Second’ Homes An Indulgence, Not A Moneymaker’
A Philadelphia Inquirer columnist has this on second homes. “One of my fantasies is to have a second home near a Vermont ski resort. As impractical as this is, I’ve watched the for-sale listings on Realtor.com and seen some appealing properties languish for months.”
“And a buddy of mine complains that he couldn’t possibly sell his Vermont home for as much as he paid five or six years ago. It seems like the real estate market has cooled, not just in Vermont but also in many parts of the country. Maybe it’s turning into a buyers’ market. So is this a good time to shop for that second home you’ve wanted?”
“Perhaps, but only if you expect to keep the second home for many years and view it as an indulgence rather than an investment. The days of flipping second homes for quick profit appear to be over.”
“The NAR reported Tuesday that sales of existing homes fell 2.8 percent from December to January, the fifth straight month of declining sales. January sales were 5.2 percent below those of January 2005. The Northeast was particularly hard hit, with sales off 10 percent from December to January and down 13.2 percent since January 2005.”
“While sales of single-family homes dropped only 1.5 percent from December to January, condo and co-op sales dropped a whopping 10.6 percent. Previously, this was one of the hottest markets, as buyers gobbled up second homes as investments. The falling sales confirm stories about investment properties sitting empty while speculators who had hoped for quick turnarounds slash prices in the absence of buyers.”
“Second homes and investment properties are hit hardest in a cooling market because people do not need them. As investments, second homes are illiquid: You can’t get your money out with the click of a mouse, as with a stock or mutual fund. Expenses of maintaining and running a second home can be offset by renting it part of the time, but to get the biggest tax benefit on a rental, you have to severely limit your own use. Also, dealing with renters can be a terrible headache, or a big expense if you hire a manager.”
“With real estate, many people focus on purchase price and sale price, figuring that if the second figure is bigger, they’ve made a profit. To be accurate, you should look at all the costs. Say you bought a place for $300,000, borrowing $240,000 at 6 percent. Suppose the property appreciated 6 percent a year, about double the inflation rate.”
“After five years, the property would be worth just over $400,000, for a $100,000 ‘profit’ on the $60,000 initially invested as the down payment. But interest would have cost about $70,000, reducing the profit to $30,000. A $30,000 gain on a $60,000 investment over five years is an annual return of about 8 percent, which is nothing special.”
“But you might also have paid $5,000 a year in real estate taxes, and an additional $1,000 a year in homeowner’s insurance. That’s $30,000 over five years, wiping out your profit. If you pay a standard 6 percent Realtor’s commission to sell the property, you’d be $24,000 in the hole. And we haven’t considered maintenance, utilities and furnishings, and the cost of traveling to the property.”
“Sure, some people make money on second homes, but I bet many are making less than they think. Best see that dream home for what it is: an extravagance, not a moneymaker.”
I didn’t have time to work in this bit of news:
‘Former Fannie Mae Chief Executive Officer Franklin Raines used the company’s charity to compromise the independence of six current directors at the largest U.S. mortgage finance company, according to a suit filed by shareholders in U.S. District Court in Washington, D.C.’
‘Raines allegedly dispensed grants exceeding $12 million from the Fannie Mae Foundation to groups such as the Brookings Institution and the John F. Kennedy Center, discouraging directors tied to the organizations from challenging policies that led to $10.8 billion in accounting errors, according to the complaint’
dont they mean hush money and i thought the realtors could sugar coat it.
this was also done at Enron, including contributing money to a university where one of the directors (wife of then Sen. Phil Graham) was a professsor.
another reason not to be fan of corporate charitable contributions.
Lingus
Sleep well my friend, for your forsworn enemies aren’t making hardly anything off of their Vt cottages.
The slimers will be selling them back to us for 25 cents on a dollar.
Second homes a money pit, not a money maker… (Unless tulip-mania temporarily results in an unprecedented bubble runup in prices!)
Chew on this;
The recent tax reform proposals that were sent to Bush including some hefty changes as they relate to realestate..Eliminating or at the least sevearly curtailing the mortgage interest deduction..I got to believe that when it washes out, most of the mortgage interest deduction will be retained…Just to much termoil if it were eliminated…However, I think the interest and real estate tax deduction on 2nd homes is VERY VUNERABLE…
Its quite understandable and the argumant can be made that the personal residence interest deduction incourages home ownership and home ownership inproves a society…Its much more difficult to make the same argument for someones beach house in Malibu…
“But you might also have paid $5,000 a year in real estate taxes, and an additional $1,000 a year in homeowner’s insurance. That’s $30,000 over five years, wiping out your profit. If you pay a standard 6 percent Realtor’s commission to sell the property, you’d be $24,000 in the hole. And we haven’t considered maintenance, utilities and furnishings, and the cost of traveling to the property.”
Oops, forgot to think about all those other expenses…
Yea, finally someone who works for the papers has figured out how to use a calculator, abacus, their fingers or whatever and determined that 2+2 doesn’t equal 5
Indeed, in all the hype about flipping for fun & profit during the boom, and leveraging your investments with “other people’s money,” the fact of all these costs was frequently swept under the table. Even when rates are low, “other people’s money” doesn’t come for free. Usury may be a sin, but it’s a fact of business life. Only now that the ride is over are people starting to say, “well, flipping wasn’t really as profitable as we thought it would be…”
And I’d guess the majority of second homes these days are either condo, or covered by HOAs, so the maitenance costs can be pretty steep month to month. Plus, you’ve got special assessments to worry about.
Want to rent it out to help pay the mortgage? The property management company takes a 30-50% cut for their time, and then you’ve got to worry about shrinkage and renter damage as well as higher insurance costs.
actually insurance is cheaper and mngmnt costs more like 15% iknow i rented out a few of my properties.however renters are morons they will drill holes in your wood kitchen cabinets demand new carpet when they stained it.all in all if you rent properties buy cheap old houses for cash and rent sect 8 they will deystroy it but at least you get paid,the worst renters i had were well off people w so so credit they want the house like they own it.
I was really burned once as a landlord as a “newbie”. The tenant was very street smart and figured out how to live in my homes for three months without paying a dime in rent. I filed against her for failing to pay…but you can’t get anything from someone who has nothing.
If I ever rent a house out again, I wil be sure to cross all my t’s and dot all my i’s. It isn’t all that easy to be a landlord. It is a liability. I have a property sitting vacant, but I figure I would be better off leaving it vacant because I don’t want to deal with S%^&!
30-50% cut for management… have never paid more than 12% for management. On multifamily (duplex) I got it down to 8% for quality management. But I only have exerience with long term rentals…I have heard that short term rental companies (popular on the coast/ski towns) do charge much higher amounts but the rental rates also much higher.
Its not hard to have cashflow from RENTAL properties in many parts of the country still.
Rentals and second/vacation homes are very different.
Reminds me of my “buddy” who I haven’t seen in a few years. He sent me a nice email which at one point started talking about the investment/vacation condo he bought up at Mammoth Mountain (Skiing). I assumed that as I read he would eventually offer the condo to my family If we ever wanted to use it for a weekend (that’s how friendships used to be)…Nope, I was shocked when he offered to RENT it to me for the week or weekend. What a pal…screw him. This is kind of like having the friend that sells Amway offering to sell you some shi#.
Most of the second homes will be on the auction block soon
“Second’ Homes An Indulgence, Not A Moneymaker’”—
The same could be said of first homes.
You don’t buy a first home to make money…..Its like my son said to me the other day “Dad, you could make so much money if you sold our house”..My answer; “And move where?”
Son; “It doesn’t matter, just go buy something cheaper”
Dad; “But I like where I live”
Son; (and I knew this was comming) “What if the house goes down in value Dad?”
Dad; “It does not matter son, it only matters if I want to sell which, I don’t”
I just don’t understand the mentality that we buy our house as if they were baseball trading cards…I purchased my house long ago..Its highly probable that its my last…
“You don’t buy a first home to make money”
Exactly. I plan to buy a home in the next couple of years despite the fact that residential real estate is expected to underperform other asset classes. The opportunity cost of not investing the funds tied up in the house is sobering, outweighing any reasonable expected appreciation on the house net of expenses. It will be the worst financial decision I’ve ever made (but not as bad as if I bought now). The house won’t be an “investment”. Rather, it will be merely a very expensive place to live–i.e., an indulgence.
The success of a home purchase is measured by the life it affords you, not by ROI.
Actually, BUYING a home for yourself IS an investment:
In normal markets, it is cheaper than renting in “lost money” costs (although it may be more expensive in total costs).
In normal markets, buying is a huge hedge against inflation.
In normal markets, when you pay off your mortgage, your housing costs plumet greatly.
As such, I plan to buy a house in a 2-7 years as the market returns to normla.
Especially McMansions purchased to increase tax breaks / capital gains.
If you could rent for cheaper in your area…then that is true. If owning is similar in price than this statement is not true.
Are these guys reading Ben’s Blog or what?
These reality articles are too much to bear.
This makes it sound like even buying a first home is a loser unless you have double digit appreciation years in a row.
Not true…Don’t you need (or want) a roof over your head of which you can control ??
Uuuuuuh…..a roof I can control ??
I live in Florida, 4 months to hurricane season and counting.
I’m currently renting a roof
OK. rent a roof…You can’t buy anyway so your opinion is mute…
OOOoowaaaaah, that was unexpected. I sense the frustration of …… a seller.
scdave…where are you coming from? I’m currently in the Miami area (got here last summer) and I could pay cash for a house if I wanted. it’s the LAST thing I would do (I ran all the numbers etc.). Like a few of these other guys, I’m renting a roof too, though it’s only a “partial” roof since it hasn’t been repaired yet from the last hurricane (Wilma). We wanted to rent. Why put up with all the crap facing Florida home owners! Bring on the hurricanes baby, I could care less if the house caves in, as long as I’m not in it. Our landlord could have sold before she rented to us, but a $400K profit in 5 years wasn’t enough for her. Here greed made her decide to wait (you know, for those 10-20% annual gains). She keeps insisting that we will want to buy it…HAH! Meanwhile comps in the neighboorhood are going down.
Sounds like my attitude on bay fill in the SF Bay area. When I buy, it won’t be on fill. But as a renter, I’m quite happy to be on fill: My bookshelves won’t fall on anybody in a major earthquake, and boo-hoo, if a big one hits (and all the buildings in the area get red-tagged), I just have to pick up my stuff and move.
Listen to both of you…One wants to rent because they live in Hurricane country and the other wants to rent because they live on unstable mud flats…
I prefer to live & OWN where I am not going to get blown away or sucked into the ground….
I hear that.
Not wishing ill will on anyone in the path of the coming hurricanes, but I say bring em on! And if my apartment or my stuff gets damaged you’d better believe I’ll bitch and moan to the landlord.
Correct me if I’m wrong, but this calculaton does not factor in the value of living in the house (the money saved by not renting). Assuming for discussion purposes a fair value of $1250 per month, the ’savings’ over 5 years is (60 x $1250) $75,000. So without getting into the time-value of money and opportunity costs, etc, etc, it is not such a bad deal or such a good deal. It is what real estate is under “normal” conditions.
For most second home buyers, the cost of using hotels or resorts would be a much better deal. Plus they could go to different places and not have the depreciation occurring; whether they used it or not.
Yep, I posted on this back in January of this year.
2 years of hotel nights at $300+/night is $220,000.
Assuming 4 weeks of vacation/year you would have to spend every night of your annual vacation at the same place for 26 years to break even.
That is a bad deal. The whole point of vacation is to travel.
You are right…when looking at a vacation home from the “investment” perspective (speculators etc.). Vacation homes are great for RICH folks who could care less about all the figures that we financial fundamental people come up with. They have vacation homes AND still do all the other travelling as well. It’s not a one or the other type decision for them. It is conspicuous consumption. Just like buying a $60K plus car, multi-million dollar yacht, etc.
People, don’t get too sucked in by all this talk of “2nd/vacation homes”. In my experience the MAJORITY of second homes purchased in the last 3-5 years were actually homes purchased with the intent to rent or flip. The buyers were claiming them to be second homes in order to obtain more favorable financing (you get better rates on second homes than on investment properties and this makes it more likely to break even or come out cashflow-positive).
It has only been in the last year or so that these “second homes” have been more closely scrutinized, i.e. the home would need to be in a “resort” area, at least 50 miles from the borrower’s primary residence”, etc.
People were even trying to buy “2nd homes” near college campuses so they could “visit their kids who just happened to be attending that same college “.
These same people would get REALLY pissed off when you saw through their BS and told them you did not intend to assist them in committing mortgage fraud.
Yep, a LOT of boomers were in on the flipping game, trust me.
Ben hit the nail on the head…
I agree that the math doesn’t work from the perspective of a second home. What I have a problem with is there appears to be no consistent and widely accepted methodology for assessing the true cost of home ownership. An accurate and unbiased formula, taking into account ALL of the economic costs of ownership, would provide a benchmark to better discuss this issue.
But David Bach from the Automatic Millionaire says that owning a home is the only way to become a Millionaire.
What gives?
(Sarcasm)
Wells Fargo was running ads on the radio in L.A. today, advertising one of Bach’s Automatic Millionaire seminars, and ensuring attendees that Wells Fargo bankers would be on hand to talk about mortgages. See this link to their web site:
http://tinyurl.com/k8kjd
It is truly disturbing to see a mainstream bank, which ought to be a symbol of prudence and restraint, co-marketing with a promoter like this. It wasn’t long ago when get-rich-in-real-estate schemes were advertised on late night TV and with full page ads in the newspapers, and that was it. Even a couple of years ago, it would have been unheard of for a reputable corporation to be allow its name to be associated with such a scheme, much less a major bank.
It’s bottom of the barrel scraping time. What was it a 30% drop in purchase applications I read about here?
That’s EXACTLY what it is. There’s just a last effort to find the last fools who still feel left out, who don’t see what we all see AND WANT TO BELIEVE THAT THE WAY TO ACHIEVE ETERNAL HAPPINESS IS TO PAY A FEE TO ATTEND A SEMINAR.
I did VA appraisal reports for Wells Fargo for years. They and their executive owned subsidiary VALUE-IT, are “KING” of the 24 hours “turnaround” appraisal. No hack-job appraisals or conflict of interests for this operation-LMAO. Plus they are total deadbeats on payment for services. Took 2 years to collect on debts. A total suck-azz company.
100k per month for raines- a thief but from a protected species, he’ll walk and we’ll pay
Flat:
Nice version… would you please stop posting racist comments.
To the point version…you are a dumbass.
Spare us your political correctness. If Raines were white, he would be headed to court like others of his ilk (Kenneth Lay, Bernie Ebbers, Marth Stewart, …)
he is not outa the woods yet i suspect he will face the music soon.
How is the race of the CEO of a company relevant to the housing bubble discussion.
It isn’t.
Fannie Mae hasn’t been indicted, declared bankruptcy or anyone charged with a crime.
Fannie Mae can’t publish their books. That isn’t a crime until after the revised books are published and the forensic accountants publish their findings.
Then you will find indictments and charges. Enron, MCI blew up in 2001. The Enron trial started in 2006. White collar crime cases take years to build. Raines isn’t off scot free and his race won’t make a difference when that day comes.
Keep your racist drivel to yourself.
Raines is relevant to the housing discussion because he was CEO of Fannie, and race is relevant to why he is getting off lightly. Sorry if it hurts to hear that race results in reverse discrimination, but please do not call this racist to point out the obvious truth.
Thank you Sun-B-Guy…Right on…
OK, you might have a point about my stupid intro.
However you haven’t responded to the lack of criminal wrongdoing due to no books and the legnth of time it takes to build white collar crime cases.
Come’on how could you put Martha Stewart in the same class as Kenneth Lay. I don’t think he had a problem with the theif comment but the “protected species” bit may have been over the top and is klan 101 speak.
Only in the same class because she went to trial (and hopefully because Lay will also go to prison); otherwise little similarity there.
I imagine it was the way it was phrased, since as human beings (Homo sapiens) we are all part of the same species.
Maybe he could have said protected class and it would have been less offensive - although, I’m sure someone would have gotten offended, but that’s life.
Claiming African-Americans are a different protected “species” sounds racist to me - only flat knows if that was his intention.
No trolling
George Bush’s Justice department protecting somebody cause they are black.
Thanx now I need a new monitor and keyboard cause I just spit coffee out my nose all over them.
You are funny.
Some of those numbers are low for florida. I dumped a condo in August. I was paying 11K/year
for taxes, 450/month for HOA, and I was hit four straight years in a row for an assessment from 1K
to 5k…It doesnt make sense to hold it if it isnt appreciating…I think a lot of people will start to try to dump second homes/condos once they realize there will be no appreciation in to the future
I don’t think he was talking about buying a first home. He is talking about getting a second vacation home.
We looked into a vacation home on the SC coast in 2002 but it did not make sense at those prices. I think it it was close to paying for 80% of it’s self over the life of the loan. I think three bedroom condos were in the 350,000.00 range then. That did not count time dealing with a manager or other B.S. It was just easier to rent a palce from someone else and leave the headaches and payments behind. Now I imagine it will be even easier to find a rental for a bettter price?
OT-
The perfect storm has begun.
Ben, can you please post a topic regarding the bank of japan and EUC central backs hawkish stance on inflation and its affects on bonds and thier proposed increases in their overnight lending rate. Two major mortgage rate price changes today as a result.
Yes, the bond market took quite a beating today both here and in Europe. Also, Japan’s bonds got whacked. And the Japanese CPI data out this evening lends credence to their CB starting to tighten monetary policy. Here’s a Bloomberg story on the situation. This may seem esoteric to your average homeowner, but the fact is, global bond markets are linked. If Japan is just starting to tighten liquidity/rates for the first time in several years … and Europe is only just now starting on ITS rate-hiking cycle (second of two hikes today), then our rates could be driven higher. Just some food for thought.
Japan’s Inflation Rate Quickens, Aiding Policy Change (Update3)
March 3 (Bloomberg) — Japan’s consumer prices rose at the fastest pace since 1998 in January, supporting the central bank’s case to end a deflation-fighting policy as soon as next week.
Core consumer prices, which exclude fresh food, increased 0.5 percent from a year earlier after 0.1 percent gains in November and December, the statistics bureau said today in Tokyo. That was more than the median 0.4 percent forecast of 33 economists surveyed by Bloomberg News.
The report may persuade the Bank of Japan to start reducing the amount of cash it pumps into the economy at a meeting next week, a precursor to lifting interest rates from near zero. Prime Minister Junichiro Koizumi said today he’s starting to see signs that deflation is ending, showing government support for the central bank to change the policy.
“The Bank of Japan’s preconditions” for changing its policy have been met, said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. Maguire predicts policy makers will cut the amount of cash pumped into the economy by about 5 trillion yen, or about 15 percent, at next week’s meeting.
Japan’s 10-year bonds dropped, sending yields to the highest since August 2004. The yield on the 1.6 percent bond due in March 2016 auctioned yesterday rose half a basis point to 1.66 percent as of 10:08 a.m. in Tokyo. The yen fell to 116.44 against the dollar, from 115.85 before the report was published.
Japan’s economy grew at an annualized 5.5 percent in the final three months of 2005, outpacing both Europe and the U.S. The economy will probably grow for a seventh straight year in 2006 and at its fastest pace since 1991, a survey of 16 economists surveyed by Bloomberg News between Feb. 17 and 27 said. That would mark its longest postwar expansion.
Preparing Investors
Bank of Japan Governor Toshihiko Fukui has been preparing investors for a change, saying policy will “immediately shift” once conditions set by the bank are met.
The central bank has vowed not to adjust its five-year-old policy until core prices stop falling for at least a few months and policy makers are sure they won’t resume sliding. It also needs to be confident about the overall strength of the economy.
Core prices in Tokyo, home to one in 10 Japanese, rose 0.2 percent in February, which show prices a month later than the national report, the first back-to-back gain since August 1998.
Excluding energy and food, Japan’s nationwide consumer prices rose 0.1 percent in January, the statistics bureau said. This gauge of prices is widely used in the U.S. and Europe to measure inflation.
The bank’s policy makers are scheduled to meet next on March 8-9, April 10-11 and April 28.
Making Progress
Finance Minister Sadakazu Tanigaki told reporters in Tokyo today the report shows Japan is making progress in beating deflation. Tanigaki said it is now up to the central bank to decide whether the conditions for shifting policy have been met.
The bank will hold interest rates near zero for a while after it reduces the 30 trillion yen ($258 billion) to 35 trillion yen of excess cash it now makes available to lenders, Fukui has said.
Three-month Euroyen futures indicate that traders are betting the central bank will raise interest rates by at least a quarter- percentage point in the last quarter of this year.
Core price gains accelerated in January mainly because the effects of a cut in phone charges from January 2005 eased, and because of gains in crude oil prices lifted the cost of gasoline, kerosene and other fuel products, the statistics bureau said today.
“Japan’s core consumer prices will continue to be pushed up by similar factors in February and March, and their increases are not likely to slow from April onwards,” because the economy will keep expanding, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo.
Wages
Monthly average wages, a key component that influences consumer prices, had their biggest gain in 18 months in December. Producer prices rose at the fastest pace in almost 16 years in January, prompting chemical and steel makers to pass on energy and commodity costs to customers.
Government officials signaled earlier this week that they won’t oppose a move by the central bank to cut the amount of cash it pumps into the economy, reversing their initial objections on concern it would cause rates to rise, stifling growth, and increasing interest payments on the nation’s debt.
Prime Minister Junichiro Koizumi and ruling Liberal Democratic Party’s policy council head Hidenao Nakagawa said on Feb. 27 the central bank should make its own decision when to change its policy as long as it cooperates with the government to beat more than seven years of deflation.
February consumer prices will be published on March 31 and March prices are due on April 28.
Basket of Goods
The government plans to adjust the basket of goods used to compile consumer prices in August, probably to include more consumer electronics items. Previous revisions lowered prices because of declines in the costs of some of the items added.
The central bank will release on April 28 its projection of annual core price gains for the year starting April 1 and the following one.
Bank of Japan officials have said they plan to present guidance to signal the bank’s policy direction and stabilize interest rate expectations when it announces a change to the policy.
The bank hasn’t decided whether to use a numerical price reference or “forward-looking language” to indicate future policy changes, Deputy BOJ Governor Toshiro Muto said on Feb. 2.
“Financial markets are now focusing on how the BOJ will describe its guideposts to contain interest rate increases, rather than the timing of a policy change,” said Yasunari Ueno, chief market economist at Mizuho Securities Japan Co. “It’s hard to stabilize market expectations with guidance which depends only on language.”
LDP’s Nakagawa has urged the central bank to target a 2 percent inflation rate.
Mikeeeee…doyou realy think anyone would read that essay…This is a blog my friend..short & to the point…
I know a lot of 2nd and 3rd home owners whistling past the graveyard.
What about those who bought 10?
This is a cecent analysis my wife & I did on considering purchasing a 2nd home near the beach but close to our personal residence (1 hour)
Cost about; 800K (were paying cash)
oportunity cost of our money; @ 6%…48K/yr….4K per month…
Taxes; $9600./Yr….$800. per month
Insurance; $1200./Yr….$100. per month…
Maintenance; $1200./Yr…$100. per month
Reserves for repairs; I will fix myself….
Totals; $60K/Yr…5K per month…
We figure we will spend 3 months per year (Top’s) at the house…
Thats 5K per week or $714.29 per night and I still have to fix the place as needed…
We decided we could RENT 12 different places in 12 different @ 5K per week and be even…
We passed on the beach house….
I can’t wait to see the upcoming articles about those dumbass parents who decided it made more sense to buy a property for their kid to live in in college, rather than dorming. How’s that $400,000 public school education looking now?
I bought my first house when I was still in collage. I rented out the other 3 rooms and they payed the morgage/taxes/insurance. I lived for free. When I moved away I rented it some older students that I knew and they took care of it for 4 more years, this entire time I had positive cash flow (including repairs). Then I sold it and made over 40k.
Could you do that now? I am not sure. I guess it depends upon the town/state. On the coasts I would guess not. But in many collage towns rents are higher compared to buying.
I did the same thing when I was 21 back in 1976 in Berkeley. Real estate was dead in the water. The home was $70K, I put 20% down (from an inheritance from my grandmother.) I rented out six (yes, six) bedrooms and lived in the seventh. I lived free and even had $150 extra a month.
I sold in 1979 when I graduated for $140K—100% gain in 2.5 years because RE was going thru one of its periodic booms. It sold in 3 hours for 5% over asking.
You can’t do anything like that today in Calif. Rents are too low, home prices are too high.
The home I rented back in 1976 for $900/mo would now rent for about $3,800—just about 4x higher. But the home itself is now worth about $1.3-$1.4M—20x higher.
So home prices have dramatically outstripped rents and just about any other category of expense over the last 30 years.
yeah, I remember those stories.
In some areas and conditions, buying for the kid is a VERY good idea.
EG, if you send em to some place like State College, PA, BUY, no question. PRices are so low, and dorm rates are still high enough that, if Jr is going to be there for 4 years, BUY. And as a bonus, you get a Football House ™ afterwards.
Likewise, when I got to grad school in Berkeley in 1995, I DAMN well wish I had my spreadsheet then, I would have taken a loan from the Bank of Grandma (bank interest, but no points and I’m preapproved) and bought a 1-2 bdrm condo in Berkeley.
Earlier this week I called a northern Maine real estate brokerage about 18 acres with a spectacular mountain view for $29,000. They told me it had just been sold and was immediately relisted for $49,000. I told them they were crazy. The $29,000 price was high for the area. The $49,000 is insane. What is scary is that now that outsiders are strting to “discover” the area they will pay these sorts of stupid prices thinking they are a deal. Of course if enough come, they’ll be right. I’m just going to keep looking and hope these folks get stuck.
Meanwhile, I am very hopeful that one day we’ll be able to snatch up a ski condo cheap at Sunday River which has been incredibly overbuilt. It hasn’t happened yet, but we’re hopeful.
For us it would be a luxury. It’s 75 minutes from the Portland suburb we live in and having a condo makes more sense than driving up and down a couple times on a weekend to get in a couple days of skiinh, or hiking or leaf peeping. And it’s nice to not have to lug equipment. On the other hand, I’m sure motels would be cheaper and I don’t know if I like the idea of being imprisoned by a second home. With motels, you get the variety of going everywhere.
Lately I’ve been seeing lots of ads for quarter shares at Sunday River. More than I’ve ever seen. Does this mean they are running out of fools and now just hoping to find quarter fools?
Any thoughts on quarter share ownership? Just toying with the idea at this point.
And 29k for 18acres is a rip off but that is exactly what I’ve seen here in VT and NH. Some stupid bastard from NJ, CT or Philly thinks its a “bargain”. What they don’t know is that there are literally hundreds of thousands of acres just like it that can barely yield $500 an acre. These idiots don’t even compare prices. All they feel is greed and plunk down borrowed cash or owner terms. Property taxes in New England are oppressive and there is little if any demand for acreage here. IF they want to dump this land, they will be giving it away.
You don’t know how many out of state retards I’ve encountered over the years who buy this dirt, make big plans and ultimately dump the property for far less than they paid. I estimate I’ve known or heard of hundreds of these dummies.
RE, bonds, equities, no matter what, you better know your market. Clearly, these dipshits don’t know the market.
Lingus,
Exactly. They don’t know their market and the only research they know is an acre might cost $250,000 in NJ, so multiple acres for $29K or $49K or whatever are a steal. As you say, there are hundreds of thousands of acres that will barely yield $500 an acre.
We last purchased land up there in 2000 and paid exactly $500 an acre for 15 acres of mixed hardwoods which had just undergone a light cut. It didn’t have any view but there’s lots of valuable timber, including a good amount of large ash. We bought it as a preserve to buffer some land we already owned, simply so we won’t have to worry about being crowded in. (And BTW, we would never post it or forbid hunting). Anyway, the idea that six years later nearby land without any good timber is now listed at about $3,000 an acre is absurd.
I sure hope that those paying these prices get burnt as you have witnessed in Vermont. Development is coming to interior Maine, but Vermont is probably 20 years ahead of us in this regard. We are a little more distant from New York and also have not been infiltrated anywhere near as much by ski areas as Vermont,
I’ve read similar stories about people buying land in the interior of Utah without personally visiting it first. They are blinded by speculative greed and they find out later that there are no roads to their parcel, no services, no towns nearby, etc. When they call the county administration to see what they can do with the land they are told “nothing”.
We bought a second home 14 yrs ago. Best thing we have ever done. More enjoyment, relaxation, and fun than you could ever put a price on. Of course, we could afford it. I suppose we could have put the money in the s&p but life is short.
You miss the point. Your ability to afford a money losing 2nd home isn’t relevant.
No one here can confirm or deny your ability to afford a money losing but gratifying second home.
Exactly. Consider the opportunity cost of that money.
For the amount spent on a vac home one could stay at 5-star hotels (at various places) for months out of the year.
You and sunset “miss the point”. It is not always about the money or the best investment. This place has been “priceless” to us.
va_vestor; Where is this 2nd box you speak of?
Oh, my old friend Lingus. This is an 800sq ft beach front shack on the 3 mile wide, sandy beach, Potomac River about 15 miles east of Fredericksburg, Va. (I-95). It is 1 & 1/2 hours door to door from our home.
We were 32 and 33 when we bought it and our son had just turned 2. From a quality of life standpoint, this purchase is far and away the best thing we have done over our 25+ years of marriage.
It is paid for and I could never imagine selling it for any reason. Not to piss you off, or get you started on equity nomads; but our 92 acre waterfront non-farm is about 5 miles away from our cottage.
Actually I see the point rather clearly.
VAIN_vestor bragging about his paid for holdings that no one can verify, again.
Sunset,
You can hate me all you want. Hope I get hit by a truck or whatever. The fact is that we have been successful in real estate investing for over 20 years. It is not a fool’s game unless one is a fool. Our investments have been part of a well thought out financial plan.
Sorry if this bursts your bubble.
Your claims cannot be verified over the internet so your boasts mean nothing.
I don’t know what you are hoping to get out of posting unverifiable claims of RE wealth on a housing bubble blog.
All of the advice on this blog is as valuable as what someone is paying for it.
I don’t particularly wish you any ill will other than marginal blog ill will reserved for anonymous internet boasting and morality lecturing.
The worst I can do is point out anonymous and unverifiable internet boasting and let the other readers decide.
I am not offering any advice to anyone. I think we are headed for a correction and have not bought since 2002. Even then, and before then, we were mainly doing 1031’s into bargain properties.
This thread is about second homes and I opined that a second home should be viewed as a quality of life issue and not as an investment. Why this set you off, I don’t know. What followed was a result of your initial attack.
OK, I will consider it.
I call a moratorium on aggressive postings toward you.
I respectfully request that you keep wealth boasting to a minimum.
Agreed.
Wow… Were did all this stem from? And VAinvestor, I are we old chums?
Um….not exactly “old chums”. As I recall, you blasted me pretty good for buying what you termed a “non-farm” and, thereby, somehow destroying an entire community’s way of life. I think that about sums it up.
Oh yeah. You said you own a farm. And it so happened that you bought a defunct farm. I remember now. Neither here nor there.
Hey Portland Mainer-Remember the Patten Land Company from the late 80’s? They were sellin’ lots in the middle of nowhere to urban rubes, sight unseen. Eventually the Ponzi scheme came to an end. It’s all just history repeating itself, except this time it’s 10X worse, Besides, all it takes is a serious black-flie hatch during a visit to view their “holdings” in order to send these land spec idiots scurry back to their urban/suburban enclaves.
I vaguely recall Patten. Were they based in Patten? These days that area is changing. There’s now a fancy art gallery in Millinocket, a Yoga retreat and gourmet restaurant in Island Falls, broadband Internet, etc. I think the folks from megalopolis are there to stay, including a lot of equity bandits from southern Maine. But the idea of 18 acres (even with a great view of the mountain) for $49,000 is absurd. The listing was just sitting there for months at $29,000. So I guess some rocket scientist buys it and thinks he’ll unload it for $49,000.
Boy do I hope this person proves to be a moron and gets burnt.
Why not get a micro-storage rental instead as a place to stow your gear at/near theslopes?
Interesting, but we’d still have to put the skis on the roof rack. There are lots of storage places up here. They primarily serve folks in trailers who don’t have adequate storage.
OT, but this is unbelievable to me. Here’s a guy on the SD “investors” board.
A bunch of speculators are buying houses in an armpit site unseen, and I’ll wager it’s only because prices are cheap relative to San Diego. And this Einstein wants to join in.
And here they are going gaga over Knoxville, Tennessee. I am crapping you negative. I have been to Knoxville. There is no reason for anyone to bid up the price of a tract house there.
Don’t they make JD near there?
Oh that would make me overbid. I like my JD wonder if a case comes with the house
Knoxville? My parents live there, and the house behind them sat on the market for a year before it sold ($600k). It’s a nice area, but house prices barely appreciate, and the market for anything more than your standard 4br is dead, and has been for quite some time.
That’s nothing. Here’s a guy on the SD board who bought 15 (fifteen) homes based (almost) entirely on the NAR’s quarterly appreciation numbers:
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=444014
Ah yes. “Jeff”. The guy with the teeth. He seems to be the big cheese there.
Good old fashioned Pump and Dump in El Paso.
I like their picante sauce though.
But at least he’s diversified:
“Oh I forgot, one final thing I look for is diversification. As safe as real estate is, a factory layoff or a base closure could seriously hurt a whole area (or a hurricane…or volcano?). But if I am spread out over 6 states, a volcano won’t be able to get ALL my homes.”
You guys missed some of the better posts elsewhere in the forum. They are like drug addicts one guy says
“with the emergence of the Pacific Rim as the dominant player, CA will become the center of the universe. We could be just at the very beginning of a almost permanent bull market for CA RE as it is one of the most desireable places to live in the world and when China’s nearly 2 billion people start looking for investments, right at the top will be CA RE.”
Oh my gosh, they ate it up and really belive that, some of those sorry people believe we will be in a perpetual state of 20% YOY gains, and that the WHOLE WORLD will invest their excess capital in real estate.
That is beyond delusional.
Foreign central banks now have over $500 billion worth of Fannie Mae and other mortgage paper. That’s mostly China and Japan. So in many regards, they ALREADY own plenty of US real estate. Don’t think they want to add more.
Doesn’t the SEC go after guys that blog stuff like this about stocks etc? Buy penny stocks, write a bunch of BS on as many blogs as you can to create interest and run the price up temporarily, and then cash out before people discover it was all a ruse. Why don’t the same rules apply here?
here’s his houses
Is it a bad sign that he can’t even spell the name of the town where he’s bought a house.
That guy Jeff is in a for a ton of hurt. He better cancel those contracts on those houses that haven’t been built yet. Just when you think you have seen everything a bigger idiot comes along. His investing strategy is very faulty. He must be reading “Tom Vu on meth investing for wealth”
“You afraid to be rich”
Tom Vu
The guy in Florida that took over Vu’s enterprise and used video from his infomercials has been in jail for some time for his fraudulent activities - but, Tom got out at the top and missed prosecution, I think.
Most of those guys wind up in jail or in the courthouse fighting the I.R.S. I’m surprised Carlton Sheets has lasted so long
“given the fact that I have only been investing for roughly 3
months and I am a “buy and hold” strategy guy.”
“In fact, if I just see a 10% return on average over the
next few years my 2.7 million portfolio will return (on
paper) 270k a year. Such is the power of leverage. Of
course, if “the bubble” bursts and we all see a 10% DECLINE,
then I will be LOSING (on paper) 270k a year. This is why
I have trouble sleeping at night (did I mention that all these
homes were bought with 100% borrowed money? …even more
stress).”
wow.
Sounds like he is into S & M in his spare time. How can someone rationally walk in to something like that. But wait I forgot it’s the realtors and mortgage brokers fault.
I wouldn’t sleep at all….
This guy really scares me…as long as house prices keep going up and he leverages with OPM, he’s a multi-trillionaire…why aren’t more people doing this (see below):
“If we are “good” at what we do (return greater than
50%?), we should be borrowing every dime that we
can and putting it into RE. Why NOT borrow at 6.5%,
10%, heck even 20% if we are getting a 50%, or 100%,
or 600% return!?”
El Paso…what a scary dump. It is pure speculative greed that is driving ANY purchases there. There is a valid reason why it is cheap and why it will stay that way.
Jeff again:
“Of course, if “the bubble” bursts and we all see a 10% DECLINE, then I will be LOSING (on paper) 270k a year. This is why I have trouble sleeping at night (did I mention that all these homes were bought with 100% borrowed money?”
The guys got moxie!
No, the guy is a MORON.
I was wondering when this guy would come up on the radar here. I’ve been seeing some of the more savvy investors (the ones that believe in positive cash flow) talk some sense into this guy but the poor chap doesn’t seem to get it.
Under his name is the slogan “the first million is the hardest”
says it all right there.
I clicked on Jeff’s profile. He’s a full time father.
He used to be a teacher I think, making in the 30k’s/yr. He gave it up to become an investor.
Isn’t it sad that we all know so much about Jeff lol!
testing……
Truely a must read post on craigslist. Get paid to go to an open house…
http://orangecounty.craigslist.org/rfs/138529081.html
My God. That IS desperation. Great post.
Sadly you haven’t seen anything yet, wait till summer
Let me tell you why Jeff’s able to do all this ‘investing’:
1. He’s not using the money he earned (so he doesn’t care how much he may loose). His wife probably has a high paying job. How else can he be a stay-at-home father??
My brother-in-law is this way, too. He’s been in and out of work for the past 10 years while my sister supports him with her high income. Too bad they’re in so much debt.
2. Jeff’s probably secured I/O loans on those 15 properties.
3. He might have put $3k down on each home in contract, or maybe not. The homes aren’t built yet, and will take 6 months to a year to be built. During that time, he doesn’t owe anything.
Alot of these contracts are hard to get out of. He won’t be able to just cancel.
When a year passes and his investments have lost half of what he thought they would gain, he will be stuck.
I see bankruptcy in the future for Jeff and years of his wife paying for his mistakes.
Yea, right like his wife is going to stay around after that. Hell she might not be around now LOL
Second homes have turned into money pits for suckers. A severe winter snow drought this year has ravaged northern New England regional economies dependant on skiiers and snowmobilers. Glum locals and vs. monied 2nd home owning urban yups make for a dismal social climate. The summer traffic on I95 to get to coastal ME and the NH mts. virtually grid-locks in July & August, turning a typical 2 hour drive into 4 & 5 hours of white-knucle stress. Meanwhile gasoline to get to these distant locales now flirts with $3.00.. Revenue starved northern NE states like ME which has the second highest number of second homes in the country, are looking towards a “luxuary” property tax to fill coffers which the locals will only be too happy to oblige at the voting booth. $3450k for all this hassle? Interest alone on this amount, would pay for a couple weeks doin’ it up big time in London, Paris, or some other exotic locale. Ya gotta be on serious drugs to be a second home owner in today’s world.
Your right on the money 74….
The ONLY caveat to your analysis is IF it is your plan to move to the 2nd home as your primary residence in the foreseeable future…Then, it could make some sence….
The ONLY caveat to your analysis is IF it is your plan to move to the 2nd home as your primary residence in the foreseeable future…Then, it could make some sence….
Most of your second-home buyers in NorNew England are incorruptable “flatlanders”, with arrogant big city attitudes, and a penchant for easy services. When the time comes to “resettle” most will be shocked to see how they will be ostracized and ignored by the locals. Not much good will to be had from people who for a decade have been priced out of the market for good quality lake & shorefront in their own state. You’d be surprised at the number of out-of-staters I’ve seen in my appraisal biz who have packed up and headed back to the city because they couldn’t deal with the local culture.
Haha…. The climate is dismal here in VT for sure. The long faces of NJ/CT/NYC maggots over the lack of snow is priceless. I see the crash of the late 1980’s all over again. I recall 2 greedy slimeballs from CT bought 5 acres down the road from me in 1988. They paid a huge some of 60k and built a 1100 sqft spec house on. They had at least 140k in it. In 1992, I bought if from them for 80k. The same place right now is still only worth 125k maximum but I guarantee if I advertised it in SlimeBallLand, I could get double that. They are definitely greedy and stupid enough to pay 250k, sight unseen.
Here’s an article about people who “collect” houses.
http://www.chicagotribune.com/services/newspaper/premium/printedition/Sunday/realestate/chi-0602190290feb19,1,6608011.column
Their arrogance illicits disdain from us natives.
Their sheepish faces gets them no help from us.
Their borrow money gets them laughs from us.
Their double talk gets them mistrust from us.
Drag your collective asses NJ/CT/NYC maggots. Just GET OUT.