I Did The Right Thing Not Buying A House, Now What?
Reades suggested a topic on opportunity in the housing bust. “Let’s talk about how to profit from the bust.”
“The group of moneyed investors guided by a Wall Street friend of mine (are) currently buying REO single family houses by the dozen from banks at 10% off list. When I mentioned the risk to my friend, he said these investors already have buyers. I don’t believe it. Most of this investment group are MD’s.”
A reply, “Most of the MD’s just fed the investment shills. Many rode the stock market crash down and then switched heavily into RE gaining most of their properties in the worst markets at their peak.”
“In Bakersfield I knew a banker in the ’70’s that bought the best foreclosures from the bank (BofA) and turned them into rentals. Some of us would classify the properties as ’slum’ but they cash flowed because you didn’t have to fix them up for the type of people needing a roof overhead.”
“Today you have a problem in CA with disclosure once you want to sell, so if your property is not up to snuff but cash flows it might not resell later without a lot of fix-up expense. Bakersfield has had its share of settling problems in different areas of town, some areas are on septic, some areas were sprayed heavily with chemicals before recently being turned into housing; ergo know the area well before jumping in.”
One posted, “This sort of slumlord stuff is disgusting, IMO. The idea that, because somebody can’t afford much, that they don’t mind, or are even deserving of, substandard housing is despicable.”
‘The greed disease runs deep in this country. There’s nothing wrong with being financially successful. But there are moral and ethical principles which people should adhere to. Unfortunately, it’s not always the case. Taking advantage of the disadvantaged is ugly any way you look at it.”
One answered, “Or maybe instead the property owners could fix up the homes, and pass on the additional cost to the renter in the form of higher rent?”
“Oh I forgot, slumlords by definition sit on their butts all day, rubbing their grubby bellies and laughing as they thumb through their envelopes of cash, dead cigars dangling from their lips. They’re all masters of maintenance and thus just need to apply their ample free time to spic-and-spanning with no extra charge.”
“You generalize to the extreme - so can I.”
And another, “People who can’t afford things up to your standard are almost always will to settle for less as a cost savings. That applies to everything including housing.”
“‘Slum lord’ is a term invented by rich people to make them feel better, by ‘fighting’ against the ‘plight’ of poor people. If you force ’slum lords’ to upgrade properties to higher end stuff, then there would be no more slums and people living there would then become homeless.”
“How about this, if you feel so strongly that one person should be forced to provide another person housing at below-market or below-cost rents, you can demonstrate your convictions by buying RE and doing exactly that. Until then, you don’t have much credibility to be able to knock someone else for not doing what you also don’t do.”
One asked, “I did the right thing by not buying a house in Florida, now what?”
“Last February I moved all of my retirement loot into TIPS funds much to my dad’s dismay. He’s always trying to give me ‘investment advice.’ He’s like every other boomer that just doesn’t want to wrap their mind around the bust. Last I checked I’m still getting around 6% and he’s losing 6-8%.”
“I am trying to be prudent and knock off the last amount of debt I have, but that opportunity could be at a great cost. I’d love to short some companies I know are doomed. So… what should I do? Start an online account and go nuts? My approach would be like when I go to the casino - bring X dollars and stop when they’re gone, or pull out when I’m ahead. Maybe I’d start with $5k and see what happens. Seriously, where should I start?”
One suggested, “If you have money set aside to buy a house, I would keep it somewhere where principal is protected and not take short-term gambles, as I feel housing will be a sure bet in two years. Assuming you have a stable job and are not worried about job loss, you may be able to play with your retirement funds.”
“For me personally, there is a disconnect between when I think things should happen and when they actually do happen. I will probably stick 5% of my 401k monies back in aggressive funds each month and just sit on them for the long haul, or remove during the peak of the next bubble. Getting in near the bottom and holding long term is safest for ppl like me.”
One posted, “Cash, relative to real estate, is increasing in value, which means you should relax and allow the market to complete its work.”
Another question, “For those with experience in the matter, should you expect positive cash flow with 20% down (10%, 5%?)? How much cash flow makes for a good investment?”
A reply, “Cash flow itself does not make for a good investment. You have to look for return on investment dollars less the opportunity cost of your down payment. If you think you can predict the future, you can also factor in appreciation, but I can’t and don’t.”
“In recent years, it has taken about a 50% down payment to make apartments ‘cash flow,’ but typically that’s not a very good investment because of all that cash tied up compared to rate of return.”
“I would consider buying more apartment buildings if I could find units that ‘cash flowed’ with 15 to 20% down. I have not seen anything like that for many years. And I wouldn’t touch single-family houses as investments unless they were practically giving them away. Even then - what a hassle for not much income.”
One noted, “I look at whether you can buy at a cap rate that is higher than the cost of any debt on the property. If so, the property might be worth buying. If not, the bank’s debt is making a greater return than your equity, and it is senior to you (less risk). That doesn’t make sense.”
“By the way, I heard the other day that if FNM and FRE stopped lending on apartments, market cap rates would go up by 200bps almost overnight. Even if they keep lending, they’ll need to raise rates to attract the capital to buy the notes.”
“It’s not a good day if you’re an apartment developer and needed to sell at a 6% cap rate.”
One had this, “I’m more interested in what folks did to *capitalize* on opportunities in the 70’s, 80’s or 90’s…”
“I’m actively on the lookout for businesses to buy and/or assets of companies with cash-flow problems. Seeing very few today (wishing prices with valuations based on last 3 years of ‘free money’). But as biz credit lines are shrunk/cutoff, there will be opportunities.”
Lastly, “In tough times, Stronger companies will buy very good (but struggling) companies at a deep discount due to market fears and tight credit. Maybe it might be a great time to invest in solid, well financed and well managed companies and let them take some of the risks.”
“Because a lot of us can’t afford to go short, it might be cool if those in the know can give some of us novices some advice so at the very least we might be able to attach our sails to a good wind.”
The Citizen Patriot. “With for-sale signs planted in lawns on seemingly every block in Jackson, residents are doing an extreme makeover on how to sell their home. From trading houses like baseball cards to hiring home stagers to ’short selling,’ some Jackson homeowners taking a by-any-means-necessary approach to selling.”
Lights, camera, open house
“After years of being rented to transient residents, Velma Henson’s north Jackson house is showing signs of wear. Her 800-square-foot vacant dwelling has a slanted patio and a shattered front window; the carpeting needs cleaning and the lawn is pleading for help.”
“After watching her house, priced at $80,000, sit on the market for about a year, Henson recently hired accredited home stager Karen Goss of Jackson to spruce up the site.
The home could be ready for showing in the next few weeks and Henson hopes to sell the house in a month or two.”
“‘There’s so many homes out there that the market is so depressed,’ said Goss, who started Jackson-based Creative Image Home Staging this year. ‘You have to have something that the neighbor or five neighbors don’t have.’”
“As houses sit on the market with owners wanting to get fast cash to help with payments, more buyers are asking for short-term lease agreements with either formal or informal declarations of their intention to purchase the house at the lease’s end. Broker Susie Mohlman, estimated that one in 10 prospective buyers at her agency is looking for a lease-to-own option.”
“Still, the method has its perils. ‘You’ve got a stranger moving into your house for an extended period of time, just like any rental situation,’ Mohlman said. ‘They can potentially do damage, you have to correct the damage and you’re at square one where you have to put your house on the market again.’”
“While novel ideas have begun to permeate the housing market, an old housing adage still rings true. ‘This has been a good year for the sellers to kind of come to terms with saying, ‘OK, I need to become realistic with the pricing of my house,’ said Tim Atkins, president of the Jackson Area Association of Realtors.”
“Average home sale prices by association members have dropped 30 percent from 2007, the number reflects smaller homes with lower base prices selling faster than larger homes.”
“Atkins advises sellers to stay on-board with their real estate agents during the Michigan market’s perfect storm — even as lower listing prices are suggested. ‘If the seller is realistic in the pricing … a good Realtor will get their home sold at a fair price,’ Atkins said.”
The Seacoast. “Economic growth in the United States is sluggish, and there are several reasons to be pessimistic about macro-economic performance in the balance of 2008, if not beyond.”
“The adjective ‘macro-economic’ is crucial. We should never forget that, even when major sectors of a country’s economy are experiencing hard times and macro-economic statistics are gloomy, there are always great opportunities for entrepreneurs and investors to be found in various micro-economic niches.”
“That being said, it seems to me that the piper now needs to be paid for decades of economic mistakes, and that painful economic corrections and adjustments will continue for the foreseeable future.”
“The housing bubble bust may weigh on us for years. While housing prices rose from 1998 through 2005, between 1.25 percent and 3.25 percent of Gross Domestic Product consisted of spending financed by homeowners wwithdrawing equity from their houses. This debt-financed spending splurge was painless as long as prices of houses continued to soar.”
“However, now that home prices are deflating, home equity credit has contracted.”
“In sum, the economic outlook for the coming months is dicey. Appropriate advice for most Americans would be Warren Buffett’s two rules of investing: 1) Don’t lose the money; and 2) Pay special attention to rule No. 1.”
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sorry, OT, but couldn’t help it
http://www.comics.com/comics/pearls/archive/pearls-20080713.html
“And yet somehow the world goes on.”
Good thought when a GSE crisis is playing out.
Wait. Hold cash, keep the powder dry. Much better deals in two to three years, IMO.
“By the way, I heard the other day that if FNM and FRE stopped lending on apartments, market cap rates would go up by 200bps almost overnight. Even if they keep lending, they’ll need to raise rates to attract the capital to buy the notes.”
I thought this is where the Fedury comes in, with liquidity to backstop GSE debt auctions in case the private market overestimates the yield.
Gold bullion & real estate are like matter and anti-matter, as one is going up in value, the other is declining @ about the same rate.
I expect to turn Gold into Real Estate @ 10 Cents on the Dollar, of current values within a year. (cash, if still accepted, might buy real estate @ 30 Cents on the Dollar)
Very good post Aladinsane!!! No one seems to look at the price of a house relative to gold….In 2000 a house might have cost $270,000 and gone up in dollars to $500,000 today.But look at it in gold, and what would have cost you 1000 ounces of gold in 2000 will now only cost you about 500 ounces. If people looked at gold as real money and real wealth, They would have to say I bought my house in 2000 and took a real beating. it cost me 1000 ounces and I just sold it for 500….
I just traded some of the gold I bought in late 2000 for a high grade coin that has not gone up as much as gold. Hence it was like buying that coin for one-third of what it would have cost in 2000….
People might gain some insight into the real inflation rate if they view purchases in the amount of gold it would cost.
Gold has very stealthily become the best investment of the Century and nobody knows…
A question for the gold bugs (I almost bought a bunch in 2004 around $410/oz.):
What do you do when it’s worth $3k/oz.? Trade it for corn? Sell it for worthless fiat paper? Throw it at the guy stealing your catalytic converter.
As usual, I am being hyperbolically sincere.
When Gold popped down to $260 an oz., on the lows almost a decade ago…
I could buy or sell as much as I wanted, in a tight spread.
Complete 100% liquidity in the depths of a down market.
Can you say the same about houses, now?
Vaguely remember one of those closing scenes in Mork where he talks to the disembodied god-like voice, and the voice asks him what he did with the sand. He replies “I put it in the cat box. It’s not as valuable here.”
Mork & Mindy?
That’s the best comparison you’ve got?
Once again, there seems to be a TAD more Interest in the Safety of ones Principal than of the Rate of Return of that Interest.
“I’m not concerned about the return on my money, I’m concerned about the return of my money.”
Will Rogers 1879-1935
The more things change, the more they stay the same
It’s entertaining to hear goldbugs describe what happened to the buying power of gold since, say the year 2000. Since that year - until a year or so ago - the country was experiencing a mania in real estate where lenders were throwing hundreds of thousands of dollars at strawberry pickers to buy real estate. The money supply exploded as a result of these loans so, natch, the price of gold went up, as did the price of a lot of other things.
But something has happened since those crazy times: This something is called a Credit Crunch, The Big Unwind, an Insolvency Crisis. Some call it GD2. Whatever name you want to put to it, it means Things Are Different Now.
This difference means that money is no longer easy to get. It means liquidity is in, debt is out. It means cash is king.
Quote the status quo, nevermore
The days of Wine and roses laugh and run away,
Like a child at play.
Through a meadowland, toward a closing door.
A door marked “nevermore”,
That wasn’t there before.
Our host had a metal blog long before housing.
Me thinks - er - who cares what I think.
2000 - an eye popping moment for some (metal; guns/ammo; etc).
Walk through the open door ~
Leigh
In Vietnam, people still deliver physical gold to buy real estate. The Chinese influence, you know.
I am also confident that in terms of gold and silver, house prices are going down much further.
Matter and anti-matter annihilate each other. Did we learn *nothing* from Star Trek?
IAT
If you really need to sell your house, you better be prepared to low-ball your house price or forget it. There are way too many homes on the market with sellers not willing to budge and thus their homes remain on the market forever. I read that SoCA house prices need to drop another 10-15% to generate any interest, but with the collapse of mortgage loan banks, buyers are going to have trouble getting a loan even if the house sale price is much lower.
The truth is,no one can afford to buy a house in SoCA, the wages do not support it and the house prices even tho lower are still too too high — ridiculously high !
I have read a few people talking about another 60%-70% in home values in Ca. I can see it happening when prices went up as much as 300-400% in some areas.
As I have said before when prices fall below 100.00 psf for all homes I will start looking again. In my area they were at 84.00 psf in 2003 by 2005 they were at 154.00 psf and now hovering between 120-130. Asking prices are still 80k-100k above average sell price. It’s coming down but painfully slow. Where I am in the central valley the run up in prices was about 1.5-2 years behind the rest of califonia so I figure they will still be behind on the way down. Besides this is a military area and walking away will ruin alot of careers, so I imagine there will be less jingle mail. On the other hand with the state budget, and the job cuts coming there are a ton of CO’s that will be in trouble. They count on overtime to pay for thier homes and toys and it’s going to hurt when it goes away.
Looking really ugly right now just hope my job doesn’t go away.
YOUR MONEY MATTERS
Personal Property
How to Sell a House, When You Have to Sell It Now
Seven tips for homeowners who can’t wait until the market turns around
By DAVID CROOK
July 14, 2008
Whether or not you like HP, you have to admire the man’s cool headed demeanor under fire.
US spells out Fannie-Freddie backstop plan
This May 2, 2007 file photo shows the Fannie Mae building in Washington. The U.S. Treasury and the Federal Reserve announced steps Sunday, July 13, 2008 to shore up mortgage giants Fannie Mae and Freddie Mac. (AP Photo/Manuel Balce Ceneta, file)
By JEANNINE AVERSA
The Associated Press
Sunday, July 13, 2008; 6:32 PM
WASHINGTON — The Federal Reserve and the U.S. Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threatened their financial survival.
The Federal Reserve said it granted the Federal Reserve Bank of New York authority to lend to the two companies “should such lending prove necessary.” If the companies did borrow directly from the Fed, they would pay 2.25 percent _ the same rate given to commercial banks and Big Wall Street firms.
“Conservertorship” may be a better option vs the window.
Dang, it’s like choosing between satan or lucifer.
Or no choice.
I want this to stop! GSEs will not be saved! (Please).
Repeat after me - iz tooo beeeg.
(Click ruby shoes - guys, er…fly dirigibles).
Dang, if they do anything, my laser beams will fry ‘em!
Sigh,
Leigh
“I expect to turn Gold into Real Estate @ 10 Cents on the Dollar, of current values within a year. (cash, if still accepted, might buy real estate @ 30 Cents on the Dollar)”
I hope to unload my gold before most realize that it’s headed downward; I don’t need to catch the absolute top. I expect to take my time to buy based on location, location, location. I don’t need to buy at a cheap rate and then within several years find myself in a slum or unkempt rental houses. I don’t want HOA dues or other fees. I want nearby medical (quality), good public transportation for when I get old, good weather, good neighbors, great community, nearby shopping. Essentially, I want to live where I’d want to vacation so that I don’t have to be on the road trying to get somewhere else.
I agree about staying out of the housing market for 1-3 years. That market is going nowhere, except down.
Has anybody suggested the energy sector. Alternative power such as wind or gas? I know this thought cannot be new…. and to that, the Mad Money guy, Jim Cramer, suggesting the energy sector te other day. He also included the oil giants. …btw, they apparently hold many of the paten to make alternative fuel vehicles a reality.
Jim Cramer is so remarkably a follower rather than a discoverer that it’s almost laughable. The guy’s the Time magazine and Business Week cover wrapped into one. He’s so late to the game he makes Dodger fans look early.
I view many of the energy majors as risky
1. They have had every incentive to overstate their proven reserves. El Paso just got caught, I think Shell got caught a year or two ago. My guess is they all do it.
2. Nationalization has stripped some of their access to oil.
3. Take a look at insider sales.
4. No doubt that demand will collapse with the economy over the next year. Airlines are going bankrupt and US consumer is cutting back on driving and consumption. Asia is facing rapid inflation and they are rolling back gas subsidies.
One noted, “I look at whether you can buy at a cap rate that is higher than the cost of any debt on the property. If so, the property might be worth buying. If not, the bank’s debt is making a greater return than your equity, and it is senior to you (less risk). That doesn’t make sense.
Hey…That makes just too much sense…!
Are you even allowed to say something that logical?
“I’m actively on the lookout for businesses to buy and/or assets of companies with cash-flow problems. Seeing very few today (wishing prices with valuations based on last 3 years of ‘free money’). But as biz credit lines are shrunk/cutoff, there will be opportunities.”
This is what I would be most interested in doing, and have considered how to do. The thought of buying real tangible assets (as opposed to notes or equity paper) on the cheap from those who need quick cash or who are not interested in finding buyers and selling to those who find real value in those assets appeals to me.
I’ll be going to a couple estate auctions over the next couple weekends. I’m mostly interested in some coins, but will be watching for anything I think has substantial value above what anyone bids for it.
Re: the slumlord thing. In the book Living Downtown the author Paul Groth argues persuasivly that the closure of SRO residential hotels (think Blues Brothers) led to an increase in homelessness. It is easy to deplore the conditions that those on the bottom rung of the economic ladder are living under. But the solution is NOT to saw the bottom rung out from under them. If they could have stepped up to the next rung they would already have done so. Instead they often become homeless, invisible to those who were so busy deploring their living conditions.
I mean, we don’t want the Kowloon Walled City, but frankly those who are poor are better served living in a place that has a rent that enables them to put a little away for a rainy day, instead falling a little behind every month. If you improve incomes, the housing will to some extant take care of itself.
Absolutely. I raised a fuss when the urban renewal people here took out one of those ancient “autels” which consisted of little separate houses that rented for 25 a week. It was a baaad place!Namely, it was on the main drag. Lots of broke people, those between jobs and families stayed there.
The PTB promised to replace it with new low income but actually they put in a special place for the disabled and a youth home…not the same thing. Especially when you have to jump through so many hoops to qualify.
Just had a conversation with family in VT and upstate NY. The delusional saga continues. RealTards and fantasy dwelling sellers continue to price themselves out of the market. Report is that nothing is selling and new inventory coming online at absurd prices.
Example: Circa 1946 house, good condition, appraised in 1999 at $38,000 just came on the market at $190k. No jobs locally, $15/hr jobs at best after a 35-40minute commute. For all intents and purposes, this house may as well be prices at $100 million. It makes no difference. Other inventory on same street coming on line at similarly absurd prices.
I have no idea where they’re coming up with these price points. I was told the sellers are hoping to cash in at the last moment as they see the gravy train in the distance. You’d think the RealTards would dissuade these moron sellers as their lifeblood depends on transaction volume. Talk about cutting their own throats.
Right when I feel vindicated by the fenders coming off the entire system, I hear local stupidity like this and begin to doubt if we’ll see the wreckage similar to the early 1990’s.
The rule of thumb (if you want to buy or invest in stocks or property) is to make your move when there is, “Blood on the Streets.” At the moment, there are only a few spots of blood. The hot-off-the-press news is that the US government is now in the mortgage business via Freddie and Fannie. So much for those two entities being non-government. The usual b.s much like the Federal Bank is a private bank. Totally misleading crap.
Anyhow, this property mess is not over by a long chalk. There are more resets coming down the line. We are in a recession. If you believe the government that we are not in a recession then you also beleive we invaded Iraq to bring, “Freedom and Democracy.” As opposed to a failed attempt to steal/control Iraqi oil. Bottom line is that the US now elect governments which provide a socialist welfare system for the big oil and pharma corporations BUT they use the capitalist system for the middle class and the poor.
There is a very good chance this will be a deep recession and very possibly a depression. Of course, if there is a depression, it will probably (hopefully) be less dramatic than the 1930’s variety BUT there will still be a lot of pain. A lot of unemployment. A lot of people drawing welfare checks and food stamps for a long while. A lot more foreclosures over the next few years. A LOT MORE. A lot of small offices and small business entities going broke and that means a lot of empty commercial property.
What does this add up to? Simply, at this stage, we are only seeing a few spots of blood. Not a lot of, “Blood On The Streets.” Thus, “NOW IS NOT A GOOD TIME TO BUY.” At some point, probably if we are lucky around 2011 or 2012, some kind of bottom might be in. By that time, you will see a lot of carnage around you - then you buy if you have anything left to buy with.
We are at that point where you have to be careful. This is fertile ground for realtors and tv foreclosure scam artists to sucker in the unwary. Realtors: “Now is a great time to buy.” Foreclosure Seminars: “I’ll show you how to make millions on foreclosures.” When the foreclosure scam artists on tv stop appearing and when the NAR stop putting of tv ads with a cheery realtor telling you, “There has never been a better time to buy a home.” ……we are nearing the bottom. Until then - keep your wallet zipped.
..then you also beleive we invaded Iraq to bring, “Freedom and Democracy.” As opposed to a failed attempt to steal/control Iraqi oil.
i missed something… mighta been on vacation at the time.
What did the attempt to steal their oil look like.. i mean, was it military or political or what.. and how did it fail? I assume we were somehow overpowered?
Yep, steal/control. Iraqi oil. Sorry Rip, you’ve got a lot of catching up to do.
if you were a fly on the wall during V.P. Cheney’s Energy Policy meetings, you would understand.
Note: As the first wave of U.S. soldiers returned from Bagdad, Haliburton was laying a pipeline. Unfortunately, no oil ever flowed toward the gulf through it.
Paulson Statement on Freddie Mac, Fannie Mae: Full Text
July 13 (Bloomberg) — Following is the text of a statement issued today by Treasury Secretary Henry Paulson:
Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction.
GSE debt is held by financial institutions around the world. Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore we must take steps to address the current situation as we move to a stronger regulatory structure. In recent days, I have consulted with the Federal Reserve, OFHEO, the SEC, Congressional leaders of both parties and with the two companies to develop a three-part plan for immediate action. The President has asked me to work with Congress to act on this plan immediately.
First, as a liquidity backstop, the plan includes a temporary increase in the line of credit the GSEs have with Treasury. Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn.
Second, to ensure the GSEs have access to sufficient capital to continue to serve their mission, the plan includes temporary authority for Treasury to purchase equity in either of the two GSEs if needed.
Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer. Third, to protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator’s process for setting capital requirements and other prudential standards.
I look forward to working closely with the Congressional leaders to enact this legislation as soon as possible, as one complete package.
Last Updated: July 13, 2008 18:00 EDT
The line about protecting the Taxpayer is a “BALD FACED LIE”. There is ignorant and there is evil, all but a few in Washington have measures of both.
Gotta love this stuff…
“Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies.”
“the plan includes temporary authority for Treasury to purchase equity in either of the two GSEs if needed.”
That sounds like double speak to me or they wouldn’t mind seeing, if things get too bad, the taxpayer becoming the majority shareholder in these GSEs. At what point the would the Treasury then sell off their equity share? Let me guess, when things stabilize just like in the secondary mortgage market? Still waiting for that to happen…
I also found it interesting that he brought up that “GSE debt is held by financial institutions around the world.” I wonder how many foreign governments have been screaming at them in the last week or so to do something. Mutually assured financial destruction (MAFD) was probably brought up more than once.
I do have a bits bucket, BTW.
I wasn’t writing in binary. Do you have a words bucket? I’m kiddin’. I’m 6 years old! I’ll find my way over to the bits buffet…
BTW, get a good night’s rest because you’ll have to explain in a thousand different ways to the bailout promoters why this isn’t a bailout. Good luck with THAT! My company’s stock has lost 97% of its value and is down to where it was in 1996. I didn’t see the Treasury or New York FED seeking to buy some sweet equity in it even though we play a vital role in the nation’s defense. I guess we just aren’t as important.
First I was told that the government COULDN’T allow the US housing market to fall. It’s done. Then the SIVs. Gone. Monolines? Junked. Then Wall Street. Toast. And now the GSE’s. Who has a trillion+ bucks, I ask?
‘My company’s stock has lost 97% of its value and is down to where it was in 1996.’
You’re the one who has to get up tomorrow and go sit in a cubicle. Explain that loser. I hope you are counting on that pension plan. I’ll be looking for opportunities.
On Slumlords;
Maintaining your property is the landlords responsibility. It’s dumb not to maintain your investment. A good landlord does a yearly inspection and asks if there are any concerns.
Do you have any property?
No, but I have cleaned and help repair my Mom’s rental many times over the years. Some people like my Mom and my father (RIP) have NO business being a landlord. I have common sense and if my Mom had listened to me I’d have spent less time cleaning up after her stupidity and she’d have more money in the bank for her old age.
With the cost of materials and labor these days, it’s impossible to provide “low income housing” and even break even. By the time the rent covers the cost of fixing up a kitchen, for example, so many years will have passed, they’ll likely have ruined it by then.
I used to have “low income” tenants, but after I got my first code enforcement inspection (fascist Los Angeles inspection ordinance) and they knit picked me into doing countless unecessary cosmetic repairs, I said screw it and kicked out the low income tenants, dolled the place up right down to the granite countertops, and rented to an upscale gay guy.
A slumlord doesn’t care - he pockets the money normally spent on maintenanace and finds a “greater fool” to unload everyone on while escaping with his loot while everything goes to pieces around him… sounds like a familiar business model these days!
“The group of moneyed investors guided by a Wall Street friend of mine (are) currently buying REO single family houses by the dozen from banks at 10% off list. When I mentioned the risk to my friend, he said these investors already have buyers. I don’t believe it. Most of this investment group are MD’s.”
This is my statement of two days ago. I talked with him again this morning allow me to clarify one point. He’s not negotiating with bank REO departments. He IS raising capital for this group who supposedly “have buyers lined up”. I gave him a skeptical look but he insists they can make $$ on his.
More importantly but unrelated to the this group of investors, he told me this morning that for the first time in 27 years, he’s sending out his resume. His stock in trade is accounting and has NASD series 6 and 7. His current clients “have no money”, word for word. If this is the rule rather than the exception, hold on because it’s gonna get ugly.
The first wave of knife-catchers may end up being badly wounded, but I still say the overall goal of all of this is to transfer as much land as possible into the hands of as few people as possible so that we can all live in slums. Now, I am not saying this plan will work, but it does fit the continue theme of transfering wealth up the ladder to the kleptocrats so an ever-decreasing number of people actually move ahead in our economy.
“Last February I moved all of my retirement loot into TIPS funds much to my dad’s dismay…”
Let’s see, that person’s dad’s still alive, so he is likely under 40 years old. I’m 49 and all my retirement is in stock mutual funds. My best buys were the early 1990s and in 2002. Seems that I have good buys ahead of me the next two years. The stock market changes very fast and I do not want to miss out on the upturn. Happy to be buying bargains in stock mutual funds now in my retirement plans.
Hi Bill, those were my words. To clarify, my dad is in his mid 60’s and I am in my early 30’s. I am the one that went all in TIPS against his advice. He’s mostly in VG star and refuses to sell/move his funds.
Why TIPS when it is clear the govt. lies about inflation?
3%+Infl as determined by CPI… I would be killing it if it were a true representation of inflation (food & energy come to mind).
Anyway, because I get to keep my initial investment and at worse, I am 1% behind inflation. Not bad IMO.
*Disclaimer* I’m am J6P that doesn’t totally comprehend everything.
…meaning I prefer to, at the very least, keep my original investment.
“In sum, the economic outlook for the coming months is dicey. Appropriate advice for most Americans would be Warren Buffett’s two rules of investing: 1) Don’t lose the money; and 2) Pay special attention to rule No. 1.”
_______________________________________________________________
All of the sudden, mere mortal Warren hasn’t been able to follow his own rules lately, and has gotten hammered, losing the money.
“Let’s talk about how to profit from the bust.”
For god’s sake - wake up people! You will be LUCKY to survive this bust, much less profit off it.
“You will be LUCKY to survive this bust”
I disagree.
In 2000 I left Buffalo… In 2003 I avoided buying a condo in Hoboken, in 2005 I avoided buying a home in Florida and ditched my condo in Rochester, I switched careers, I drive a beater, have near-zero debt, and get by with very little; several months ago I moved to protect my retirement funds.
The bust is undeniable now. We all need to continue to be forward looking. I expect all of us to thrive in the coming years. Wake up? I’ve been awake since 2000.
I’ve been discouraged by all of the hucksters getting away with murder, so let’s stay focused and kick ass and not apologize for it. We are the boot straps crew, let’s start acting like it.
Amen. I’m a small business owner with zero-debt - no mortgage on my home. Like you, I’m in my 30s, and I have about $1mil in CDs, cash, treasuries, and gold/hard currency hedges. The entrepreneurial “bootstrap crew” is out there… and we’re this country’s best hope going forward.
I’m glad you’re around, Muggy. Keep on postin’! There’s always profit to be made, or at least salvaged.
Read between the lines. People in all walks of life are really starting to freak out. It’s really gone haywire during this past week, with people on and offline thinking their T-bills, money market funds and cash are suddenly worthless. That the USA suddenly will become a third-world country.
What does that tell us? That the world is coming to an end or that the turnaround (short-term? long-term?) is about the kick in? Is a dead cat bounce on the way? Is a meaningful 2-3 year secular bull in store? Neither? Both? The big money in the overall stock market is immediately after most people lose their minds and throw in the towel.
So have we reached that point yet? Hmmm….
i agree! We’re doomed! sell sell sell sell now! Pull your money out of the banks! Dump your stocks! Cash out that 401K! Sell everything you own and stuff the loot under the mattress, preferably in the form of GOLD! Then, gas up and head for the hills! I’ll be right behind you, and no, I will not be buying any of those filthy, worthless stocks on my way out.
Get on with it already.. don’t wait too long or global warming will fry you to a crisp!
“don’t wait too long or global warming will fry you to a crisp!”
Yeah, why don’t you post a link to that article again about the nonsense petition from the Oregon Institute of Alternative Science or whatever it’s called? You know, the one that has been debunked a hundred times over, but that you keep posting here anyway.
nah.. i had a very interesting conversation with.. hmm.. what can i say.. a leader of industry? the other day and I got turned on to a couple ways whereby I can snatch a nice little slice of the UN’s global carbon tax pie, should it ever actually be instituted..
So, my days of edumacating the global warming sheeple is o-v-e-r. I’m one o’ you now baby
All hail the brilliant algore.. or whoever!
“So, my days of edumacating the global warming sheeple is o-v-e-r. I’m one o’ you now baby
All hail the brilliant algore.. or whoever!”
You mean “whoMever”.
Surviving may mean just what you deride. maybe you should wake up…
Disagree strongly! got out of equities in late ‘07 (who could NOT see this coming?), I am currently 95% in CDs and the rest in bear mutual funds I am going up. And who says you can’t do a little SHORTING? And when housing settles down a few YEARS I will get a nicer place CHEAP!
Why can’t I bring myself to short a stock? Does it tell the world I’m a pessimist. I’ve been a seriouos investor for over 40 years. I’ll admit to being somewhat risk averse and have considered bear funds, but I have never jumped. I have lost a lot lately. Anyone else like me with thoughts or advice?
I may even consider buying a totally remodeled foreclosure in 2012 for 10 cents on the dollar (in my dreams). -
By a short (or better yet, ultrashort) ETF and just think of it as any other stock/ETF… buy when it’s low, sell when it’s high.
I just on the sale of a piece of investment property (sf rental house ) that was part of an assemblage for a high rise apartment building in big SE city . It took a over year to pull things together because of zoning issues so I got the benefit of a better market . After the zoning issues were resolved, the very established buyer could not get an acquisition and development loan ( about $55 M) but managed to get a short term loan from a regional lender for the purchase of the land . I now have the cash and on have a couple of weeks left to decide to pay $120K+ in capital gains tax or risk reinvesting (via 1031 exch ) in a further declining market. . After reading this stuff and listening to my accountant , I am more inclined to pay the taxes and wait .
While I was waiting for the server to come back up, I gave this one some thought. I’ve been over a lot of this stuff on my foreclosure blog, but now that I’m going to trustee sales, it is more relevant.
While it may not be a good time to buy a house or multi-family where you live, there are some things that are becoming obvious. First, forget about the resale market. The distressed property market is the one to focus on IMO. That means there is some self education that anyone can be doing right now ahead of a potential purchase.
As I’ve said, going to these auctions is a great learning experience. You’ll see what is selling (or not selling) how the process works. Who is actually buying and for how much. And you’ll see stuff go back to the beneficiary (lender - learning the terminology is a help too.) and so forth.
One good example of something I learned from that B&B place that went back to the bank. Those guys played a little $150k game with the process. It didn’t work for them because the one guy who signed up to bid didn’t even have the minimum. I talked to a RE lawyer about it, and it may even be illegal.
I’m learning who stands where, who is helpful, who isn’t. But one thing is for sure; when a house sells to a third party at auction, you have just witnessed THE market. There is no clearer visibility of where your market is on that day than a successful trustee sale.
Hey Ben,
Can you comment more on the game at the auction? I couldn’t figure out what happened from your post.
My broker friend, who was in REOs big time in OC in the 90s, called the trustee before the auction. He was told there was a solid bid of $850k prior to the sale. So at the courthouse steps, the title co gals phone rings (it rings about 15 times just prior to each auction) and she announces there is a bid above the $700k. Then the only guy signed up to bid (you have to sign in before hand) announces that he intends to bid under the minimum. This means he is wasting his time. They never accept less than the minimum at the auction.
So then she does the obligatory sale and it goes back to the lender for $700k. There never was a real bid of $850. Somebody made that up and the gal played along, or maybe the beneficiary, I don’t know. But it wasn’t right.
Are you seeing any absolute auctions? The ones I see around here are just reserve auctions. Spend all day bidding just to hear your bid was rejected and get a sales pitch about available properties. Some cities have good foreclosure websites. Others dont seem to have much. When I do a google search some are just spam or infected. Are there any nonsubscription websites you recommend? I guess it is good to know the players so when the market really crashes you know ppl with inside info.
No, I haven’t seen any absolute auctions in N AZ yet. But I see 90%+ of auctions postponed, which leads me to believe that the pressure must be building on the lenders. One thing is clear to me; these lenders play a different game in region to region. In Florida, California and Nevada, Countrywide is dealing. Here, they play games.
Ben, I thoroughly agree with you on now being the time to learn the what will be the ‘new’ buying process. Personally I don’t just want to learn the lingo, but I want to get to those insiders that can alert me to a good buy when it’s coming to the market place. I also want to know just how the ‘CA disclosure laws’ are going to be applied to foreclosed property and how to research all potential liabilities attached to the property; here in CA some natural liabilities are attached to settling problems, flood plains, soil contamination, shoddy workmanship, zoning, septic tanks, etc. By 2010 I’m thinking of getting an RE license to get inside the system.
‘I’m thinking of getting an RE license to get inside the system.’
That is an option. Personally, I am aligning myself with pros that I have known for years and trust. This is a tricky situation. There is more corruption and cronyism in the REO biz than I expected.
“There is more corruption and cronyism in the REO biz than I expected.”
The other day I couldn’t tell if you were agreeing with me about pocket listings. It appears that you were serious.
I had an acquaintance bragging about snagging tons of REOs all over PA because her atty husband gets all the good ones before anyone else. I’ve met some greedy mofos in my time, by this lady was rolling in it.
Ben, I really need the little barf .gif guy.
http://www.nytimes.com/2008/07/14/washington/14guarantee.html?_r=1&hp&oref=slogin
Goodbye…democracy…Hello…Socialism..
How to lose money in the bust:
YOUR MONEY MATTERS
Personal Property
How to Sell a House, When You Have to Sell It Now
Seven tips for homeowners who can’t wait until the market turns around
By DAVID CROOK
July 14, 2008
So you say you’re selling your house?
Hey, it could be worse. You could be selling a Hummer.
If you’ve been waiting for a good offer to come through, this probably isn’t exactly big news to you: This is the worst home-selling market since Herbert Hoover was president. In much of the country, prices are already way down and probably heading even further south. Houses are sitting on the market for months longer than sellers expected.
Need to sell your house? Real-estate agents in Greenwich and Wilton, Conn., offer tips to Paul Lin of The Wall Street Journal Digital Network on how to sell a house in a slowing market.
And don’t think this is just a momentary lull, a short slowdown before the market recovers and then takes off again. What you see today is the market you have, for now and, quite possibly, for a long time to come.
“What you see today is the market you have, for now and, quite possibly, for a long time to come.”
Nonsense. Almost all housing markets will continue to improve… for buyers.
“After years of being rented to transient residents, Velma Henson’s north Jackson house is showing signs of wear. Her 800-square-foot vacant dwelling has a slanted patio and a shattered front window; the carpeting needs cleaning and the lawn is pleading for help.”
“After watching her house, priced at $80,000, sit on the market for about a year, Henson recently hired accredited home stager Karen Goss of Jackson to spruce up the site.
The home could be ready for showing in the next few weeks and Henson hopes to sell the house in a month or two.”
Um, excuse me. She’s hiring a ‘home stager?’ Slanted Patio and shattered front window and she needs a ’stager’ to figure out how to market the place. This has to be the dumbest person on the planet. BTW Home Stager will be one of those bubble jobs that disappears soon…maybe not soon enough but they’ll be looking for jobs with the rest of the REIC folks.
Realtwhores still friggen con-artist liars. Can’t stand even talking to these manipulative thugs.