See posts on the real estate plunge thread--prices are getting cheaper by the month and have been for a couple of years now.
-
Trouble logging in? Send us a message with your username and/or email address for help.
-
Hello all! We will be performing a website & forum update soon. You may get logged out so now is the time to make sure your email address in your account is correct - go to your account to check it and update it now. Send us a message with your username and/or email address if you need help.
Another Auction --Heron's Watch 7 Condos
- Thread starter SHELLY
- Start date
See posts on the real estate plunge thread--prices are getting cheaper by the month and have been for a couple of years now.
flyforfun
Beach Fanatic
Just like stocks it takes cash....working for banks and mortgage companies is not part of my process. I sit back and let you guys/gals slam the market down and then I pay cash. People who over leverage themselves in RE market, just like stocks, go broke every day! However, the stock market is full of people who are experts in moving money from your pocket into theirs. Cheating, dishonesty and cooking the books is all ok until you get caught, and too few every get caught. Good attorney and a paid off jury will get the stock crooks back to the beach of bahama's or Mexico while one enjoys their large nest egg. If you have not experienced the pain of playing the stock market either you have been lucky or have time to play it full time. I prefer RE, and will take my chances at the black jack table in Vegas over the stock market any day!
SHELLY
SoWal Insider
The operative word in your statement is "play," which rhymes with "excessive risk" and "speculation."
No risk and fraud to see in the RE sector folks...just keep moving long:
----------------------
A local home appraiser is alleging widespread mortgage fraud in Bakersfield?s housing market, accusing local real estate professionals of artificially inflating prices to generate illegal profits.
Appraiser Gary Crabtree said Friday he has alerted federal, state and local authorities to ?suspicious? home sales in the Bakersfield area. But he said he believes what he has found is just the beginning.
?I think I?ve just scratched the surface,? Crabtree said. ?I know there are other people in the real estate industry in Bakersfield that have knowledge of this. They are just not talking.?
After documenting 22 suspect cases in the last year, Crabtree said he has referred six of the strongest instances to the FBI, California Department of Real Estate and California Office of Real Estate Appraisers, and three to the Bakersfield Association of Realtors. He also has attempted to notify the lenders involved in each of the 22 cases.
Neither the FBI, Department of Real Estate or Office of Real Estate Appraisers would confirm Friday whether they have ongoing mortgage fraud investigations in Bakersfield. Crabtree stressed that he doesn?t have any firsthand knowledge of any investigations by the agencies.
The California Department of Real Estate receives between 8,000 and 10,000 complaints a year, spokesman Tom Pool said.
?We investigate any complaint that comes our way,? Pool said. ?It is very likely some of those came from the Bakersfield area. But I can?t tell you how many of them are mortgage fraud.?
Crabtree and Bakersfield Association of Realtors President Ray Karpe said they believe questionable transactions make up a minority of local home sales.
?There are hundreds of really good, really qualified serious lenders and Realtors in town,? said Brynn Powers, vice president and general manager of Alliance Title?s Bakersfield office. ?There are just a few that have found a way to get around the rules.?
Crabtree said some of the properties in question may have been ?flipped? ? purchased and sold for profit ? by investors, real estate professionals or so-called straw man buyers whose identities and credit histories were used to secure loans. The cases include what Crabtree said appear to be fraudulently inflated sales prices and buyers purchasing properties with 100 percent financing.
Some buyers received money back at the close of escrow, Crabtree said, sometimes under the guise that the money would be used for installing amenities that were not installed, such as backyard landscaping.
Crabtree said he believes some real estate agents and brokers as well as lenders and appraisers may have taken part, while others were taken advantage of in the scheme.
Some of the properties have gone into foreclosure or received notices of default, Crabtree said, leaving lenders holding the bag.
?It has falsely inflated values,? Crabtree said. ?Foreclosures will follow.?
Powers said a relative who earns about $10 an hour was approved for a $200,000 loan and asked to falsify documents to say he made more money.
?If anybody asks you to tell a lie or an untruth to get qualified for a loan, you shouldn?t do it,? Powers said. ?If you have to tell a lie, don?t do it, even if you want the house real bad.?
Karpe confirmed that his organization received information from Crabtree, but said the potential wrongdoing falls outside the association?s policing authority. He said the Realtors association would wait to see if any punishment was handed down from higher authorities.
?Once some of the investigations go through and people get their just punishment, it will clean things up,? Karpe said. ?But you are always going to have people pushing things. Most of the people in our business do good business, but a couple grab the headlines and it taints the whole industry. I don?t like it.?
The FBI estimates that mortgage fraud losses total between $1 billion and $4 billion a year.
?It is an epidemic,? said Ann Fulmer, vice president of industry relations for Interthinx, a company that provides mortgage fraud prevention and detection technology and risk management tools to banks and lenders. ?We don?t have a ... handle on how big a problem it is because it is not reported by everyone. Lenders don?t always recognize it.
?I don?t think we have seen the worst of it yet.?
Fulmer, who has worked with federal and state regulatory and law enforcement agencies fighting mortgage fraud, said more mortgage fraud cases are coming to light.
?When the market was so hot and properties were appreciating quickly, it was more difficult to spot,? she said. ?Because the market is slowing down, the fraud that happened in loans that originated in the last two years is like dead bodies rising to the surface.?
Crabtree said he began tracking the questionable transactions so he wouldn?t use them as comparable properties when doing appraisals.
Crabtree said word is out in local real estate circles that he has provided information to agencies about potential improprieties.
He said he has lost business as a result and others in the industry have stopped talking to him for fear of being implicated.
But he said he believes it is the right thing to do.
?I could have just let this gone on and not said anything to anyone,? Crabtree said. ?But it is my responsibility as an ethical appraiser to report these cases of suspicious activity.?
-------------------------------------------
But that's Califorinia...it's not Florida??
The Federal Bureau of Investigation's recent Financial Crimes Report states that mortgage fraud is a "pervasive and growing" problem in the current market climate, especially in the Sunshine State. In fact, the report singles out Florida as one of the nation's top 10 hot spots for mortgage fraud, along with Georgia, South Carolina, Illinois, Missouri, Michigan, California, Nevada, Colorado and Utah.
The advantage and risk of investing in real estate is leverage as opposed to stocks...even buying stocks on margin, much greater leveraged can be obtained in RE.
The little guy investing in stocks typically is only investing cash and can only lose the equity amt...RE on the other hand can be purchased with zero equity; however, the entire value of the asset is at risk.
Also...I'm sorry but you're not a RE investor if you buy in cash...it devistates returns.
The little guy investing in stocks typically is only investing cash and can only lose the equity amt...RE on the other hand can be purchased with zero equity; however, the entire value of the asset is at risk.
Also...I'm sorry but you're not a RE investor if you buy in cash...it devistates returns.
Searcher
Beach Comber
Not only can you leverage the purchase of RE but if you buy the right property, you can - through rent - use other people's money to pay down your obligation.
SHELLY
SoWal Insider
Not many properties purchased during the frenzy (and even the majority for sale on the market now) will produce positive cash flow from rental income.
.
Searcher
Beach Comber
I couldn't agree more - egrp's breakdown in #7 above is a fair example. Im guessing that one should not buy resort property in SOWAL, or anywhere else with the expectation of positive cashflow.
SHELLY
SoWal Insider
Searcher,
It's not just about rentals in resort areas, although they are the worst.
I've been following a story on a RE "investors" message board for some time. The protagonist is "Jeff" who fancied himself a savvy RE investor...this portion of his story begins at the point the RE market is toppy:
(These comments are actual "cut and paste" comments...Folks, you can't make this stuff up!)
(May 05):
JEFF:I would LOVE to tell you about how my investments are doing. Sadly, in order to do that I would have to KNOW how my investments are doing. This is next to impossible given the fact that I have only been investing for roughly 3 months and I am a "buy and hold" strategy guy. I have just done the "buying" part and haven't yet done the "holding" part--not by a long shot. In fact, I have only closed on three homes. Many of my homes won't be built until the summer/fall, and at least 5 won't be built for a year. The advantage, of course, is that I won't be losing any money (due to negative cashflow, a distinct possibility, especially for the Florida homes) on these homes, but they will be appreciating all the same.
(AUG 9, 05)
JEFF: I currently only have ONE SFH that is in that range. I bought a home for 212k in SLC (Salt Lake City) that I am L/O for around $1600. This MORE than pays for my total expenses per month. I put 0% down. Even so, I recommend to others that they try to stay in the 150k range or under. No mater WHERE you are renting, this price range is MUCH more likely to cashflow!
This is different than my Cape Coral homes which have NOT closed yet. The price on them is ~240k. I expect to be ~$300-$500 down on them each month. I am willing to do this though, as each will probably be going up 10k a month on average (my guess). On paper, is seems as if they can sit empty and still be good investments (like Phoenix a few months ago?).
(AUG 18, 05)
JEFF: I give all the credit for identifying Cape Coral to Adiel Gorel. I had hardly even heard of Cape Coral when he (or was it Dani, his assistant) told me about it.
The great thing is that I bought THREE houses there (a lot for me!). Their total value is around 750k. So if they continue to go up at 45% a year (doubtful, but an interesting thought), I could make over 300k in one year! All this on about a ~9k investment. Am I missing something? This seems too good to possibly be true!
If this works out as I am imagining, I am definitely quitting my job. Oh, wait! I can't quit my job, I am unemployed...
(NOV 15, 05)
JEFF: My "worst" investment is no longer SLC (appreciation-wise)--OKC is now lowest at 11%. Of course, I am MAKING $100-$200 a month on fully rented houses in OKC, while my SLC house remains empty on the market at ~$1000 for a 220k house (no takers?).
Holding costs (i.e. vacancies) were WAY higher than I budgeted for (often 5k a month), and I have significantly cut into my cash reserves.
To the degree that my houses are typical of the areas they are in, and hence these NAR numbers are representative, I could be making a weighted average of a 23% return on ~2.8 million in RE (if current numbers hold). Somehow, I just don't think I will be that lucky--it just seems too good to be true--however, I don't see why I shouldn't make half that...In fact, if I don't lose these houses to foreclosure due to vacancies...I could eventually make a significant bundle.
As described above, I have contracts on 15 houses, but I have technically only closed on 9. I signed the papers on another one in ABQ tonight though, so should "own" 10 by the week's end. Of course, when this one closes I will be back up to 3 vacant, and will be losing about 4k a month. Such is life (MY life anyway). I should have budgeted for more vacancies...good thing my wife stopped me from buying more when she did or I would REALLY be in trouble!
(NOV 21, 05)
OTHER POSTER: Jeff I hope you have a ton of liquid cash on hand to payoff the negative cashflow your many purchases are going to lead to.
JEFF:I don't know what you would consider to be a "ton," but I do have what I consider to be significant cash reserves--as outlined elsewhere on this board. In addition, I have a pretty good HELOC to turn to in REAL emergencies. Though my reserves are currently lower than I projected, they seem adequate for the time-being--as long as I don't buy more
I am not embarrassed to say that negative cashflow is scary--even risky. I MAY run completely out of money in 2-3 years or less...but ALL investment is risky. In this case do the numbers not justify the risk? Where is the error?
(APR 4, 2006)
JEFF: Well, it is officially my one year anniversary of investing. It would of passed entirely unnoticed except for one thing.
On Monday I received a check from my first lender on my first house for $3000. It appears that there was an "overpayment" of escrow--in my favor.
I probably wouldn't of thought anything more about it...except that today I received another check for $1700 from my second lender on my second house! That's $4700 that I wasn't expecting (almost as good a surprise as my 27k tax refund...).
(*Shelly thinking out loud: "overpayment" = Mortgage Lender Cashback Kickback?)
POSTER: Wow, how did you get 27K back in taxes?
JEFF: That's easy, just follow these three steps.
Step 1--be stupid enough (or should I say have poor enough tax planning) to OVERPAY your taxes by 27k in advance through withholding. This is the most important step, without it step 3 becomes very difficult.
Step 2--start a business and be "bad" enough at it that you accumulate losses of 100k (or more?).
Step 3--Find a way to apply the 100k loses from your business to your w2 income and ask the IRS for your overpayment of 27k back.
Works for me...
If you are having difficulty getting large sums back from the government, perhaps you need to work on step 1...
FAST FORWARD: (JAN 1, 07)
JEFF: I am having difficulty renting two properties. One in ABQ (slow time of the year) and one in Cape Coral (too much competition or bad PM, I can't decide). These two houses alone are costing me ~3k a month. Ouch!
Can anyone connect me with someone in Cape Coral who can rent/LO my homes out?
My equity position is listed earlier in this thread--no significant changes. Basically I have turned a 198k equity position in my personal residence into a 300k to 500k equity position in 14 rental houses--plus the right to never pay Federal income tax again. This new equity position is currently costing me 3k a month, when I rent my houses it will only be costing me about 1k a month (or less?).Debt juggling is just fine, I have had to hit my "back up" cash reserves twice lately to cover vacancies--each time for 5k. Ouch. Without those darn vacancies I would be about break even...
Change in perspective or approach? I can say that I adamantly wish I hadn't bought any houses in Cape Coral! If only I would of known that they were going to be the worst performing.
(FEB 15, 07)
JEFF: I didn't really expect to, but admitting it anyway was hard. My three houses in Cape Coral are going to end up being HUGE mistakes...they have lost thousands of dollars in equity and are losing $1000 a month while I rent them. While all mistakes are mine, in my defense I was clearly the victim of some pretty unscrupulous "businessmen." The builder took over two years to build my house (ONE isn't even done YET!). Now normally that wouldn't be a problem on pre-construction, but according to the contract I signed as an absolute beginner I have to pay the construction interest while they sit on their butts. Dang. Also, these houses actually went UP 50k each in the first few months I owned them (if I coulda sold), but over the last year have lost greater than 50k. If the builder would of built on time, I could of made 100k or more. Also, the lender said I wouldn't have to re-qualify my construction to perm loan, but since the builder went over the 12 month period, I DID have to re-qualify and couldn't...so that cost me ANOTHER 10k (times 3). And so on...basically I am going to lose a LOT of money these negative cashflow houses...
(APRIL 25, 2007)
JEFF: Well...as many of you know I own three terrible houses in Cape Coral Florida. Through a series of misjudgments and being taken advantage of (and lied to), I am losing ~$1000 on month on each of these houses when they are rented. I am just sick about them and often cannot sleep--like now.
Anyway, what should I do?
I have been hitting my personal residence HELOC for the negatives, but can only take that so far. I would just like to "walk away" from these homes but of course I am too embarrassed to do that (so far) and I suspect it is not an option anyway...
What are my options? These houses appraised at ~315k (closed in last year) but might only sell for 230k right now. I owe 264k.
THE END?
Last edited:
Searcher
Beach Comber
WHAT? - 15 houses? Salt Lake City?, Cape Coral? ABQ? (where/what is that?)
Stupid is as stupid does. - Forrest Gump
Here are our rules - I know there are other ways to invest in RE but this works for us:
- Crunch Thy Numbers! - be conservative, be realistic
- Know Thy Neighborhood! - Know trends, know demographics, it also helps a lot to actually live where you are investing.
- Know Thy Renters! (before you buy) - Who is gonna want to live in your property? Are there lots of those type folks around? Do you want to deal with them every day?
- Keep Thy Hands On! - Do all your own management and as much maintenance as you can.
- Know Thyself! - Do you actually want to burn a nice Saturday showing an apartment to a bunch of strangers? How about fixing a toilet at 9:00 at night?
- Aviod the SFD! - Simple math, when you have a vacancy in a duplex, you only lose half the rent. Quad, even better. etc.
- Have Patience! - As we know, Real Estate goes in cycles. Plan up front to wait it out.
- Moderate Thy Expectations! - Don't expect to break even for two years. Break even is OK, profit is better. Unless you own a LOT of property, have low/no debt carry and/or are doing this full time, you won't make much money.
Shelly - I hope Jeff is OK. He sounds pretty bad there at the end. Keep us posted.
flyforfun
Beach Fanatic
Egrp, you and Shelly both are amateurs....don't have a clue. Stick with investing in CD's...its safer.