[EconProf]

At the height of the mania for real estate (perhaps 2006 for residential, 2007 for commercial) the popular mood among investors was the sky’s the limit, look at recent appreciation, everything makes sense, drain your liquidity and borrow to the limit, etc., etc.
In retrospect, we were all drunk. Very few escaped the party atmosphere, although remarkably, many now claim they did.
I’d venture to say that everyone who bought then was speculating, rolling the dice.
Now that values have collapsed, buyers should be more characterized as investors than speculators. They are more likely to make money on cash flow than previous owners because they can slash rents below prevailing levels, attract tenants, and beat the competition who have high basis prices.
Additional evidence: When, throughout history, have RE buyers made the most money? When things look bleakest! Try 1933 anywhere in America, 1975 and 1985 in CA, 1995 in San Diego. Also, some of the price action of the REITS and other bottom fishers now suggests a bottom.
I am certainly not calling a bottom, and investing now is not for the faint of heart. But there are postiive signs out there along with all the negatives that many on this site are downplaying.

[EconProf]

At the height of the mania for real estate (perhaps 2006 for residential, 2007 for commercial) the popular mood among investors was the sky’s the limit, look at recent appreciation, everything makes sense, drain your liquidity and borrow to the limit, etc., etc.
In retrospect, we were all drunk. Very few escaped the party atmosphere, although remarkably, many now claim they did.
I’d venture to say that everyone who bought then was speculating, rolling the dice.
Now that values have collapsed, buyers should be more characterized as investors than speculators. They are more likely to make money on cash flow than previous owners because they can slash rents below prevailing levels, attract tenants, and beat the competition who have high basis prices.
Additional evidence: When, throughout history, have RE buyers made the most money? When things look bleakest! Try 1933 anywhere in America, 1975 and 1985 in CA, 1995 in San Diego. Also, some of the price action of the REITS and other bottom fishers now suggests a bottom.
I am certainly not calling a bottom, and investing now is not for the faint of heart. But there are postiive signs out there along with all the negatives that many on this site are downplaying.

[EconProf]

At the height of the mania for real estate (perhaps 2006 for residential, 2007 for commercial) the popular mood among investors was the sky’s the limit, look at recent appreciation, everything makes sense, drain your liquidity and borrow to the limit, etc., etc.
In retrospect, we were all drunk. Very few escaped the party atmosphere, although remarkably, many now claim they did.
I’d venture to say that everyone who bought then was speculating, rolling the dice.
Now that values have collapsed, buyers should be more characterized as investors than speculators. They are more likely to make money on cash flow than previous owners because they can slash rents below prevailing levels, attract tenants, and beat the competition who have high basis prices.
Additional evidence: When, throughout history, have RE buyers made the most money? When things look bleakest! Try 1933 anywhere in America, 1975 and 1985 in CA, 1995 in San Diego. Also, some of the price action of the REITS and other bottom fishers now suggests a bottom.
I am certainly not calling a bottom, and investing now is not for the faint of heart. But there are postiive signs out there along with all the negatives that many on this site are downplaying.

[EconProf]

At the height of the mania for real estate (perhaps 2006 for residential, 2007 for commercial) the popular mood among investors was the sky’s the limit, look at recent appreciation, everything makes sense, drain your liquidity and borrow to the limit, etc., etc.
In retrospect, we were all drunk. Very few escaped the party atmosphere, although remarkably, many now claim they did.
I’d venture to say that everyone who bought then was speculating, rolling the dice.
Now that values have collapsed, buyers should be more characterized as investors than speculators. They are more likely to make money on cash flow than previous owners because they can slash rents below prevailing levels, attract tenants, and beat the competition who have high basis prices.
Additional evidence: When, throughout history, have RE buyers made the most money? When things look bleakest! Try 1933 anywhere in America, 1975 and 1985 in CA, 1995 in San Diego. Also, some of the price action of the REITS and other bottom fishers now suggests a bottom.
I am certainly not calling a bottom, and investing now is not for the faint of heart. But there are postiive signs out there along with all the negatives that many on this site are downplaying.

[EconProf]

In weighing the merits of buying distressed commercial and residential properties, or the loans thereon, keep in mind the ease of renting them at vastly lower rents. You can steal tenants from the competition which is in denial not only about the value of their own property, but the sinking rental value as well.
When you buy a property at half its peak price, you can slash the rents to fill it up and still make cash flow.
I recall the early and mid-1990s apartment market in San Diego. When gloom and doom prevailed as apartment vacancies were in the teens, a few brave souls bought buildings for $30k per door, slashed rents, and filled up, much to the distress of mom and pop owners who refused to face market realities. Many of them suffered 30 to 40% vacancy rates rather than cut rents. Most went under, adding to the inventory for the bottom-fishers to scoop up.

[EconProf]

In weighing the merits of buying distressed commercial and residential properties, or the loans thereon, keep in mind the ease of renting them at vastly lower rents. You can steal tenants from the competition which is in denial not only about the value of their own property, but the sinking rental value as well.
When you buy a property at half its peak price, you can slash the rents to fill it up and still make cash flow.
I recall the early and mid-1990s apartment market in San Diego. When gloom and doom prevailed as apartment vacancies were in the teens, a few brave souls bought buildings for $30k per door, slashed rents, and filled up, much to the distress of mom and pop owners who refused to face market realities. Many of them suffered 30 to 40% vacancy rates rather than cut rents. Most went under, adding to the inventory for the bottom-fishers to scoop up.

[EconProf]

In weighing the merits of buying distressed commercial and residential properties, or the loans thereon, keep in mind the ease of renting them at vastly lower rents. You can steal tenants from the competition which is in denial not only about the value of their own property, but the sinking rental value as well.
When you buy a property at half its peak price, you can slash the rents to fill it up and still make cash flow.
I recall the early and mid-1990s apartment market in San Diego. When gloom and doom prevailed as apartment vacancies were in the teens, a few brave souls bought buildings for $30k per door, slashed rents, and filled up, much to the distress of mom and pop owners who refused to face market realities. Many of them suffered 30 to 40% vacancy rates rather than cut rents. Most went under, adding to the inventory for the bottom-fishers to scoop up.

[EconProf]

In weighing the merits of buying distressed commercial and residential properties, or the loans thereon, keep in mind the ease of renting them at vastly lower rents. You can steal tenants from the competition which is in denial not only about the value of their own property, but the sinking rental value as well.
When you buy a property at half its peak price, you can slash the rents to fill it up and still make cash flow.
I recall the early and mid-1990s apartment market in San Diego. When gloom and doom prevailed as apartment vacancies were in the teens, a few brave souls bought buildings for $30k per door, slashed rents, and filled up, much to the distress of mom and pop owners who refused to face market realities. Many of them suffered 30 to 40% vacancy rates rather than cut rents. Most went under, adding to the inventory for the bottom-fishers to scoop up.

[EconProf]

In weighing the merits of buying distressed commercial and residential properties, or the loans thereon, keep in mind the ease of renting them at vastly lower rents. You can steal tenants from the competition which is in denial not only about the value of their own property, but the sinking rental value as well.
When you buy a property at half its peak price, you can slash the rents to fill it up and still make cash flow.
I recall the early and mid-1990s apartment market in San Diego. When gloom and doom prevailed as apartment vacancies were in the teens, a few brave souls bought buildings for $30k per door, slashed rents, and filled up, much to the distress of mom and pop owners who refused to face market realities. Many of them suffered 30 to 40% vacancy rates rather than cut rents. Most went under, adding to the inventory for the bottom-fishers to scoop up.

[EconProf]

Strangely enough, banks will lend at a higher loan-to-value rate for buyers than they will the same guy who owns the property free and clear. In their infinite wisdom, they somehow think the buyer is a better risk than the (relatively) higher net worth guy who already owns the house. This works against those investors who can buy a fixer-upper super cheap, rehab it, then get a new loan on it, then repeat.

[EconProf]

Strangely enough, banks will lend at a higher loan-to-value rate for buyers than they will the same guy who owns the property free and clear. In their infinite wisdom, they somehow think the buyer is a better risk than the (relatively) higher net worth guy who already owns the house. This works against those investors who can buy a fixer-upper super cheap, rehab it, then get a new loan on it, then repeat.

[EconProf]

Strangely enough, banks will lend at a higher loan-to-value rate for buyers than they will the same guy who owns the property free and clear. In their infinite wisdom, they somehow think the buyer is a better risk than the (relatively) higher net worth guy who already owns the house. This works against those investors who can buy a fixer-upper super cheap, rehab it, then get a new loan on it, then repeat.

[EconProf]

Strangely enough, banks will lend at a higher loan-to-value rate for buyers than they will the same guy who owns the property free and clear. In their infinite wisdom, they somehow think the buyer is a better risk than the (relatively) higher net worth guy who already owns the house. This works against those investors who can buy a fixer-upper super cheap, rehab it, then get a new loan on it, then repeat.

[EconProf]

Strangely enough, banks will lend at a higher loan-to-value rate for buyers than they will the same guy who owns the property free and clear. In their infinite wisdom, they somehow think the buyer is a better risk than the (relatively) higher net worth guy who already owns the house. This works against those investors who can buy a fixer-upper super cheap, rehab it, then get a new loan on it, then repeat.

[EconProf]

If we can step down from the anger we all feel from the bubble and its inevitable popping, there may be a degree of resolution and, almost, justice in this outcome.
It’s been said that the whole mania involved stupid lenders making stupid loans to stupid people. Here the borrower is going to suffer since he is coughing up a lot of money from foolishly buying into the bubble mentality and is presumably a net loser even after paying only 25% of his 2d. The foolish lender will really take a haircut, and we piggs are happy to see he presumably did not sell the loan. And if he bought it from the originator he still deserves his fate for lack of due diligence.
Correct me if I am wrong, but don’t see any taxpayer money involved here. It is just possible that the guilty/foolish parties are the losers.

[Author]

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