patrick.net

You never could, you've been living in a fantasy world, and now your just wising up to it. That's the first step to recovery.

You can live the American dream of buying a house, even in the SF Bay Area.
Just get used to eating Ramen. And not saving for retirement. Or taking vacations. Or buying a new car. Or new clothes. Or going out to eat.

Have you ever shopped at a Goodwill store? Or rented out a room to a complete stranger? Or looked into selling a kidney?

Some people think putting 43% of their income into buying a home is worth the sacrifice. Maybe you will too.
Life is about sacrifice. What are you willing to sacrifice to get your piece of the American dream?

If you buy into a manifest bubble, ignoring long term trends, you get what you deserve.

The promoters, cheerleaders and real estate lobbyists are the first to disappear when the prices collapse. Good luck hearing from the Patnet lobbyists when that happens. Their job is simply to distort the airwaves with optimism until the music ends.

RedStar says

I bought in 2010, and found this site during my house search. I'm glad I didn't listen to the "permabears" but I sure was second guessing my purchase until last year.

I bought in 2010 as well, though I didn't buy a condo on Star Island just because it was a few hundred thousand dollars less than it was a few years ago. Even at those great reduced prices, there still isn't any viable exit strategy that would have been in my favor.

It's not when you bought, it's what and where you bought, and how certain one is that you will have the same level of income and lifestyle for the thirty years you would have the mortgage.

90% of these people that buy in these type of Neighborhoods consider any future inflation of their would be home, as part of their future money scheme.

Man makes plans and God just laughs.

It's kinda like being a real estate agent. They have a vested interest in you buying anything, so they can collect.

The Rentier has a vested interest in promoting a bullish outlook on the real estate market, as their multiple properties only increase in value during such.

Ceffer says

The promoters, cheerleaders and real estate lobbyists are the first to disappear when the prices collapse. Good luck hearing from the Patnet lobbyists when that happens. Their job is simply to distort the airwaves with optimism until the music ends.

You can tell inveterate gamblers because they always brag about their winnings, but never about their losses.

No investor is right all the time, and those who claim to always have the winning investment, are simply not telling the whole truth, are trying to manipulate, or are serving their or somebody else's agenda.

So where does that leave the various and sundry promoters and lobbyists who claim to ALWAYS know the future, have never taken losses (allegedly) and have specific instruction about where you should put your money?

Until these self anointed wise men starts admitting that their investment strategies have gone awry on occasion, when, and how, I will severely reserve judgment about whether they are telling the whole truth, or are just full of it.

Oh, and remember, those who have successful investment strategies seldom brag about them, much less online, unless they are just baiting the lure for suckers.

another victim of the evil permabears.

regardless of what anyone posted, when inventory went down to 3 months that should have been a wake-up call.

Ceffer says

Oh, and remember, those who have successful investment strategies seldom brag about them, much less online, unless they are just baiting the lure for suckers.

Correct.

Everyone on this blog is a dipshit. Except me, who bought condos and homes in Phoenix at drop dead low prices.
I am the smartest investor you will ever meet. You are the moron loser that didn't buy homes in Phoenix.

Me: the super duper star investor. You: the mouth-breathing moron that isn't me.

I will keep reminding you of my great investment decisions, over and over and over again, in case you forget how great I am.

Well, here is one of my greatest deals: I bought a van near the river for $100, did $25 work on it and a family of 4 is living in it now for $100/month. Try to learn from my success!

I am not worried.
Everything will be fine...

meetyaks says

Now, I dont think I can buy a house in Bay area anytime in my life

Don’t be depress, enjoy life.
I wanted to buy aggressively in 2011 and 2012 in Bay Area, but houses I wanted to have and places I wanted to live in were always too expensive. I still live in luxury rental, drive luxury cars, and go on short to long vacations. In mean time I become a Landlord. Bought many houses (mostly new) in places I don’t mind to be my retirement destination. Enjoy cash flow, double digit return on money, tax depreciation, appreciation in value, paying down principal by others, and have great tenants.

Why invest in a market that has had stratospheric gains? Generally, you want to invest when people are fearful and heading for the door. This is not the case in SF. People are merely complaining about the high prices and the rise in evictions. I live here!

You made a Life Choice based on what bloggers, many of us anonymous with pseudonyms, wrote here?

How do you know that some points aren't disingenuous, or else made in jest?

Jeez.

bullshitmagnet says

There are many investments that outperform houses. I think people gravitate towards housing as an "investment" because they can easily use huge leverage to buy them, and magnify their investment returns.

You need to do some more research--nobody buys a house solely for capital appreciation. As an investment, one buys housing for the rent dividends. Any capital appreciation is icing on the cake.

I'm having trouble feeling any sympathy for anyone that based their most important of life decisions, on the postings of the jack assed morons that post here.

Especially as vague as posters often are, not bothering to mention that they are speaking on behalf of local market conditions.

Here in SE PA, any fool that didn't wait out interest rates to bottom, got fleeced, as housing has at best flatlined over the past 5 years. While the stock market doubled. One could have easily waited and saved by renting, and watched their DP double in the stockmarket, all the while house prices stagnated and the cost to borrow money, plummetted

Ah, hindsight. And how many people put their entire housing down payment savings into the stock market?

All these posts about calling the bottom, but not one mention about TARP, foreclosure moratoriums, cramdowns, mark to market, QE2, QE3, QEinfinity, bond bubble, etc. Buying a house has been more about forecasting our government programs than much else.

Everyone on this blog is jealous of me.
No one but me has anything good to add to any discussion.
Clearly, pat.net would go downhill without me.

If I didn't keep reminding everyone of my great investment triumphs, no one would learn anything!

I am still not worried.
Everything will be fine...

He likes using that word. It gives him the 'tinglies'...

Call it Crazy says

egads101 says

you are just a moron cocksucker who does personal attacks,

Writing about yourself again I see!!

No one should listen to any advice but mine.
Any other advice is useless and wrong.

Me: the best adviser and investor. You: the moron that doesn't listen to my advice.

I am not worried.
Really, I'm not worried!
Everything will be fine...

I am always right in every argument. Even when I'm wrong, I'm right.
I will search for old posts that you wrote during the housing crash to remind you that I am right.

Because I'm always right.

Right?

Right?

And I am still not worried.
Everything will be fine...

Are we becoming like China, where the people invest in real estate because they have to invest in something (and don't trust their banks)?

egads101 says

Never? the last bubble kind of proves that ain't true.

I guess it depends on what one means by "completely" disconnected. When assests or any type of trading or investment vehicles get truly overpriced, even if many know they are overpriced, it's anyone's guess how much more overpriced they can get. (see greater fool theory).

What has happened has already happened. So what is the strategy now?

Don't pay attention to any of the above.
Move to Toronto.
meetyaks says

What has happened has already happened. So what is the strategy now?

"-------->I wish I did not know this web site"

By meetyaks Follow Sat, 16 Nov 2013, 12:31am 1,027 views 58 comments

I hate this website too. IT IS SO ADDICTING. I can't give it up. I love it.

egads101 says

2. QE. etc. served to lower interest rates. maybe. that is all. So, you re-run your mortgage compared to rent. When I saw mortgages with 25% down, that would be half or less than rent, I bought. I don't need to think about QE ending, my mortgage is set for life. On one home I pay $605 and it is rented for $1500, on another I pay $425, it is rented for $900, and a third, I pay $675 and it is rented for $1500 as well.

My personal residence, I pay $1150, and it would rent for $1700.

Yes but even though you might be paying more for rent over what a mortgage would cost, keep in mind:

1. $200,000 if left invested in something other than a house brings at least $1000/month in return (spendable cash). Maybe more.
2. A mortgage doesn't cover maintenance (new roof, paint, carpet, plumbing repairs and so on). This has also to be added in.
3. Even if you borrow money to buy a home, your investment is very risky because of the leverage. Borrowing $200,000 with a small down payment (lets say 5%) means anything more than a 2% (or so) decline in house prices results in a 100% loss on your original investment.

Obviously item 3 works in reverse also, in that a small percentage increase in home prices results in dramatic percentage returns on your original investment (downpayment). That's why, even with moderate home price increases, many people will brag about how "smart" they were to buy a home.

Keep in mind that if there is so much seemingly "easy" money to be made by "investing" in houses, there is a huge amount of risk hidden somewhere. There is always the risk/return tradeoff. There is no such thing as a no risk, high return investment.

Of course some people will claim that they may very well have made tons of money investing in houses. Maybe even year after year. Which makes them brag even more (and claim even more that they are smarter than anyone else). But keep this in mind:

If someone flipped a coin 10 times, on average, you would expect them to get heads half the time, tails half the time (50% probability of heads or tails). A few people might get heads 60% of the time. But then imagine you had 100 million people do the coin flipping experiment. Out of that 100 million, there would like be one person that got all heads, for all 10 coin tosses. Does this mean that person had any particular skill at coin flipping? NO. It's just luck. Same thing with investing. Some people might claim to know the secret of when house prices will rise or fall a few percentage points up or down. And then brag about how "smart" they are. But, just like the coin flipping experiment, it might really just be LUCK. Even if someone has had consecutive "success" over time!

bullshitmagnet says

Obviously item 3 works in reverse also, in that a small percentage increase
in home prices results in dramatic percentage returns on your original
investment (downpayment). That's why, even with moderate home price increases,
many people will brag about how "smart" they were to buy a home.

The big difference between primary residence and investing in stocks/bonds/funds is that the former provides for consumption and investment value while the latter is solely an investment vehicle. That is a very important difference. Additionally I would argue that for most people bying primary residence that the investment considerations are secondary to consumption considerations. The proper analysis to use is price/annual rent ratio for apples to apples properties.

bullshitmagnet says

1. $200,000 if left invested in something other than a house brings at least
$1000/month in return (spendable cash). Maybe more.

Your scenario of 6% return is definitely not guaranteed to be located in secure investment vehicles. Even relatively stable companies such at T and MO are not returning 6% dividend yield right now. Oftentimes when dividend yield is high it's a warning that it's gonna be cut in the near future cause the shares have been getting beat down! Now if you are talking about capital gains "returning" 6%, that is an inaccurate analysis because capital appreciation in stocks doesn't mean anything until shares are sold unless you are a retiree trying to withdraw 4% of portfolio annually for the rest of your life.

meetyaks says

What has happened has already happened. So what is the strategy now?

What I would suggest is that you stop looking at the past. Yes if you compare today to 2012 and especially 2010 or 2011 you will find that not buying will easily cost you 6 digits from lifetime housing costs perspective. However, that is water under the bridge at this point. You need to make projections about buying now vs waiting going forward. Hopefully, you have been able to save some money meanwhile from 2012 or whatever period you originally wanted to buy which will somewhat soften the blow. Additionally, compared to 2010 or 2011 the interest rates are lower, so you should be able to afford a higher principal balance.

Keep in mind that overall bay area is not friendly to renters. There's evidence that wall street investors have been buying single family homes to rent out around here. The reason they do that is because they have ahem "confidence" that they can rent out properties at high rents which is what they call "stong rental market." What this euphemism means is that renters pay boatload in rent in this area so when you make your projections into the future, I would suggest that you don't set very optimistic assumptions for rental variables.

"The "housing is an investment" idea is a fad"

http://research.stlouisfed.org/fred2/series/CUUR0000SEHA

Bellingham Bill says

"The "housing is an investment" idea is a fad"

http://research.stlouisfed.org/fred2/series/CUUR0000SEHA

What this graph demonstrates is that housing is an excellent inflation hedge which should provide motivation to purchase as soon as it's feasible granted that price/annual rent ratios are reasonable.

http://research.stlouisfed.org/fred2/graph/?g=ozj

stunning to me that rents are up 50% since I came back to the US in 2000.

Rents in Tokyo have been flat or down since then.

Japan's depopulation is going to be a beautiful thing.

The US, not so much.

http://research.stlouisfed.org/fred2/graph/?g=ozm

Shows they've been 180deg out of phase with us since 1970.

Our boomer echo is just arriving into the work and housing market.

God help us.

egads101 says

So, where is the risk? if the home value dropped, which at this point it would have to drop a freaking ton to even where I started... well, I keep making nearly $10K a year in rental profit. on my $50K investment.

if you don't understand how good a 20% return is, well there is no hope for you!

Cocksucker? Such language. I apologize if I have offended you! Running a business as a landlord isn't pure investing. That's running a business/creating a job for yourself. So yes I would expect to hear that you would be making money doing it. Otherwise nobody would be a landlord and there would be no rental properties for rent.

BTW: there is no such thing as a risk-free 20% return on any investment. If any such investment exists, why would anyone invest in risk-free government bonds and earn next to nothing? Everyone would simply invest in your 20% risk-free idea instead (and, at some point thus lowering the return on your risk-free 20% investment to what other risk-free investments are earning in todays environment: essentially zero). Such high returns on something that is risk-free won't last long.

dublin hillz says

Your scenario of 6% return is definitely not guaranteed to be located in secure investment vehicles. Even relatively stable companies such at T and MO are not returning 6% dividend yield right now. Oftentimes when dividend yield is high it's a warning that it's gonna be cut in the near future cause the shares have been getting beat down! Now if you are talking about capital gains "returning" 6%, that is an inaccurate analysis because capital appreciation in stocks doesn't mean anything until shares are sold unless you are a retiree trying to withdraw 4% of portfolio annually for the rest of your life.

Yes, 6% dividend in todays environment without counting capital appreciation is optimistic. However there are funds paying nearly 4%, which aren't risk-free but do carry only a moderate amount of risk. And, as I mentioned, interest rates might rise in the future.

Please note that there are people posting on this board that are trying to convince each other that they are earning a risk-free 20% annual return by investing in homes.

dublin hillz says

The big difference between primary residence and investing in stocks/bonds/funds is that the former provides for consumption and investment value while the latter is solely an investment vehicle. That is a very important difference. Additionally I would argue that for most people bying primary residence that the investment considerations are secondary to consumption considerations. The proper analysis to use is price/annual rent ratio for apples to apples properties.

Yes I would agree. "Investing" in a home has benefits over investing in pure financial assets (stocks/bonds) in that you can actually live in a home. That benefit would need to be accounted for.

dublin hillz says

Keep in mind that overall bay area is not friendly to renters. There's evidence that wall

Most of the country in unfriendly to renters. You can be evicted for no reason, or have the rent raised at any point. There has been so much mentioned about the "rights" of homeowners/mortgage holders, with bailouts, multiple year squatters, QE buying mortgage bonds, and on and on. But why never any protection for the rights of renters??

bullshitmagnet says

So, where is the risk? if the home value dropped, which at this point it would have to drop a freaking ton to even where I started... well, I keep making nearly $10K a year in rental profit. on my $50K investment.

You could also buy a lawnmower for $100, and earn $1000 your first month mowing lawns. That would return to you over 10 TIMES your original investment!

egads101 says

if you don't understand how good a 20% return is, well there is no hope for you!

Not as good as 30% return without leverage. LOL. Both of us should probably count in the opportunity cost of money during renovation time if 20-30% accounting return is normal for us, and don't forget our own time's worth. e.g. for every $100k capital tied up for 3months to half a year for renovation, at our 20-30% supposed portfolio return rate, some regression has to be taken into account for the $10k or so rent missing when calculating overall portfolio return rate.

BTW, what's wrong with cocksuckers, Roberto? We need suckers. I only wish I could spend more time with cocksuckers, the work on the houses are taking time from having our cocks sucked . . . so that has to be taken into account too when it comes to calculating how much successful business is costing us. Sometimes, we lose not just the sucking, but the beloved sucker altogether due to our obsession with work . . . so raise rent accordingly to reflect the true cost of our labor.

egads101 says

Reality says

egads101 says

if you don't understand how good a 20% return is, well there is no hope for you!

Not as good as 30% return without leverage. LOL.

when someone says something like that, you know you are listening to a fucking moron.

Never under-estimate Reality. $110k all cash purchase, $40k renovation over 6 months (other houses/buildings had to be renovated first, so this one was on hold for 3-4 months after the roof leak was fixed immediately after closing). $5k monthly rent revenue now, of which about $4k is net; can potentially rise to $7k for revenue in the next couple months, as there are units not finished yet.

20-30+% is the accounting rate when money is working after fully rented, but we have to take into account times when the money is sitting idle, like being repaired and waiting for repair, not to mention the time for accummulating money shopping for houses. The real return is not 20% for you and not 30+% for me. We can't just count the winnings, and not fully count the time when money is sitting idle, in order to pounce on those opportunities or having too much on our plates after pouncing to bring each building online right after closing, or simply the building taking more work than a few days or few weeks.

egads101 says

Reality says

The real return is not 20% for you and not 30+% for me. We can't just count the winnings, and not fully count the time when money is sitting idle, i

dude, it took me 18 days from signing papers, till collecting rent. I've had the home for 20 months now, changed tenants once, it is on contract for 2 years with this second guy, and I STILL haven't had an entire month's vacancy since the day I put my John Hancock on the deed.

this newest guy made a big cash deposit too, since he has a cash business repairing motorcycles and hence no paychecks to verify...so do I get to count the $3.5K he has as security in my bank account?

Does AZ state law allow you to use that $3.5k to buy new houses and keep up with the 20% return? How long did it take you to accumulate the $50k to make the down payment? What was the return on that money while being accumulated? How much time does it take you to accumulate $50k now from rent income to get another house? That's what I'm saying. . . it's not a 20% return business for you, and not a 30+% one for me.