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sdduuuude
ParticipantSurprisingly, I haven’t found that the people I use are having any trouble at all. I got a ridiculously high bid for a weekend side project and ended up doing it myself. I have been waiting for this to happen for a while now but the slowdown in that sector comes a bit later than in housing – a year or so, maybe.
One thing to do is ask around about architects. First the architects slow down, then construction.
sdduuuude
ParticipantA nice picture showing just how much you would have made, had you bought 2 years ago and sold today.
Even if you time it perfectly, buying in Sept. 04 and selling in Nov. 05, you still only make 2% after real estate and closing costs, with ALOT of work, hassle, and time spent.
sdduuuude
ParticipantI still think the intitial premise of this post doesn’t make sense – that IPayOne getting sold indicates problems with their business plan.
It is fair that you take issue with their business plan, however, just not based on the fact that the business was sold.
Assuming they are in failure mode, though, it is likely that such failure is a result of a real-estate shakeout that is surely occuring. Having industry sales cut by 30% or more in the last year is going to hurt a startup, regardless of how good their business plan is.
sdrealtor – you defend your profession admirably, by the way. And effectively.
When you point out the limited profit in the industry, I wonder if the internet and discount brokers haven’t already had an effect. Also, with the profit spread so thinly, any significant reduction in commissions could wipe out the industry. Thus, if someone can figure out how to use the net to make it more efficient, it could take over.
Also – could the internet make it possible for a single agent to be more productive, and thereby live on smaller commission rates?
Furthermore, I think Real Estate Agents themselves have contributed to making the process as convoluted as possible – through lobbying and lawsuits – so that people perceive the need for an agent. Nothing against specific agents, but I’m sure the NAR is not working towards a smoother homebuying process.
I have purchased a house with an agent, and without. I must say it was easier without. Many of the complicated items on the forms are there just to protect the liability of the agents themselves. When buying without, I could just skip those sections altogether. Plus, the escrow agent walked us through all the details.
Worried about lawsuits? Get a lawyer, find an experienced escrow agent and do your own deal. That’s what I say.
I think the online process could go very smoothly if overseen by an escrow agent and legal advisors on both sides. They would take a fraction of the 5% agent fees.
I suspect after the coming bad times pass, the internet will rule. For the time being, though, I see the stalled momentum in the market killing any new internet-based businesses that may want to try something new.
sdduuuude
ParticipantPerhaps this article will change your perspective a bit:
sdduuuude
ParticipantThis is an incorrect statement:
“If you bought into this premise two and a half years ago and decided not to buy because you thought things had peaked, you missed a huge run up in the value of what would now be your home”
The median prices has been flat for over two years in San Diego. This means if you tried to flip a house any time in the last two years, you would basically be out 6% in comission and closing costs. Many neighborhoods are down 10% from two years ago.
Phoenix is a little different because its run-up came later. However, this site was founded on San Diego data.
October 10, 2006 at 12:42 PM in reply to: Some advice on home loan interest rate vs. typical home appreciation rate #37590sdduuuude
Participantdoofrat – that is correct. It was just an example to show how important rent is when calculating the quality of the investment. You can’t just use the interest rate of the loan and the rate of growth of the house. By the way, I included no down payment in WORLD 1 – 100% financing was assumed to simplify the example. But if you do assume a down payment, of course you would have to look at the growth of that money.
i.e. your actual mileage may vary – do the numbers.
Also, as you say, if the asset you need is depreciating and you have an opportunity to buy later at a lower price, then do so.
sdduuuude
ParticipantI don’t understand how, when a company is purchased, that means its business model does not work. The logic doesn’t follow.
sdduuuude
ParticipantI forgot two others:
Lower interest rates and homebuilder stocks have stopped falling.
sdduuuude
ParticipantJust for the record – I don’t like this tucker post either.
Powayseller, don’t go for the bait. A good one to ignore for all of us. Just don’t post to it and let it drop out of site.
sdduuuude
ParticipantHmm. powayseller chased away Docteur a few weeks ago and Chris. Both super sharp guys who added an important perspective on our topics. Thanks alot.
This is a bad trade-off, in my opinion. Keeping powayseller and losing Chris.
This was a really is a bad place for investment advice and now it has gotten worse.
October 9, 2006 at 9:11 PM in reply to: Some advice on home loan interest rate vs. typical home appreciation rate #37535sdduuuude
ParticipantThe interest rate is the cost of the capital to purchase something that you would otherwise have to rent. Thus, in order to understand what you are “making” you have to understand what you would be paying in rent.
To help sort this out – assume two worlds. In one you rent and in the other you buy.
Lets ignore property taxes, income tax breaks, insurance (and anything else I forget or don’t want to calculate). You can add those in later.
In both worlds lets assume inflation is 5%, home
appreciation is 5% and interest rates are 5%.WORLD 1:
On day 1, You buy a $100,000 house with a 10-year fixed rate mortgtage of 100% of the home value. Your monthly payment is 1060.66 per month for 10 yearsAfter 10 years, you own a house worth $162,000.
WORLD 2:
On day 1, you rent a house with a 10-year lease at 1060.66 per month.After 10 years, you own nothing.
——————————————-
When you buy a house, you are using your monthly income to buy a durable capital good rather than burn it on an expense.
Another important thing to understand is that the useable life of the capital good is longer than the loan period.
This means you are paying a little more earlier in life to avoid paying rent later in life. In WORLD 1, after 10 years, your payment is zero. But in WORLD 2, you are still forking out rent, and your new lease payment will be higher due to inflation.
Even if the value of the house stays at $100,000, you have used debt to finance the purchase of a capital good that retains significant tangible value at the end of the loan.
Now, in reality, your rent probably wouldn’t be the exact same as your house payment and there would be maintenance expenses involved in keeping the house up. Lets say in WORLD 2, your rent is only $500. This means you can put away $560 per month into an investment that earns 5% per month. Cool, huh?
Well, after 10 years, you would still only have about $78,000 in the bank – well short of the $162,000 house in WORLD 2.
Try this analysis with reasonable “real-world” rents, interest rates, house values and a 30-year mortgage.
This is why the interest rates, home prices, AND the rental market need to be considered when purchasing a home or an investment property.
sdduuuude
ParticipantAnd it has been really nice. You are participating without being overbearing. I know this is like crack to you and you are looking for an excuse to spend 7 hours here, but don’t do it.
Maybe it just so happens that there isn’t that much going on and we don’t necessarily need someone to take over your role.
The quality of posts in general has been great, too. The threads have been interesting, with not much to weed through.
And if you do decide to fire up the news mill, please make a daily news thread so we don’t have 15 in a day.
sdduuuude
ParticipantGood idea for a thread, Powayseller. I must admit, I’m starting to like this Robini guy. If a recession starts in early 2007, I think it will last a looooong time because I see nothing good to pull us out of it in early 2008. I still think a recession may be a couple quarters past his prediction, but I am paying attention.
sdduuuude
Participantprivatebanker – hahahaha. I totally agree. You can find great and bad investment advice here. Problem is knowing which is which.
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