Forum Replies Created
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AuthorPosts
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March 19, 2008 at 6:55 PM in reply to: Property tax confusion for houses that sell for much less than what owner paid #173877
CA renter
ParticipantI hate to see fools being rewarded for their ignorance, but the only “loan modification” I support is either fixing the interest rate for the entire term of the fully-amortizing loan OR writing-down the principal amount. Thing is, the write-downs NEED to be used as comps for future purchases, as the new principal amount would be the correct market price.
Lenders should be able to choose between principal write-downs or foreclosures. Also, the FBs should have an unsecured loan for the amount that’s written-down, and the lender should be entitled to any amount received up to the original loan amount in any future sale to satisfy this loan. The lenders should not be able to carry these new unsecured loans as assets — they should be kept off their balance sheets since nobody knows when or if they will ever be repaid.
ParticipantI hate to see fools being rewarded for their ignorance, but the only “loan modification” I support is either fixing the interest rate for the entire term of the fully-amortizing loan OR writing-down the principal amount. Thing is, the write-downs NEED to be used as comps for future purchases, as the new principal amount would be the correct market price.
Lenders should be able to choose between principal write-downs or foreclosures. Also, the FBs should have an unsecured loan for the amount that’s written-down, and the lender should be entitled to any amount received up to the original loan amount in any future sale to satisfy this loan. The lenders should not be able to carry these new unsecured loans as assets — they should be kept off their balance sheets since nobody knows when or if they will ever be repaid.
ParticipantI hate to see fools being rewarded for their ignorance, but the only “loan modification” I support is either fixing the interest rate for the entire term of the fully-amortizing loan OR writing-down the principal amount. Thing is, the write-downs NEED to be used as comps for future purchases, as the new principal amount would be the correct market price.
Lenders should be able to choose between principal write-downs or foreclosures. Also, the FBs should have an unsecured loan for the amount that’s written-down, and the lender should be entitled to any amount received up to the original loan amount in any future sale to satisfy this loan. The lenders should not be able to carry these new unsecured loans as assets — they should be kept off their balance sheets since nobody knows when or if they will ever be repaid.
ParticipantI hate to see fools being rewarded for their ignorance, but the only “loan modification” I support is either fixing the interest rate for the entire term of the fully-amortizing loan OR writing-down the principal amount. Thing is, the write-downs NEED to be used as comps for future purchases, as the new principal amount would be the correct market price.
Lenders should be able to choose between principal write-downs or foreclosures. Also, the FBs should have an unsecured loan for the amount that’s written-down, and the lender should be entitled to any amount received up to the original loan amount in any future sale to satisfy this loan. The lenders should not be able to carry these new unsecured loans as assets — they should be kept off their balance sheets since nobody knows when or if they will ever be repaid.
ParticipantI hate to see fools being rewarded for their ignorance, but the only “loan modification” I support is either fixing the interest rate for the entire term of the fully-amortizing loan OR writing-down the principal amount. Thing is, the write-downs NEED to be used as comps for future purchases, as the new principal amount would be the correct market price.
Lenders should be able to choose between principal write-downs or foreclosures. Also, the FBs should have an unsecured loan for the amount that’s written-down, and the lender should be entitled to any amount received up to the original loan amount in any future sale to satisfy this loan. The lenders should not be able to carry these new unsecured loans as assets — they should be kept off their balance sheets since nobody knows when or if they will ever be repaid.
ParticipantRay,
That looks very similar to the PPNs referenced in my post.
————-
BTW, nobody is disputing that real estate **can be** a good investment. It can also be a very bad investment. When leveraged (you have a mortgage), you stand to lose more than 100% of your investment if you have a recourse loan (and the lender persues it).
What made me question Felix’s statements were the “buy now or be priced out FOREVER” nonsense along with the “you can’t time the market” nonsense added to the “real estate always goes up” nonsense. Those cliches are straight from the trolls’ handbook. There are plenty of people on these RE bubble sites who can debunk those claims over and over and over, again. If Felix were a successful trader, he would know better than to claim that markets can’t be timed. One needn’t pick the absolute tops and bottoms. Just get within 5-10% of them, and you’ll do very well for yourself — it’s easy to do once you leave your emotions out of it and look at the facts/run numbers.
ParticipantRay,
That looks very similar to the PPNs referenced in my post.
————-
BTW, nobody is disputing that real estate **can be** a good investment. It can also be a very bad investment. When leveraged (you have a mortgage), you stand to lose more than 100% of your investment if you have a recourse loan (and the lender persues it).
What made me question Felix’s statements were the “buy now or be priced out FOREVER” nonsense along with the “you can’t time the market” nonsense added to the “real estate always goes up” nonsense. Those cliches are straight from the trolls’ handbook. There are plenty of people on these RE bubble sites who can debunk those claims over and over and over, again. If Felix were a successful trader, he would know better than to claim that markets can’t be timed. One needn’t pick the absolute tops and bottoms. Just get within 5-10% of them, and you’ll do very well for yourself — it’s easy to do once you leave your emotions out of it and look at the facts/run numbers.
ParticipantRay,
That looks very similar to the PPNs referenced in my post.
————-
BTW, nobody is disputing that real estate **can be** a good investment. It can also be a very bad investment. When leveraged (you have a mortgage), you stand to lose more than 100% of your investment if you have a recourse loan (and the lender persues it).
What made me question Felix’s statements were the “buy now or be priced out FOREVER” nonsense along with the “you can’t time the market” nonsense added to the “real estate always goes up” nonsense. Those cliches are straight from the trolls’ handbook. There are plenty of people on these RE bubble sites who can debunk those claims over and over and over, again. If Felix were a successful trader, he would know better than to claim that markets can’t be timed. One needn’t pick the absolute tops and bottoms. Just get within 5-10% of them, and you’ll do very well for yourself — it’s easy to do once you leave your emotions out of it and look at the facts/run numbers.
ParticipantRay,
That looks very similar to the PPNs referenced in my post.
————-
BTW, nobody is disputing that real estate **can be** a good investment. It can also be a very bad investment. When leveraged (you have a mortgage), you stand to lose more than 100% of your investment if you have a recourse loan (and the lender persues it).
What made me question Felix’s statements were the “buy now or be priced out FOREVER” nonsense along with the “you can’t time the market” nonsense added to the “real estate always goes up” nonsense. Those cliches are straight from the trolls’ handbook. There are plenty of people on these RE bubble sites who can debunk those claims over and over and over, again. If Felix were a successful trader, he would know better than to claim that markets can’t be timed. One needn’t pick the absolute tops and bottoms. Just get within 5-10% of them, and you’ll do very well for yourself — it’s easy to do once you leave your emotions out of it and look at the facts/run numbers.
ParticipantRay,
That looks very similar to the PPNs referenced in my post.
————-
BTW, nobody is disputing that real estate **can be** a good investment. It can also be a very bad investment. When leveraged (you have a mortgage), you stand to lose more than 100% of your investment if you have a recourse loan (and the lender persues it).
What made me question Felix’s statements were the “buy now or be priced out FOREVER” nonsense along with the “you can’t time the market” nonsense added to the “real estate always goes up” nonsense. Those cliches are straight from the trolls’ handbook. There are plenty of people on these RE bubble sites who can debunk those claims over and over and over, again. If Felix were a successful trader, he would know better than to claim that markets can’t be timed. One needn’t pick the absolute tops and bottoms. Just get within 5-10% of them, and you’ll do very well for yourself — it’s easy to do once you leave your emotions out of it and look at the facts/run numbers.
ParticipantThis was too fun to pass up… 🙂 So much to refute, too little time. In keeping with Rich’s motto, “In God We Trust. Everyone Else Bring Data,” I am calling B.S. on Felix’s posts.
Felix said:
I was expecting only $3400/mo but got $3800/mo..
Ran a search on Craigslist for rentals between $3,000 and $4,000. Since Felix’s house was easily rented for $3,800, it must be real nice!
Here’s an example in La Costa (5 br). Based on text and advertised rent, looks like it was originally marketed for rent at $4,200 and is now available for $3,900. Didn’t get bid-up like Felix’s place (however, it does have an ocean view, like Felix’s rental):
http://sandiego.craigslist.org/nsd/apa/594895568.html
Here’s one (5br) in San Marcos for $3,295 (significantly lower than Felix’s):
http://sandiego.craigslist.org/nsd/apa/594896120.html
Another 5 br. “Sprawling & luxurious single level 3600 sq. ft. estate” in La Costa for $3,650:
http://sandiego.craigslist.org/nsd/apa/594516419.html
And this one (only 4 bedrooms, with a pool — check out the pics!), in Elfin Forest, where your kids can go to RSF Elementary School — a mere $3,250:
http://sandiego.craigslist.org/csd/apa/594787986.html
————————–I could go on…
Back to the point. If Felix bought an investment property in the “San Diego area” with an ocean view, and could **easily** rent it out for $3,800 (he only expected $3,400), how much would that house cost?
Look at the above rentals. They would all list for $700K to over $1 million, and probably sell for around $800K (or more, in the case of $3,800 rentals).
Felix claims to have paid cash for the home. Let’s be **extremely** generous and say he paid $700K on a house that rents for $3,800.
At $700K, the property taxes would run at least $8750/yr. (1.25% of purchase price with additional bonds, etc. and it could go higher if prices rise). He says insurance costs him $1,500 annually, and has “minimal” HOAs…we’ll say $40/mo = $480/yr. Let’s add a very optimistic amount for maintenance and property management (he said he’s an “outsider” who purchased a rental in SD)…$500/yr. Assume “optimistic” vacancy of one month every three years ($3800 per month/36 months) at $105.56/mo=$1,267/yr. Add all those costs up, and we get $12,497/yr. Since he paid cash, there’s no mortgage deduction, so we’ll take 33% off the prop taxes ($2887.50), and we arrive at net expenses of $9,609.50 per year.
If he earns $3,800/month, that’s $45,600 annually. Deduct the $9,609.50in costs, and we arrive at a net “profit” of $35,990.50. I’m being generous on all the rent and purchase price assumptions, etc., so we won’t get into depreciation or deductions on maintenance.
With these very optimistic assumptions, Felix would earn about 5% on his investments ($35,990.50/$700,000 = ~5%).
Here’s the fun part… Home prices haven’t yet begun to fall in the higher-end areas. He would have been safer buying “investment” properties in the already hard-hit areas. If the higher-end prices drop just half as much as the lower end (by 50% or more, already), that $700K house stands to lose 25%, or $175,000 within the next ten years (FWIW, I think the higher-end will lose at least 40%, but that’s just a guess). How about rents dropping? Recession? “Unexpected” maintenance costs? Transaction and sales costs if he needed to sell?
All this for a return that Felix could have gotten with Treasuries just a short while ago — and no tenant hassles.
Other things he could do with that money? JP Morgan is issuing Principal Protected Notes on a basket of emerging market currencies with a 200% participation rate. It matures in two years, and you are guaranteed to get your principal back if JPM is still solvent. You will earn a decent return if the dollar falls against these currencies. NOT INVESTMENT ADVICE!!!! — he was asking what else he could do with his money. You can research more here, and follow links:
http://en.wikipedia.org/wiki/Principal_protected_notes
The Yen and Swiss Franc are up over 10% within the past few months. There’s oil, gold, silver, platinum, commodities, etc.
Of course, a trader who’s been watching the credit bubble would have made **very** good money shorting homebuilders, lenders/banks, ratings agencies, retailers, etc. This would net much, much more than 5%, and you wouldn’t have to deal with the hassles of landlording.
It’s interesting that someone who claims to be an active stock trader (since 1983) and partner in two “successful” small trading firms, would buy a rental with 100% cash and not know where to find an easier way to make a 5% return. Not to mention the claim that this downturn will be “well over” in 18 months.
So…I’m calling it: Certifiable troll. 😉
ParticipantThis was too fun to pass up… 🙂 So much to refute, too little time. In keeping with Rich’s motto, “In God We Trust. Everyone Else Bring Data,” I am calling B.S. on Felix’s posts.
Felix said:
I was expecting only $3400/mo but got $3800/mo..
Ran a search on Craigslist for rentals between $3,000 and $4,000. Since Felix’s house was easily rented for $3,800, it must be real nice!
Here’s an example in La Costa (5 br). Based on text and advertised rent, looks like it was originally marketed for rent at $4,200 and is now available for $3,900. Didn’t get bid-up like Felix’s place (however, it does have an ocean view, like Felix’s rental):
http://sandiego.craigslist.org/nsd/apa/594895568.html
Here’s one (5br) in San Marcos for $3,295 (significantly lower than Felix’s):
http://sandiego.craigslist.org/nsd/apa/594896120.html
Another 5 br. “Sprawling & luxurious single level 3600 sq. ft. estate” in La Costa for $3,650:
http://sandiego.craigslist.org/nsd/apa/594516419.html
And this one (only 4 bedrooms, with a pool — check out the pics!), in Elfin Forest, where your kids can go to RSF Elementary School — a mere $3,250:
http://sandiego.craigslist.org/csd/apa/594787986.html
————————–I could go on…
Back to the point. If Felix bought an investment property in the “San Diego area” with an ocean view, and could **easily** rent it out for $3,800 (he only expected $3,400), how much would that house cost?
Look at the above rentals. They would all list for $700K to over $1 million, and probably sell for around $800K (or more, in the case of $3,800 rentals).
Felix claims to have paid cash for the home. Let’s be **extremely** generous and say he paid $700K on a house that rents for $3,800.
At $700K, the property taxes would run at least $8750/yr. (1.25% of purchase price with additional bonds, etc. and it could go higher if prices rise). He says insurance costs him $1,500 annually, and has “minimal” HOAs…we’ll say $40/mo = $480/yr. Let’s add a very optimistic amount for maintenance and property management (he said he’s an “outsider” who purchased a rental in SD)…$500/yr. Assume “optimistic” vacancy of one month every three years ($3800 per month/36 months) at $105.56/mo=$1,267/yr. Add all those costs up, and we get $12,497/yr. Since he paid cash, there’s no mortgage deduction, so we’ll take 33% off the prop taxes ($2887.50), and we arrive at net expenses of $9,609.50 per year.
If he earns $3,800/month, that’s $45,600 annually. Deduct the $9,609.50in costs, and we arrive at a net “profit” of $35,990.50. I’m being generous on all the rent and purchase price assumptions, etc., so we won’t get into depreciation or deductions on maintenance.
With these very optimistic assumptions, Felix would earn about 5% on his investments ($35,990.50/$700,000 = ~5%).
Here’s the fun part… Home prices haven’t yet begun to fall in the higher-end areas. He would have been safer buying “investment” properties in the already hard-hit areas. If the higher-end prices drop just half as much as the lower end (by 50% or more, already), that $700K house stands to lose 25%, or $175,000 within the next ten years (FWIW, I think the higher-end will lose at least 40%, but that’s just a guess). How about rents dropping? Recession? “Unexpected” maintenance costs? Transaction and sales costs if he needed to sell?
All this for a return that Felix could have gotten with Treasuries just a short while ago — and no tenant hassles.
Other things he could do with that money? JP Morgan is issuing Principal Protected Notes on a basket of emerging market currencies with a 200% participation rate. It matures in two years, and you are guaranteed to get your principal back if JPM is still solvent. You will earn a decent return if the dollar falls against these currencies. NOT INVESTMENT ADVICE!!!! — he was asking what else he could do with his money. You can research more here, and follow links:
http://en.wikipedia.org/wiki/Principal_protected_notes
The Yen and Swiss Franc are up over 10% within the past few months. There’s oil, gold, silver, platinum, commodities, etc.
Of course, a trader who’s been watching the credit bubble would have made **very** good money shorting homebuilders, lenders/banks, ratings agencies, retailers, etc. This would net much, much more than 5%, and you wouldn’t have to deal with the hassles of landlording.
It’s interesting that someone who claims to be an active stock trader (since 1983) and partner in two “successful” small trading firms, would buy a rental with 100% cash and not know where to find an easier way to make a 5% return. Not to mention the claim that this downturn will be “well over” in 18 months.
So…I’m calling it: Certifiable troll. 😉
ParticipantThis was too fun to pass up… 🙂 So much to refute, too little time. In keeping with Rich’s motto, “In God We Trust. Everyone Else Bring Data,” I am calling B.S. on Felix’s posts.
Felix said:
I was expecting only $3400/mo but got $3800/mo..
Ran a search on Craigslist for rentals between $3,000 and $4,000. Since Felix’s house was easily rented for $3,800, it must be real nice!
Here’s an example in La Costa (5 br). Based on text and advertised rent, looks like it was originally marketed for rent at $4,200 and is now available for $3,900. Didn’t get bid-up like Felix’s place (however, it does have an ocean view, like Felix’s rental):
http://sandiego.craigslist.org/nsd/apa/594895568.html
Here’s one (5br) in San Marcos for $3,295 (significantly lower than Felix’s):
http://sandiego.craigslist.org/nsd/apa/594896120.html
Another 5 br. “Sprawling & luxurious single level 3600 sq. ft. estate” in La Costa for $3,650:
http://sandiego.craigslist.org/nsd/apa/594516419.html
And this one (only 4 bedrooms, with a pool — check out the pics!), in Elfin Forest, where your kids can go to RSF Elementary School — a mere $3,250:
http://sandiego.craigslist.org/csd/apa/594787986.html
————————–I could go on…
Back to the point. If Felix bought an investment property in the “San Diego area” with an ocean view, and could **easily** rent it out for $3,800 (he only expected $3,400), how much would that house cost?
Look at the above rentals. They would all list for $700K to over $1 million, and probably sell for around $800K (or more, in the case of $3,800 rentals).
Felix claims to have paid cash for the home. Let’s be **extremely** generous and say he paid $700K on a house that rents for $3,800.
At $700K, the property taxes would run at least $8750/yr. (1.25% of purchase price with additional bonds, etc. and it could go higher if prices rise). He says insurance costs him $1,500 annually, and has “minimal” HOAs…we’ll say $40/mo = $480/yr. Let’s add a very optimistic amount for maintenance and property management (he said he’s an “outsider” who purchased a rental in SD)…$500/yr. Assume “optimistic” vacancy of one month every three years ($3800 per month/36 months) at $105.56/mo=$1,267/yr. Add all those costs up, and we get $12,497/yr. Since he paid cash, there’s no mortgage deduction, so we’ll take 33% off the prop taxes ($2887.50), and we arrive at net expenses of $9,609.50 per year.
If he earns $3,800/month, that’s $45,600 annually. Deduct the $9,609.50in costs, and we arrive at a net “profit” of $35,990.50. I’m being generous on all the rent and purchase price assumptions, etc., so we won’t get into depreciation or deductions on maintenance.
With these very optimistic assumptions, Felix would earn about 5% on his investments ($35,990.50/$700,000 = ~5%).
Here’s the fun part… Home prices haven’t yet begun to fall in the higher-end areas. He would have been safer buying “investment” properties in the already hard-hit areas. If the higher-end prices drop just half as much as the lower end (by 50% or more, already), that $700K house stands to lose 25%, or $175,000 within the next ten years (FWIW, I think the higher-end will lose at least 40%, but that’s just a guess). How about rents dropping? Recession? “Unexpected” maintenance costs? Transaction and sales costs if he needed to sell?
All this for a return that Felix could have gotten with Treasuries just a short while ago — and no tenant hassles.
Other things he could do with that money? JP Morgan is issuing Principal Protected Notes on a basket of emerging market currencies with a 200% participation rate. It matures in two years, and you are guaranteed to get your principal back if JPM is still solvent. You will earn a decent return if the dollar falls against these currencies. NOT INVESTMENT ADVICE!!!! — he was asking what else he could do with his money. You can research more here, and follow links:
http://en.wikipedia.org/wiki/Principal_protected_notes
The Yen and Swiss Franc are up over 10% within the past few months. There’s oil, gold, silver, platinum, commodities, etc.
Of course, a trader who’s been watching the credit bubble would have made **very** good money shorting homebuilders, lenders/banks, ratings agencies, retailers, etc. This would net much, much more than 5%, and you wouldn’t have to deal with the hassles of landlording.
It’s interesting that someone who claims to be an active stock trader (since 1983) and partner in two “successful” small trading firms, would buy a rental with 100% cash and not know where to find an easier way to make a 5% return. Not to mention the claim that this downturn will be “well over” in 18 months.
So…I’m calling it: Certifiable troll. 😉
ParticipantThis was too fun to pass up… 🙂 So much to refute, too little time. In keeping with Rich’s motto, “In God We Trust. Everyone Else Bring Data,” I am calling B.S. on Felix’s posts.
Felix said:
I was expecting only $3400/mo but got $3800/mo..
Ran a search on Craigslist for rentals between $3,000 and $4,000. Since Felix’s house was easily rented for $3,800, it must be real nice!
Here’s an example in La Costa (5 br). Based on text and advertised rent, looks like it was originally marketed for rent at $4,200 and is now available for $3,900. Didn’t get bid-up like Felix’s place (however, it does have an ocean view, like Felix’s rental):
http://sandiego.craigslist.org/nsd/apa/594895568.html
Here’s one (5br) in San Marcos for $3,295 (significantly lower than Felix’s):
http://sandiego.craigslist.org/nsd/apa/594896120.html
Another 5 br. “Sprawling & luxurious single level 3600 sq. ft. estate” in La Costa for $3,650:
http://sandiego.craigslist.org/nsd/apa/594516419.html
And this one (only 4 bedrooms, with a pool — check out the pics!), in Elfin Forest, where your kids can go to RSF Elementary School — a mere $3,250:
http://sandiego.craigslist.org/csd/apa/594787986.html
————————–I could go on…
Back to the point. If Felix bought an investment property in the “San Diego area” with an ocean view, and could **easily** rent it out for $3,800 (he only expected $3,400), how much would that house cost?
Look at the above rentals. They would all list for $700K to over $1 million, and probably sell for around $800K (or more, in the case of $3,800 rentals).
Felix claims to have paid cash for the home. Let’s be **extremely** generous and say he paid $700K on a house that rents for $3,800.
At $700K, the property taxes would run at least $8750/yr. (1.25% of purchase price with additional bonds, etc. and it could go higher if prices rise). He says insurance costs him $1,500 annually, and has “minimal” HOAs…we’ll say $40/mo = $480/yr. Let’s add a very optimistic amount for maintenance and property management (he said he’s an “outsider” who purchased a rental in SD)…$500/yr. Assume “optimistic” vacancy of one month every three years ($3800 per month/36 months) at $105.56/mo=$1,267/yr. Add all those costs up, and we get $12,497/yr. Since he paid cash, there’s no mortgage deduction, so we’ll take 33% off the prop taxes ($2887.50), and we arrive at net expenses of $9,609.50 per year.
If he earns $3,800/month, that’s $45,600 annually. Deduct the $9,609.50in costs, and we arrive at a net “profit” of $35,990.50. I’m being generous on all the rent and purchase price assumptions, etc., so we won’t get into depreciation or deductions on maintenance.
With these very optimistic assumptions, Felix would earn about 5% on his investments ($35,990.50/$700,000 = ~5%).
Here’s the fun part… Home prices haven’t yet begun to fall in the higher-end areas. He would have been safer buying “investment” properties in the already hard-hit areas. If the higher-end prices drop just half as much as the lower end (by 50% or more, already), that $700K house stands to lose 25%, or $175,000 within the next ten years (FWIW, I think the higher-end will lose at least 40%, but that’s just a guess). How about rents dropping? Recession? “Unexpected” maintenance costs? Transaction and sales costs if he needed to sell?
All this for a return that Felix could have gotten with Treasuries just a short while ago — and no tenant hassles.
Other things he could do with that money? JP Morgan is issuing Principal Protected Notes on a basket of emerging market currencies with a 200% participation rate. It matures in two years, and you are guaranteed to get your principal back if JPM is still solvent. You will earn a decent return if the dollar falls against these currencies. NOT INVESTMENT ADVICE!!!! — he was asking what else he could do with his money. You can research more here, and follow links:
http://en.wikipedia.org/wiki/Principal_protected_notes
The Yen and Swiss Franc are up over 10% within the past few months. There’s oil, gold, silver, platinum, commodities, etc.
Of course, a trader who’s been watching the credit bubble would have made **very** good money shorting homebuilders, lenders/banks, ratings agencies, retailers, etc. This would net much, much more than 5%, and you wouldn’t have to deal with the hassles of landlording.
It’s interesting that someone who claims to be an active stock trader (since 1983) and partner in two “successful” small trading firms, would buy a rental with 100% cash and not know where to find an easier way to make a 5% return. Not to mention the claim that this downturn will be “well over” in 18 months.
So…I’m calling it: Certifiable troll. 😉
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