[4plexowner]

and parking is included with each home!!!

wow, can I buy two???

[4plexowner]

The history of fiat currencies is that they last about 50 to 70 years before they are rejected by the people.

Usually, the people revert to gold and silver as currency because trust has been lost in the fiat currency (which was always worthless anyway). Governments reluctantly follow the people into silver and gold backed currencies until they can pull the wool back over the people’s eyes and introduce another fiat currency.

(Please don’t debate me on these points – if you really care, go do some research – be a student of history as your founding fathers were and you will understand why they wrote in the Constitution that only silver and gold will be legal money in the United States.)

The US dollar is a fiat currency and I believe it is currently at the end of its 50-70 year lifespan. The fact that the Federal Reserve has chosen to hide M-3 and repurchase agreement numbers (as of April, 2006)confirms to me that they are doing everything they can to prop up a failing economic system (which includes the fiat US dollar and the banking system that operates in the US dollar).

It is my opinion that we are headed into the next great depression. This one will be more dramatic than the one in the 1930s and it will encompass the entire globe. Declining real estate values and failing banks will be just a few of the steps on the downward staircase. It is also looking like disease and famine will occur on a global scale in coming years.

The current generations of Americans are not going to handle economic depression well at all! Very few people have seen hard times and we’re about to have them in spades!

Declining housing values will be the least of our worries in the coming years.

Believe it or not, I am not a pessimist even though I hold these pessimistic beliefs. I have reached these opinions during 5 years of research on the US and world economy. I have focussed in particular on the history of money and fiat currencies because I believe fiat currencies are the biggest scam ever pulled off on the people of the world. I believe that anyone who spends the time and energy to do the research I have done will arrive at the same or similar concusions.

I also acknowledge that most people will remain asleep in front of American Idol and other reality-TV tripe. These people will be blind-sided by the economic collapse and will, unfortunately, look to politicians to rescue them (which just starts the fiat currency, welfare-state cycle over again).

[4plexowner]

If you are serious about selling, drop below the 400K price point. If you are really lucky you might get more than one buyer and you could get bid back up over 400K.

I have had two condos for sale off and on for the last year. Lots of months with little or no activity until I dropped below the 400K level.

Now I have one condo in escrow at 395K and getting some showings on the other one.

By the way, looking at comps in my area, I am at least 100K below any resale condo that has sold in the last 6 months and I am 150K below comparable new construction condos.

[4plexowner]

I really appreciated seeing your original question, powayseller. In my opinion, America is doomed economically until people understand that we are living in a monetary system that is dishonest and rigged in favor of the bankers and politicians. Asking the question, “where does the money come from?”, is an excellent first step.

There is only one true statesman serving America right now. This man is Representative Ron Paul. He is the only person who questions the financial games that people like Greenspan, Bernanke and Snow play. If you pay attention, you will notice that when Mr. Paul asks a question of any of these people in public, the station takes a commercial break or cuts away to something else (why is that? – don’t want the sheeple to question the status quo like Mr Paul does?).

Mr Paul constantly talks about the perils of fiat currency and how America is on a slippery slope financially. Read his latest missive which is entitled, “Perils of Economic Ignorance”.
http://www.house.gov/paul/tst/tst2006/tst032706.htm

Gold as currency – unfortunately, I don’t see this happening until after the economy collapses (or at least until the US dollar is rejected by all players). My pessimistic view of human nature tells me that we will continue to do everything we can to maintain the status quo. This is easier than making painful changes now. Unfortunately, all we are doing is postponing the inevitable.

Our government will do everything it can to supress the price of gold because rising gold prices indicate economic problems (and/or monetary debasement). Prior to the coming collapse, we will probably have another period when gold and silver will be illegal for US citizens to hold. The government will tell us that terrorists are using silver and gold bullion to support their evil activities and therefore they have to make silver and gold illegal. The reality is that confiscating silver and gold will just let them maintain the status quo with the US fiat dollar for awhile longer.

Since you are in a questioning mood, here are some things for you to research and question:

> the Federal Reserve is a private corporation and IS NOT part of the US government – the owners of this private corporation are the other reserve banks
> We The People pay the Federal Reserve interest on all the money they create out of thin air (please let that sink in – we are paying a private corp interest on something that they created out of thin air!)
> our founding fathers were students of history – they understood the perils of fiat currency and central banking and they tried to protect us from them (that’s why the Constitution says only silver and gold will be legal money)
> there have been several trillion dollars in new loans made by banks since 2000 but overall reserves held by banks have DECREASED since 2000 – and people think their money in the bank is secure!!! – FDIC is just another underfunded agency (like PBGC the pension guarantee program) that will ultimately be overwhelmed as the economy collapses
> information about how the monetary system works has been intentionally removed from the education system of all western countries – don’t teach the people about something you don’t want them to understand or question

I don’t know what we as individuals can do about our dishonest monetary system. I believe this is the root problem underlying most of the issues in America today. I am trying to educate people when the opportunity arises but it is frustrating as hell.

Part of the challenge is that most Americans are living paycheck-to-paycheck so concepts like ‘store of value’ and ‘intrinsic value’ have no meaning when I try to educate them about money. We have also been fed a load of BS from the central banks and our government that inflation is necessary and even a good thing. Americans buy this BS because they don’t know any better. And who is the typical American going to believe, Alan Greenspan or 4plexowner?

Q: How do you know when a banker or politician (with the exception of Ron Paul) is lying?

A: Their mouth is moving.

[4plexowner]

Money serves several purposes. The purpoase that we are most familiar with is money as a medium of exchange. I exchange my labor for the US dollar because the grocery store isn’t interested in my skills as a computer programmer. Paper money, sea shells, wampum, tobacco, cattle – all of these forms of ‘money’ fulfill the purpose of being a medium of exchange and all of these have been used as ‘money’ at some point in human history.

The main aspect of ‘money’ that paper dollars do not fulfill is to be a store of value. That means when I have extra ‘money’ I want to put it away for a rainy day and I want that ‘money’ to have the same purchasing power in the future as it does today.

In 1913 the Federal Reserve was founded and the US dollar has been declining in value since. Today, the US dollar is worth about 3 cents compared to its purchasing power in 1913. This monetary debasement is a hidden tax on the citizens of any country that uses fiat currency and allows that currency to be debased.

Politicians use monetary debasement to finance their welfare schemes (ie, buy votes) and to finance their foreign wars. If they tried to finance these activities via taxes (their only other way of raising money), the citizens would revolt and then the politicians’ games would be over. Since most people won’t learn how the monetary system works (and this info has been intentionally removed from the education systems of western society), monetary debasement is easy to pull off without the citizens taking offense. They even brainwash the population to think that 2 or 3% inflation is necessary and even good!

2 or 3% inflation for 93 years has reduced the value of the US dollar by 97%. It won’t be too much longer before the final 3 cents worth of value is gone.

It is only when monetary debasement becomes extreme that the price of gold begins to rise. And that is where we are today.

Yesterday, the 23rd of March, 2006 was the last time the Federal Reserve is going to publish the M-3 monetary aggregrate numbers or the repurchase agreement numbers. Why is the US Federal Reserve the only central bank in the world that is choosing to hide this critical aspect of its banking system?

Please educate yourself on the monetary system in the US. Start by reading “Creature from Jekyll Island.”

Silver and gold have been used as money for at least 5000 years. I am humble enough to believe that my ancestors probably figured out the best form of money during those 5000 years – ie, if sea shells or wampum or fiat paper was a better form of money than silver and gold we wouldn’t be having this discussion.

[4plexowner]

Here’s a fun game to play.

Figure out how many ounces of gold you could buy if you sold your real estate today. (Gold closed around $550/oz today)

Gold will be at least $1650/oz before 2010 which means the value of your real estate will decline by a factor of 3 compared to gold.

Another way of stating this is that your million dollar property today will be worth $333K before 2010 if you price it in real terms (gold and silver are the only real money).

Going from $1 mil to $333k is a 66% drop but it might take 4 years instead of 3.

My points above only address debasement of the US fiat dollar (the price of gold is a measure of this debasement as it has been throughout history). There will also be a decline of house prices in nominal terms so the end result will be even worse.

It blows my mind that anyone is buying real estate these days!!!

[4plexowner]

I am a cynic by nature – consider yourself forewarned.

The reason you won’t find anything negative about powerlines in the mainstream media is because of all the public schools that are built underneath high-voltage power lines. To acknowledge that power lines are a health issue would open up the government (city, state and federal) to numerous lawsuits.

Imagine what would happen if the FDA announced that being in close proximity to high-voltage power lines caused cancer!

Same issue with mercury/lead fillings in teeth. Anyone with more than 3 brain cells can see the health issue involved with putting two highly toxic substances into the human mouth. The ADA can’t acknowledge this health issue without exposing themselves to lawsuits – therefore they will always maintain that mercury/lead fillings are safe. (I have had all the mercury/lead fillings removed from my teeth and I will never poison my children in this manner.)

Remember that 90% of the media in the US is now owned by only 5 corporations. And one man, Robert Murdoch, controls a significant portion of these 5 corps. My point is that media in the US is tightly controlled and therefore it is easy to prevent unacceptable news from being aired or printed.

You’re obviously a thinking biped (as opposed to the mindless sheeple that populate most of this planet). The fact that you are asking questions about powerlines probably means your intuition is telling you that there could be an issue. Go with your gut and stay away from these hi-powered condos. Or at least make a serious effort to research the effects of power lines on the human body.

And now for my next rant, why would you want to pay $280K for a condo that will be selling for $120-140K within the next 5 years?

[4plexowner]

There is almost always a bigger picture going on than the details we focus on. In my opinion the biggest picture in human history is ALWAYS money. So, if you want to understand the world you have to understand money.

Start by reading “The Creature From Jekyll Island” – don’t be intimidated by its size – this is MUST reading if you want to understand today’s world.

Inre immigration into the US (legal or illegal): This country is about to experience a HUGE shortfall of taxpayers to support the about-to-retire baby boomers. When social security was founded there were 30 payers for every payee. The current ratio is 3 to 1 and declining. America needs new blood to pay taxes and, since Americans aren’t having enough babies, the new blood can only come from foreign countries.

How many attempts have been made in the past three years to make illegal immigrents ‘sort-of-legal’ by granting driver’s licenses, etc? There have been at least two attempts in California and I believe other states have also made efforts (all unsuccessful?). These attempts are just the first step in making the illegals taxable (ie, the government doesn’t care about their citizenship status as long as they pay taxes).

Illegals are also tied to money because American corporations need to cut costs. Their biggest cost is labor so illegals help them increase their profit margins. Our government is currently being run for the benefit of corporations and leaving the borders open is just one of the perks being given to corporations by our government.

Sorry to inform you that in the big picture, illegals are not a benefit to our society as Americans. They ARE a benefit to the corporate-fascist powers that have taken control of this country. Illegal workers will help them paper over the holes in the system and keep it going for a little while longer.

Sorry for ranting about illegals but they are just another aspect of the money game that is being played right now. Housing is currently the biggest aspect of this same money game.

Please, please, please educate yourself about our monetary system! Until we understand the problem we will be unable to implement a solution. And in my opinion, a dishonest monetary system is at the HEART of all the problems we are currently experiencing.

Don’t believe me? Perhaps you’ll believe the founding fathers who wrote a quaint piece of paper (called the US Constitution) wherein they declared that the only legal money would be silver and gold. When’s the last time you saw any honest money in circulation?

[4plexowner]

The tax laws in this country are written for business owners. W-2 wage earners take it in the shorts when it comes to taxes.

Yes, real estate is one of the few ways for a W-2 wage earner to reduce his taxes.

I think we are still failing to communicate here. My point is that NO MATTER how much taxes your friend ‘saves’ because of mortgage interest deductions, he is only ‘saving’ this money because HE HAS TAKEN MONEY OUT OF HIS POCKET AND GIVEN IT TO THE BANK IN THE FORM OF INTEREST. This interest money is real income that your friend had to earn so he could give it to the bank. The bank is never going to give this money back – it is gone for good.

Your friend will get a 35% (max) offset (from the IRS in the form of tax savings) from this out-of-pocket expense BUT HE IS STILL OUT THE MONEY HE SPENT ON INTEREST. So does he have more money or less money at the end of the year? (Hint: the answer is “less”)

Now, there are other benefits to owning real estate. If it makes sense for your friend to buy vs rent then the tax savings offset the expense of owning. In my opinion, however, the tax ‘savings’ by themselves do not justify buying real estate.

And in particular, in a market where real estate values are likely to decline by 40-50% in the next 5 years, why would anyone buy ANY real estate much less a mobile home?

I am also a high-income, single, W-2 wage earner. When I first started buying property I thought there would be significant tax bennies. My experience with 6 multi-unit properties has taught me that the tax bennies of owning real estate are limitted at best and certainly don’t justify the purchase if that is the only reason the purchase is being made.

My financial advice: remain (or become) a renter, pay down debts, buy silver and gold bullion and kick back for the next few years. Let the real estate market correct while some of the geo-political crises resolve themselves (one way or the other). I believe we are currently at a point in history where being liquid and mobile is the ideal financial state. That’s one of the reasons I sold 5 of my properties. Real estate is neither liquid (especially in a declining market) or mobile.

[4plexowner]

I gave up several years ago trying to talk people out of doing stupid things in real estate.

If your friend thinks he will have tax benefits by buying a mobile home he should go for it. Life is the best teacher. Hopefully he won’t pay too much for the lessons that are being offered here for free.

My point is that the supposed tax benefits to owning real estate are overblown. Tax savings ARE NOT a reason to buy real estate.

And it boggles my mind that someone earning $200K would even talk about paying 12% interest on a mortgage. Has he never heard the saying, “rich people collect interest and poor people pay it?”

[4plexowner]

From my perspective as an investor, mobile homes are even worse than condos.

You think you are a ‘homeowner’ but you don’t own the land you are sitting on.

My electrician has owned his mobile home in east county for many years. When rents were rising so quickly in 1998-2004, the rent on his trailer pad increased by a factor of 4. He is paying $600/month to rent the pad that his free-and-clear home sits on.

And don’t kid yourself about a mobile home being mobile after it has been placed onsite and lived in for a few years. If you buy a used mobile home you should assume that it is going to sit right where it is for the rest of its life.

The ‘tax deduction’ is one of the many real estate myths that have been fed to the American people for years. Forgive me for being long-winded but …

The reality is that there is no tax benefit to owning real estate until the mortgage interest you pay exceeds the standard deduction that everyone gets when filing their taxes.

As a single person I get a $5000 standard deduction on form 1040. If I choose to itemize my expenses in order to claim mortgage interest, I GIVE UP THE $5000 DEDUCTION. And therein lies the myth.

Let’s use some example numbers to clarify.

Your friend pays 100K for the mobile home and gets 100% financing at 6.5% interest only. That means he will pay $6500 in mortgage interest each year and will enter this amount on schedule A of his tax return. He loses his standard deduction of $5000 but reduces his taxable income by the $6500 paid in interest. At a 30% tax rate that means a tax savings of $1950. But don’t forget that he has spent $6500 on interest so his net position at the end of the year is: DOWN $4550.

If the same person remains a renter and keeps the standard deduction he saves $1500 in taxes and doesn’t spend any money on interest. His net position at the end of the year: UP $1500.

I’m being very simplistic in this example. There are other reasons for itemizing deductions besides real estate and everyone’s tax situation is different. My point is that owning real estate is not the tax paradise that it is portrayed to be. Don’t use the ‘tax benefit’ as a reason to buy real estate.

(And the reason these cheap units aren’t getting snatched up is because no investor wants them. If it made economic sense to own the units an investor would buy them. The only way mobile homes make sense is if you need a place to live and you’re willing to live in a trailer.)

[4plexowner]

Are condo builders and converters playing escrow games?

Here’s the scenario: condo seller has a bunch of units that won’t sell and is afraid that prices might start dropping – seller puts a few of those units into escrow (brother-in-law, neighbor’s dog, etc) at the dream price and hopes that the ‘pending’ sales put a floor beneath prices (“Well, Mr & Mrs Jones, we’ve got three of these units in escrow at $429K. You’d better secure your unit today …”).

Eventually the pending sales fall through and the units become available again. (And Mr & Mrs Jones sue the seller because he is selling units for $30K less than they paid just a few months ago.)

I saw a local condo converter put 8 units into escrow on the same day in late 2005. No sales for 4 months and then 8 units go into escrow on the same day – I know this can be explained but it makes me suspicious. Prices in this development continued to drop and units are still available today.

I agree with you, powayseller, I’m not seeing “sold” signs popping up (although condo sales aren’t as visible as single-family houses). I am seeing more “for sale” signs and more single-family properties being cleaned up in preparation for sale. How many sellers are planning to take advantage of the spring bounce? Will we see lots of new listings in the next few weeks?

[4plexowner]

I forgot to include this point in my last post:

The condo market is currently depressed by corporations that are doing conversions and HAVE to sell their units. You’ve seen the sign flippers. These condos will continue to be reduced in price and the incentives offered will increase until the condos sell. These corporations have no intention of becoming landlords.

As a seller with options I am choosing not to compete with these corporations in the condo market.

As an aside: according to my loan broker, the incentives provided to condo buyers by these corporations are being hidden from the lenders – an appraiser is supposed to inform the lender of anything that materially affects the value of the transaction – for example if the property comes with a brand new car or $30K worth of other incentives – there are also laws that address how much a seller can give the buyer in the way of closing costs so the incentives being offered instead of, or in addition to, closing costs are legal in the strictest sense – any lenders/appraisers care to comment?

[4plexowner]

You nailed the primary advantage to investing in 2-4 unit properties. An investor gets the benefits of owner-occ financing along with the benefits of multi-units. That’s why I ended up with 6 of ’em (and moved around a whole bunch!).

The per-unit cost of 2-4 unit properties is typically higher than it is for larger properties. At least part of this difference is because of the easier financing available for 2-4 unit properties. Once you get the 5th unit you are into commercial loans and, as I understand it, these loans typically require 35% downpayments. Since most people don’t have $$$ for large downpayments, there is more demand for multi-unit in the 2-4 unit arena.

inre “…you would have been better off …”: … and if wishes were fishes, we’d all …

Your profit analysis is correct given the condo market in spring-summer 2005. I believe the condo market peaked in August right after I came on the market. At that point, the four condos were worth more than the 4plex but I over-priced my units.

In today’s market, if I was serious about selling all four condos in a timely manner, I don’t believe I would end up being ahead. Remember, I’ve been watching the comps for my area very closely for almost a year now.

Also, four condo sales vs one 4plex sale means 4 times the potential liability in a very litigious society.

Here’s an interesting question: “what is multi-unit property worth in today’s market?”.

When I started buying in 1998 I was looking at bread-and-butter 4plexes priced at 9 or 10 times rents (ie, annual rents X 9 or 10). In 2000 I paid 11.5 X rents for a 4plex in Mission Beach and I thought I was paying too much. I stopped buying property when the rent multiplier started going over 14 or so because there was no way to make the numbers work. I started selling when the rent multiplier was in the high teens and low twenties. The last property I sold at 18 times rents. I’m currently on the market at about 22 X rents which reflects a premium for the condo map and the $200K remodel.

I think ultimately we will get back to rent multipliers in the 9-10 area (50-60% correction) and probably over-shoot on the way down – I will be bottom fishing anywhere below 10.

[4plexowner]

I converted the 4plex to condos.

I went on the market in June as condos. I priced too high and missed what was probably the peak of the condo market. By August the units I had comp-ed against had dropped from the high 400’s to the low 400’s (and were still on the market). The same units were ultimately reduced to the high 300’s.

I had the condos priced in the low 400’s for two months or so with some activity. Got one of them into escrow but the buyer flaked when he saw my disclosures (I assume he wanted to have the option of sueing me and my disclosures eliminated all the reasons he might have used in court).

After the condos I was comp-ing against dropped below 400K I pulled my condo listings and went on the MLS as multi-units.

I’m priced at a reasonable price based on the current market and don’t intend to give the property away. My next step will be to pull the listing and rent the units.

There are so many aspects to the “keep it or sell it question”. The property is currently my residence which adds another wrinkle.

One aspect that I consider is what the property will be worth after the market corrects. I’m expecting a 50-60% correction which will drop my property back to what I have in it. From that perspective all I’ve lost is paper equity and I’ve kept a low tax payment and had a nice place to live.

Another consideration is the cost of selling. By the time I sell and pay taxes I’m “giving up” about $250K of this paper equity to RE agents and IRS. (yes, I’m aware of several ways to avoid paying capital gains so save your keystrokes inre that subject)

[Author]

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