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Suzanne

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Reply with quote  #1 

Hi everyone,

 

Could you explain the concern about the crash discussed in the two books and the relationship to real estate.

 

Thanks!

Suzanne

taddyangle

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Reply with quote  #2 

I am worried about the CA real estate market correcting, as are most of the investors on this board.

 

If you read John Talbott's book Sell Now! He makes a very compelling argument on the coming crash/decline, however I should add that he thought a crash would have already occurred.  I have a fair amount of Talbott's book underlined, and when I have more time I will share some of why he thinks you should sell now.

 

Same with Dent, and Schiller.  These guys, at least Schiller have been saying this for sometime.

 

My concern is my ability to accept the fact that I am holding a depreciating assets.  My logic is why not sell 1/3 or so of the RE holding and use the gains to invest in other investments, and as Dr. Dan points out, in investments that will keep up with inflation.

 

I have always been a fan of exchanging real estate, but at this point I am thinking that I will exchange real estate into some other assets.  I think most of the RE investors are doing the same.  In fact some have already done this, and in my opinion already ahead of the curve.

 

We will still keep RE in TX, UT, and AZ, but just last night I had SDCIA member hidden market place my duplex on the MLS.  After this property sells we will have sold 4 of our 5 CA properties.  I honestly never thought that would be the case, as I thought we were in those for the long haul.  Or at least that when we bought we thought that.

 

 

 

 

 


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ogden

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Reply with quote  #3 

What other options are there to 1031 into?

 

I'm at the point where I would rather just sell property and pay the capital gains.  The property I own aren't in depreciating markets and I sold out of San Diego last year.  But I'm going to sell probably two properties over the next two years to go heavy on cash flow, less leverage, and more cash on hand. 

 

I'm going to start paying off properties completely and move in that direction for the next couple of years.  This strategy sounded foolish a year ago but I'm glad I have started on this path last year. 

 

I can possibly roll my earnings into NNN, but I'm concerned about those as well and yields are typically low. 

 

If anybody has advice about NNN and any good yields please send them my way.  My conceren is that I want the cash on hand and not tied into anymore property. 

dansimo

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Reply with quote  #4 
yes, more NNN info. please...

I'm going to the Conti commercial seminar next week...so maybe we'll have more to talk about then.




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taddyangle

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Reply with quote  #5 

Please share when you find out more. 

Other options

 

Private Anuity Trust (PAT).  Good way to defer taxes, but generally only pay about 5%, but you only pay taxes when you withdrawl money. 

 

Just pay taxes on earnings.  I am leaning this way.

 

1031, not really big on this any longer.

 

There are some energy mines you can exchange into, I believe Dr Dan has talked about this, and I also heard about it on a radio investment show. 

 

 

 

 

 

 


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taddyangle

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Reply with quote  #6 

I just ran across this in the OC Registar.

 

April 29, 2006

Insider Q&A: Housing bear Bruce Norris

blog-norris.jpg
Bruce Norris of The Norris Group in Riverside is a real-estate investor, lender, and frequent lecturer on the ups and downs of California real estate. He currently believes the market is headed for a steep decline -- nine years after he correctly called the start of the ongoing home-price rally. Among other things, he thinks the median selling price of an Orange County residence could be back below $500,000 by 2010. We figured we'd check in with him to see why he's so bearish.

Q. What are your main concerns about the housing market right now?
A. The main concern I have is the building of inventory. I believe it is caused by us reaching an all time low in affordability. When affordability gets this low (14%, also reached in 1989,) so few people can afford to buy, the housing market loses velocity. Affordability does matter, despite what you may have heard. The fact that Californian's are netting $220,000 per sale doesn't mean the affect of low affordability no longer applies. The $220,000 we are netting in comparison to our median price is actually less of a percentage than the dollars we netted in 1989. The market begins to slow when so few can afford to enter the market.

Q. How soon do you think it will take to see tangible evidence of the serious drop you predict?

A. The process of a decline starts without much fanfare. More and more homes compete with each other until someone sells for less than the current comps. Builders have a harder time selling. They offer incentives, broker co-ops, and discounts. Because the builders are selling fewer homes, they build less of them. I think by the end of 2007, if not before, you'll see builders auctioning off their unsold houses. This will have a very sobering affect on the "mood" of the market.
As prices start to fall you enter a phase when people who fall behind don’t have much of an equity cushion. Without equity, they have limited options. The properties that go into default more often become properties auctioned off at the courthouse steps. Since prices at this time are no longer accelerating, these investors will be willing to pay less for them. Because of less aggressive buyers at the trustee sales, this causes lenders to own more property. Eventually the properties owned by lenders have a significant impact on real estate prices. They become the "motivated sellers" and prices can decline in earnest.

Q. So how bad might it become?
A. The severity of a downturn will depend on a few things. The numbers of adjustable mortgages obtained in the past few years could be very detrimental if their first payment adjustments come at the wrong time. Many of the interest only loans carried with it a very affordable payment. If people can't afford the new payment when it adjusts, they will either be looking to sell the home or refinance. What if that affordable rate isn't around any longer? Then the property will be put up for sale. This means more inventory and more competition.
If people decide to leave the state (net migration loss) in significant numbers, the prices will suffer more. If you think this isn't already a reality, check the statistics for U-Haul. They will give you what it costs to rent a one-way moving van from California to anywhere you like. First, get the price of renting a truck going from California. Then price the same trip from that destination back to California. You will shocked that the cost is sometimes 1,000% higher to go from California that to California. Why would that be? It is because there already are more people leaving California than coming in. What else could be the explanation?

Q. Anything else?
A. The last problem that could affect real estate prices could be caused by something we don't have control over; the three letter word, oil. If an event causes oil prices to spike significantly for a long period of time, inflation could become a real problem. The worst case scenario would be if the Fed has to fight inflation while we have an economic downturn.

Q. As a real-estate investor, what are you doing with your own money?
A. I've switched most of the real estate I hold for rentals out of state. Because of the study we do, I know what states have the opposite cycle of California. This allows me to exit California near the top and go where prices will accelerate during California's down cycle. A lot of people kind of make fun of investors who left the state too early and missed out on the last rise in price. Well, let me show you why it doesn't bother me too much. I sold two 50-year-old houses in San Bernardino in so-so areas free and clear for about $425,000. I 1031 (tax-free) exchanged that money to another state, buying four new all-brick homes for $102,500 each. The San Bernardino homes rented for $1,000 each. The new houses in another state rent for $850 each. My cash flow improved and because the homes are new, I have no maintenance issues. The San Bernardino homes each went up to $300,000. The new homes went up to $160,000 each. Here's my point. The likelihood of those 50-year-old houses in San Bernardino being worth $400,000 is very small. The likelihood of my new house going to $200,000 each is very high.
Warren Buffet, when asked why he's so rich said, "I always sold too soon." As an investor, I would be more cautious than aggressive for the next few years.

Q. What would have to occur to change your outlook?
A. The one thing that could prevent damage to California's price is a decline in interest rates to 2004 levels. If that happens, and there is an outside chance of it, then prices would end up lower, but not hammered. Because of the oil, it's more likely we’ll see higher interest rates sometime in the next five years.


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john3232

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Reply with quote  #7 
Quote:
Originally Posted by taddyangle

If people decide to leave the state (net migration loss) in significant numbers, the prices will suffer more. If you think this isn't already a reality, check the statistics for U-Haul. They will give you what it costs to rent a one-way moving van from California to anywhere you like. First, get the price of renting a truck going from California. Then price the same trip from that destination back to California. You will shocked that the cost is sometimes 1,000% higher to go from California that to California. Why would that be? It is because there already are more people leaving California than coming in. What else could be the explanation?

 

And many are moving to Az which is helping the Phx metro to grow by more than 100,000 each year!

 

Suzanne

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Reply with quote  #8 

Thank you for responding Taddyangle.

 

These books/texts are not speaking specifically about CA.  So, I guess my next question is related to analysis and interpretation of topical information and how we then relate economic data to our state versus our country.  It seems to me that the price of oil and fed rate hikes/decreases, threat/verge of WWIII and ARMS relate to the nation and not specifically to California.  How do you have a comfort level in out of state investments (and I know that people are happy and comfortable and profitable doing this) when economic pressures affect the U.S. and not just CA.  What about an event that can affect our national real estate market?

 

Thanks!

Suzanne

RobertCampbell

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Reply with quote  #9 

 

Suzanne,

 

These books/texts are not speaking specifically about CA.

 

Here's how I see things.  Those books/texts present the big picture about real estate, demographic, and macro-economic trends that will effect CA and every state in the country.

 

Perspective adds 60 points to an IQ score.  In my view, those books/texts give you valuable perspective.  I would suggest that you focus on the big picture first, then draw conclusions about how CA will be impacted.

 

If you believe a psusami trend will hit the U.S. economy and/or real estate market, very few states will be unaffected.  Kinda like top down analysis for the stock market - only 15% of all stocks buck the primary trend of the overall averages.

 

Robert Campbell

reijoe

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Reply with quote  #10 
Quote:
Originally Posted by john3232
Quote:
Originally Posted by taddyangle

If people decide to leave the state (net migration loss) in significant numbers, the prices will suffer more. If you think this isn't already a reality, check the statistics for U-Haul. They will give you what it costs to rent a one-way moving van from California to anywhere you like. First, get the price of renting a truck going from California. Then price the same trip from that destination back to California. You will shocked that the cost is sometimes 1,000% higher to go from California that to California. Why would that be? It is because there already are more people leaving California than coming in. What else could be the explanation?

And many are moving to Az which is helping the Phx metro to grow by more than 100,000 each year!



UHaul isn't the only method of moving. In fact, you could use the UHaul numbers for an opposing argument. The argument would be that the only people who use UHaul are lower class people. Any family making $100k a year (say a $70k primary earner and a $30k secondary earner) could easily afford a full service moving company. As well, if people are relocating to CA for new white collar type jobs, more often than not a relocation package will be included that covers a full service moving company. So the UHaul numbers are evidence that the lower class is moving out, and in conjunction with the population trends, that the middle and upper class is moving in.

As a single anecdote, I moved to CA for a new job and received a relocation package that included a full service moving company. Although, were I to pay for the moving myself, I probably would have rented a UHaul trailer.

Just playing devil's advocate.


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Reply with quote  #11 
Quote:
Originally Posted by reijoe
Quote:
Originally Posted by john3232
Quote:
Originally Posted by taddyangle

If people decide to leave the state (net migration loss) in significant numbers, the prices will suffer more. If you think this isn't already a reality, check the statistics for U-Haul. They will give you what it costs to rent a one-way moving van from California to anywhere you like. First, get the price of renting a truck going from California. Then price the same trip from that destination back to California. You will shocked that the cost is sometimes 1,000% higher to go from California that to California. Why would that be? It is because there already are more people leaving California than coming in. What else could be the explanation?

And many are moving to Az which is helping the Phx metro to grow by more than 100,000 each year!



UHaul isn't the only method of moving. In fact, you could use the UHaul numbers for an opposing argument. The argument would be that the only people who use UHaul are lower class people. Any family making $100k a year (say a $70k primary earner and a $30k secondary earner) could easily afford a full service moving company. As well, if people are relocating to CA for new white collar type jobs, more often than not a relocation package will be included that covers a full service moving company. So the UHaul numbers are evidence that the lower class is moving out, and in conjunction with the population trends, that the middle and upper class is moving in.

As a single anecdote, I moved to CA for a new job and received a relocation package that included a full service moving company. Although, were I to pay for the moving myself, I probably would have rented a UHaul trailer.

Just playing devil's advocate.

 

 

Now thats a good point, and shows how a lot of "indicators" are really just guesses...

 

Here in Florida all I hear about is "how great north carolina is" and how everyone who cant afford hurricane ins is going to move there.

 

Just wait til they realize the state income tax rate is 8.25%....and its cold as hell in the winter....

 

The people who cant afford the insurance will sell house to those that can...improving our economy.... 

mike

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Reply with quote  #12 
Quote:
Originally Posted by nobubbleintampa
Quote:
Originally Posted by reijoe
Quote:
Originally Posted by john3232
Quote:
Originally Posted by taddyangle

If people decide to leave the state (net migration loss) in significant numbers, the prices will suffer more. If you think this isn't already a reality, check the statistics for U-Haul. They will give you what it costs to rent a one-way moving van from California to anywhere you like. First, get the price of renting a truck going from California. Then price the same trip from that destination back to California. You will shocked that the cost is sometimes 1,000% higher to go from California that to California. Why would that be? It is because there already are more people leaving California than coming in. What else could be the explanation?

And many are moving to Az which is helping the Phx metro to grow by more than 100,000 each year!



UHaul isn't the only method of moving. In fact, you could use the UHaul numbers for an opposing argument. The argument would be that the only people who use UHaul are lower class people. Any family making $100k a year (say a $70k primary earner and a $30k secondary earner) could easily afford a full service moving company. As well, if people are relocating to CA for new white collar type jobs, more often than not a relocation package will be included that covers a full service moving company. So the UHaul numbers are evidence that the lower class is moving out, and in conjunction with the population trends, that the middle and upper class is moving in.

As a single anecdote, I moved to CA for a new job and received a relocation package that included a full service moving company. Although, were I to pay for the moving myself, I probably would have rented a UHaul trailer.

Just playing devil's advocate.

Well the Uhaul is probably the easiest to check, BUT you can check the other movers as well. Just start calling moving companies. Why don't you call the moving companies and report back on what it reveals. It would be a good data point.

 

Funny that those "white collar" workers that can afford to hire movers still can't afford the median price home here. The fact is 100k is chump change out here.

Mike

 

john3232

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Reply with quote  #13 

AZ has been the second fastest growing state in the country in recent years. I don't believe the figure of 100,000 who move into the Phx metro each year is an exaggeration or that a solid number aren't educated,middle-class. I've read repeated articles in the San Diego Tribune and over the past two years  about Southern Californians packing up and leaving Cal for a better quality of living and AZ often being a destination of choice. 

 

As far as U-hauls go... I don't know much. However I do know when I have listed my homes in East Mesa with RentClicks this past year I received numerous inquires for those currently in Cal but planning to relocate to AZ because of their job. 

 

Suzanne

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Reply with quote  #14 

Taddyangle,

I would be interested in hearing your understanding of the author's "Sell Now" rationale.  I debate this every day as I, like everyone else on this board, look for deals.  What if I come across a really hot deal? How will I best determine if it's best to rehab and flip or lock in an interest only 10 or 20 or 30 year loan and sit tight-ride out the downturn and benefit from the next upcycle. 

 

I am very influenced by several members of this board-including you - your intent on running the numbers!  Ronald Starr's buy, hold, cashflow and invest for the long term, Samson's clarity about staying in CA for his investments and of course Bruce Norris and Robert Campbell focusing on market cycles. So it's great but all the information makes me do a lot of thinking!

 

Enjoy and hopefully you see the post.

Suzanne

 

P.S.  Thanks for all the responses

taddyangle

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Reply with quote  #15 

I struggle devising an investment strategy that seems to fit my style.  The more I learn the more I seem to want to adjust the strategy.

 

I suppose since I have only been investing 3+ years it is tough to say that I am in it for the long term given that we have already sold 4 properties over the last 18 months and have two others on the market.  We do however plan to keep at least 5 of our properties for at least 10+ years, but who knows. 

 

As far as Sell Now!  I really enjoyed the book.  Talbott talks about how out of whack the housing P/E is in certain areas.  He gives examples from 2000 and then 2005.  Basically he states that in the cities with huge increase in the P/E means that those folks overpaid for their homes.  As prices decline, this becomes obvious.

 

He also spends some time bagging on the lenders and how they are part of the problem because of the loan types and loaning to folks that probably should have rented. 

 

All in all he states many reasons why the downturn is coming, mostly however because prices cannot continue to increase forever, it is just not possible.  There has to be a correction, but unfortunately this run-up was stretch due to Greenspan, and loose lending.  

 

Talbott has a chart in his book that shows the percent home prices would go down over the next 5 to 7 years if things turn down to 1997 levels, which he says is when “most of this nonsense started.”  If you believe his chart SLC declines 5.7%, while most of the CA cities decline 40-60%.  San Diego is at 58.7%. 

 

He also goes on to say that you should sell any investment or vacation properties that are over $200k.  And that if your primary residence is over $330k you should sell. 

 

Anyway, this is a doom and gloom book, but he supports much of what he says, and it has given me a lot to think about.


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Suzanne

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Reply with quote  #16 

Yes!  It is hard to find a strategy and stick to it.  Perhaps one has to be at this for a while before getting into a comfort zone or a risk level.  For example, out of state precon investing just seems like gambling - at least during this leg of the market cycle but what Ron Starr does seems so solid.  Like Samson, I am investing in CA and learning the strategies that work in a downturn.

 

I will get this "doom and gloom" book so that I can add 60 points to my IQ (Thanks Robert!)  Perspective is so important.  I look for CA properties daily.  That is my almost full time focus and I do come across deals but then I ask:  If this is a deal today, will it be a deal next year?  Will the coming 1500% increase in foreclosures and declining prices/correction wipe out the benefits of this deal over the next year or two?  If I had a way to hold these properties then great but how .  I don't know yet how to assess that.  I would love to see our local experts run scenarios at one of our meetings (hint hint.)  You buy this house today and then show numbers for two possible outcomes:  A quick rehab and flip OR you hold during the downturn.  What are the negatives and positives of both choices and what are the worst case scenarios of both.  The learning continues. 

 

Thank you

RobertCampbell

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Reply with quote  #17 

 

Suzanne,

 

You are open-minded and flexible, which are two required qualities for long-term success in the markets.

 

Keep an eye on those trends - they make you rich or make you poor. 

 

Would you be interested in doing a 6 to 8 page Executive Summary of "Sell Now" by Talbot for me?  Or anybody else?  In exchange, I'll give you a FREE one-year subscription to my Timing Letter.

 

Robert Campbell

wayne

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Reply with quote  #18 
Quote:
Originally Posted by taddyangle

I struggle devising an investment strategy that seems to fit my style.  The more I learn the more I seem to want to adjust the strategy.

 

I suppose since I have only been investing 3+ years it is tough to say that I am in it for the long term given that we have already sold 4 properties over the last 18 months and have two others on the market.  We do however plan to keep at least 5 of our properties for at least 10+ years, but who knows. 

 

As far as Sell Now!  I really enjoyed the book.  Talbott talks about how out of whack the housing P/E is in certain areas.  He gives examples from 2000 and then 2005.  Basically he states that in the cities with huge increase in the P/E means that those folks overpaid for their homes.  As prices decline, this becomes obvious.

 

He also spends some time bagging on the lenders and how they are part of the problem because of the loan types and loaning to folks that probably should have rented. 

 

All in all he states many reasons why the downturn is coming, mostly however because prices cannot continue to increase forever, it is just not possible.  There has to be a correction, but unfortunately this run-up was stretch due to Greenspan, and loose lending.  

 

Talbott has a chart in his book that shows the percent home prices would go down over the next 5 to 7 years if things turn down to 1997 levels, which he says is when “most of this nonsense started.”  If you believe his chart SLC declines 5.7%, while most of the CA cities decline 40-60%.  San Diego is at 58.7%. 

 

He also goes on to say that you should sell any investment or vacation properties that are over $200k.  And that if your primary residence is over $330k you should sell. 

 

Anyway, this is a doom and gloom book, but he supports much of what he says, and it has given me a lot to think about.

taddyangle,

 

If you read his 2003 book, you would find that almost every conclusion he made turns to be complete opposite in reality. I don't understand this. Why do people keep saying things if they are consistently being wrong? If I just do or say or predict things randomly, I would get it 50% right.

 

Sorry for the negative comments, but they are based on facts.

 

wayne

taddyangle

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Reply with quote  #19 

Wayne,

 

I did not read his 2003 book.  And if I had, I do not think I would have believed it in 2003.  My opinion would have been, ya right, this guy is crazy.

 

The facts are pretty clear now however.  Look at the stats over the last 12 months.  The trend to me is obvious.  As an example, my wife and I bought in so cal starting 2003.  We have sold a few properties between March 2005 and March 2006.  Had we held those properties the net increase would have been 5% from the time we sold.  Since we sold the net increase was 58%.  

 

I don't believe you can predict the future, but I do believe you can stay ahead of the trend. 

 

Just based in this board over the last 2 years you should have been able to stay ahead of the trend.  Read posts by most that have posted, many shared what they were doing and why. 

 

 


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Suzanne

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Reply with quote  #20 

It is really difficult to assess when people make predictions.  I gauge the information depending on who is talking and why!  coming from LOCAL people based on their own personal successes and failures.  I like to hear about mistakes too-it's real.  When the out of towners speak-I take it with a grain of salt-especially when they have a $10,000.00 package to sell. 

 

It was very powerful when Bruce Norris came to speak and say very clearly and directly "I don't have good news for you today-the market is going to turn and here are the reasons why" and he had no big package to sell.  That impacts me more than anything else. 

 

I think Robert is right when he says that these books give you "perspective" (that is my new mantra for a while )  But to look at them and make concrete decisions - perhaps not.  Blend the information with the realities in your backyard so to speak. 

 

My two cents.

Suzanne

 

 

 

 

RonaldStarr

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Reply with quote  #21 

Suzanne—CA---------------

 

“You buy this house today and then show numbers for two possible outcomes:  A quick rehab and flip OR you hold during the downturn. “

 

At the risk of sounding like a “real estate guru,” I must say that making money with real estate is not as hard as rocket science, brain surgery, or rocket surgery.

 

Doing “flips” or, as I like to call them, “real estate merchandising” deals will work in any market, even one with downtrending prices.  The definition is buying properties at well below CURRENT market value and reselling AS SOON AS POSSIBLE at or near market value.   However, you have to buy very much below market value to make the profit certain.  None of this 3%, 6%, 9% below market value business.  You have to be buying at 20% or more below market value.  Even if prices are going down, you can resell for an attractive price to a buyer at say 8-15% below market value.  When you are the best value on the market, you will capture the buyers that are active.

 

The “hold” business is simple: you have to have at least a breakeven after-tax cash flow when considering ALL expenses, including vacancy loss, uncollectable rents, maintenance, and so on.  This requirement seems to be virturally impossible to meet in Coastal California.  The prices are just too high, the ratio of rents to property value are just too low. 

 

Now, it can be done with huge down payments.  At the extreme, if you pay 100% of the purchase price in cash, your expenses are going to be quite low.  The reason is simple: loan payments are usually the greatest individual expense for investors and typically are greater than all the other expenses combined when you are highly leveraged.  But, the problem with being non-leveraged—owning the property free and clear—is that your return on your investment or your return on your equity goes way down compared to the typical return from leveraged investments.  You get perhaps 5-10% annual cash on cash return.  This is a little better than a bank CD or treasury debt investment.  But it is also much more time-consuming and maybe somewhat more risky.  Risky in the short term, at least, as your equity may decline if property prices do.

 

Also, you can get the appreciation and depreciation on the whole value of the property, but you paid for the whole value of the property to get that.  When you are leveraged, you pay less money and still get all the depreciation and the appreciation on all of the value of the property, both the part you own and the part that the lender bought for you.

 

But, it will not be easy to find reasonably-leveraged positive-cash-flow properties in CA.  There is just too much competition for you. Many people would like to invest close to home.  And there are very few  properties that will make sense on a cash flow basis. 

 

I’d suggest you probably have to ignore virtually all of the single family houses for sale on the open market.  You probably have to be paying less than $200K for a house.  Perhaps less than $150K, depending upon the rents the houses command.

.     

Now, there may be some situations you can find in CA that provide positive cash flow with a reasonably small down payment, say 5-25% down.  But they are not going to be the average property.  They might be something like older mobile homes or the very lowest priced properties, such as labor camp houses.  There may be some commercial opportunities that make sense, such as the mini warehouse, “you store it” type operations, if you can find a location where the market is not oversaturated with them.

 

Good Investing and Good Investigating***********Ron Starr************ 

 

 

Suzanne

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Reply with quote  #22 

Robert, Yikes! 6-8 pages. I'm going to have a Grad school flashback!

 

I'll get a copy and take on the challenge.  What if I dictate the information? 

 

Suzanne

Subcranium

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Reply with quote  #23 
Bubbles always last longer than they should. That's what makes predicting the timing of the pop so dangerous. Shiller makes that point in "Irrational Exuberance."

You know it'll pop. You just can't say when. How do you know? Because mortgage/rents and mortgage/wages have never been so out of balance. Because prices can't keep going up, because eventually you run out of buyers.

Since they can't keep going up, they have to flatten. Flattening is disasterous when people have been depending on increases to fund lifestyle. So flattening leads to an inevitable drop.

Suzanne

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Reply with quote  #24 

Thank you very much for that detailed response.  I'm sure it's appreciated on this board!

 

I've been tempted.  I put in offers all the time and recently at $245,000.00, $275,000.00 and $175,000.00---I didn't get a quick no (that made me wonder....hmmm..)  So my response is: Would you snag a SFH today if you got it at $275,000.00 in CA? Do a interest only 30 year? This is pretty tempting since properties haven't fell that far this year-

 

Suzanne

samzell

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Reply with quote  #25 

*****taddyangle,

 

If you read his 2003 book, you would find that almost every conclusion he made turns to be complete opposite in reality. I don't understand this. Why do people keep saying things if they are consistently being wrong? If I just do or say or predict things randomly, I would get it 50% right.

 

Sorry for the negative comments, but they are based on facts.

 

wayne******

 

------->Wayne, your right on the money.  My sentiments exactly!  People have short memories and forget every year that last year the same things were being said/

 

All the market predictors have been WAY off the mark.  There was PLENTY of bubble talk in the Bay Area starting in 2001, after all, jobs tanked and prices had ALREADY been climbing rapidly since 1996.  I heard Norris speak way back in 2003 talking about how things were going to fall apart soon.  He was talking 2004-2005 for the begining of a crash back then. 

 

Not saying they won't, but here we are almost in 2007 and things STILL are not collapsing in CA (to the great frustration of all the bubbleheads I might add).  Foreclosures are still below their historical averages.  Even the worst market in the state, San Diego has barely seen a 1% decline in Median price (and that was mainly condo's, SFR's have still not shown a year-over-year decline). 

 

Yes the market is slowing down and we'll probably see a decline in values.  But the bubblehead stuff is so anticlimactic at this point, how many years can you be wrong about the giant CA RE collapse theories and still be taken seriously? 

 

You can predict an earthquake in CA every year for the next 80 years and you'll probably be right eventually.

 

 

 

 

 

 

 

 

 

 

taddyangle

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Reply with quote  #26 
Quote:
Originally Posted by Suzanne

Thank you very much for that detailed response.  I'm sure it's appreciated on this board!

 

I've been tempted.  I put in offers all the time and recently at $245,000.00, $275,000.00 and $175,000.00---I didn't get a quick no (that made me wonder....hmmm..)  So my response is: Would you snag a SFH today if you got it at $275,000.00 in CA? Do a interest only 30 year? This is pretty tempting since properties haven't fell that far this year-

 

Suzanne

 

Not enough info. 

 

I am seeing huge drops in condos and still it does not seem like they are moving. Properties will continue to fall where we are seeing decreases.  I am seeing this already in Palm Springs.  So slow, and entry level condos are already down 10% this year based on my observation.

 

I am sure people are making money in this market, but I will leave that for the pros.  Our time will come.


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dansimo

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Reply with quote  #27 
samzell,

My wishfully hopeful side is inclined to agree with you, (because I'm highly leveraged on a few properties), yet how would you explain the certain imbalances in the market and their consequential outcomes?
In other words, how do you think this will play out?

The one thing I give the "bubbleheads" credit for is they generally have decent, substantiated arguments. But with "softlanders", I haven't heard or read or at least been exposed to their explanation of how the market will correct and take care of the imbalances specifically.

It doesn't seem unreasonable to me that although the negative predictions may be "off the mark" in close timing, it seems very plausible that the predictions are inevitable.


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wayne

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Reply with quote  #28 

Quote:
Originally Posted by dansimo
samzell,

My wishfully hopeful side is inclined to agree with you, (because I'm highly leveraged on a few properties), yet how would you explain the certain imbalances in the market and their consequential outcomes?
In other words, how do you think this will play out?

The one thing I give the "bubbleheads" credit for is they generally have decent, substantiated arguments. But with "softlanders", I haven't heard or read or at least been exposed to their explanation of how the market will correct and take care of the imbalances specifically.

It doesn't seem unreasonable to me that although the negative predictions may be "off the mark" in close timing, it seems very plausible that the predictions are inevitable.

It could be played out several different ways. If interest rate goes down (and this could be a real possibility), people can still refinance and their payment could still be low enough. Then the market will be fine. CA properties are imbalanced most of the time in recent history if you compare mortgage with wage. Change occurs only in a bad economy. And this seems to be the norm.

 

Why the mortgae to wage theory is always valid? It is not valid in many big cities, in europe, in Japan, and in many other countries. People are not entitled to decent housing. Can it be changed? sure.

 

Inflation is a strong support. weak dollar is another strong support. supply and demand is another strong support (there is still a shortage of housing available in CA). immigration is another strong support. Did anyone do a thorough analysis on those factors? I have not seen one yet.

 

how about the economic outlook of CA? I think the long term outlook is tremendous. I think So Cal will be the trade, cultural, and financial center of pacific rim. How much big deal is that? I think someday LA will surpass NewYork, and that day is not far off.

Subcranium

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Reply with quote  #29 
>>Why the mortgae to wage theory is always valid? It is not valid in many big cities, in europe, in Japan, and in many other countries. People are not entitled to decent housing. Can it be changed? sure.

It's not a matter of whether wages can be out-of-whack with mortgages. Of course they can. And as you point out, in many cities they are perpetually out-of-whack. But that's not the point.

Here's the point. When there is a ratio for a city that holds for decades, and then all of the sudden it runs away, and the timing is coincident with loose lending, "new" kinds of loans, and people that chase real estate up in the popular belief that that's the only direction it can go, it's foolish to bet that the new ratio is all of a sudden the normal one.

It's simply a matter of risk and reward. No one knows how it ends. It's just a matter of where you place your bet.
RobertCampbell

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Reply with quote  #30 

 

Wayne,

 

Inflation is a strong support. weak dollar is another strong support. supply and demand is another strong support (there is still a shortage of housing available in CA). immigration is another strong support. Did anyone do a thorough analysis on those factors? I have not seen one yet.

 

Then why don't you give us an economically sound argument that is backed by data that supports your outlook?

 

Talbot gives us data that supports his outlook. 

 

Robert Campbell

 

 

 

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