtor]

Hawk I am not so sure I believe that. Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home. No way the guy is going to have 22 homes and a lender is gonna let him do this.

In my opinion after the second or third home it doesnt work. So what I think he may be doing is somehow concealing the homes by putting them in a corp or something of that nature. That way when he goes through underwriting it doesn’t show that he has all those homes.

Still your point makes sense. However alot of the investors we see at the sales are simply lackeys paid by the group of investors to make the offers. They get authorization to purchase for the corp. These corps are backed by lots of investors. These cases are cases of buy and flip as opposed to buy and hold. Not to say what the ratio is of new money to old money but I am sure there is a healthy mix.

[SD Realtor]

Hawk I am not so sure I believe that. Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home. No way the guy is going to have 22 homes and a lender is gonna let him do this.

In my opinion after the second or third home it doesnt work. So what I think he may be doing is somehow concealing the homes by putting them in a corp or something of that nature. That way when he goes through underwriting it doesn’t show that he has all those homes.

Still your point makes sense. However alot of the investors we see at the sales are simply lackeys paid by the group of investors to make the offers. They get authorization to purchase for the corp. These corps are backed by lots of investors. These cases are cases of buy and flip as opposed to buy and hold. Not to say what the ratio is of new money to old money but I am sure there is a healthy mix.

[SD Realtor]

Hawk I am not so sure I believe that. Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home. No way the guy is going to have 22 homes and a lender is gonna let him do this.

In my opinion after the second or third home it doesnt work. So what I think he may be doing is somehow concealing the homes by putting them in a corp or something of that nature. That way when he goes through underwriting it doesn’t show that he has all those homes.

Still your point makes sense. However alot of the investors we see at the sales are simply lackeys paid by the group of investors to make the offers. They get authorization to purchase for the corp. These corps are backed by lots of investors. These cases are cases of buy and flip as opposed to buy and hold. Not to say what the ratio is of new money to old money but I am sure there is a healthy mix.

[CA renter]

[quote=ocrenter]let’s take someone who previously had $500k of saving in CDs.

BofA High Yield CD is at 1.2%, or $6000 interest per year.

$166k buys you a 1000 sqft condo in RB or San Marcos and so on… rent is $1300/month, minus $600 for property tax and HOA and property management fee, $700/month.

split the $500k into three, and you can buy 3 of these things in cash generating $700/month, that’s $25200/year, or a 5% return on your money.

$6000 a year vs $25200 a year, seems like pretty easy math to me.[/quote]

Bingo, ocrenter! And this is why high rates are going to hurt the housing market even more than most people expect. Rates have been artificially inflated for so long, that fixed-income investors (and others with large cash positions) are forced to get into different markets, and the housing market is one of the greatest beneficiaries of the low rates, IMHO.

[CA renter]

[quote=ocrenter]let’s take someone who previously had $500k of saving in CDs.

BofA High Yield CD is at 1.2%, or $6000 interest per year.

$166k buys you a 1000 sqft condo in RB or San Marcos and so on… rent is $1300/month, minus $600 for property tax and HOA and property management fee, $700/month.

split the $500k into three, and you can buy 3 of these things in cash generating $700/month, that’s $25200/year, or a 5% return on your money.

$6000 a year vs $25200 a year, seems like pretty easy math to me.[/quote]

Bingo, ocrenter! And this is why high rates are going to hurt the housing market even more than most people expect. Rates have been artificially inflated for so long, that fixed-income investors (and others with large cash positions) are forced to get into different markets, and the housing market is one of the greatest beneficiaries of the low rates, IMHO.

[CA renter]

[quote=ocrenter]let’s take someone who previously had $500k of saving in CDs.

BofA High Yield CD is at 1.2%, or $6000 interest per year.

$166k buys you a 1000 sqft condo in RB or San Marcos and so on… rent is $1300/month, minus $600 for property tax and HOA and property management fee, $700/month.

split the $500k into three, and you can buy 3 of these things in cash generating $700/month, that’s $25200/year, or a 5% return on your money.

$6000 a year vs $25200 a year, seems like pretty easy math to me.[/quote]

Bingo, ocrenter! And this is why high rates are going to hurt the housing market even more than most people expect. Rates have been artificially inflated for so long, that fixed-income investors (and others with large cash positions) are forced to get into different markets, and the housing market is one of the greatest beneficiaries of the low rates, IMHO.

[CA renter]

[quote=ocrenter]let’s take someone who previously had $500k of saving in CDs.

BofA High Yield CD is at 1.2%, or $6000 interest per year.

$166k buys you a 1000 sqft condo in RB or San Marcos and so on… rent is $1300/month, minus $600 for property tax and HOA and property management fee, $700/month.

split the $500k into three, and you can buy 3 of these things in cash generating $700/month, that’s $25200/year, or a 5% return on your money.

$6000 a year vs $25200 a year, seems like pretty easy math to me.[/quote]

Bingo, ocrenter! And this is why high rates are going to hurt the housing market even more than most people expect. Rates have been artificially inflated for so long, that fixed-income investors (and others with large cash positions) are forced to get into different markets, and the housing market is one of the greatest beneficiaries of the low rates, IMHO.

[CA renter]

[quote=ocrenter]let’s take someone who previously had $500k of saving in CDs.

BofA High Yield CD is at 1.2%, or $6000 interest per year.

$166k buys you a 1000 sqft condo in RB or San Marcos and so on… rent is $1300/month, minus $600 for property tax and HOA and property management fee, $700/month.

split the $500k into three, and you can buy 3 of these things in cash generating $700/month, that’s $25200/year, or a 5% return on your money.

$6000 a year vs $25200 a year, seems like pretty easy math to me.[/quote]

Bingo, ocrenter! And this is why high rates are going to hurt the housing market even more than most people expect. Rates have been artificially inflated for so long, that fixed-income investors (and others with large cash positions) are forced to get into different markets, and the housing market is one of the greatest beneficiaries of the low rates, IMHO.

[gn]

[quote=SD Realtor]Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home.

In my opinion after the second or third home it doesnt work.
[/quote]

Is this because, immediately after buying & renting out the house, lenders disregard the rental income ?

Does the investor have to wait 6 months before the lenders consider the rent as income ?

[gn]

[quote=SD Realtor]Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home.

In my opinion after the second or third home it doesnt work.
[/quote]

Is this because, immediately after buying & renting out the house, lenders disregard the rental income ?

Does the investor have to wait 6 months before the lenders consider the rent as income ?

[gn]

[quote=SD Realtor]Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home.

In my opinion after the second or third home it doesnt work.
[/quote]

Is this because, immediately after buying & renting out the house, lenders disregard the rental income ?

Does the investor have to wait 6 months before the lenders consider the rent as income ?

[gn]

[quote=SD Realtor]Given the underwriting standards of today, each additional home the guy purchases makes it harder and harder to get the next home.

In my opinion after the second or third home it doesnt work.
[/quote]

Is this because, immediately after buying & renting out the house, lenders disregard the rental income ?

Does the investor have to wait 6 months before the lenders consider the rent as income ?

[Author]

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