U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 06-21-2015, 11:32 AM
 
16,519 posts, read 17,570,611 times
Reputation: 23616

Advertisements

Quote:
Originally Posted by Zippyman View Post
Um.. you really think that?

Where waz u in 2008-2011?

Lots of people in all the high priced markets in the US found out different, just a few years ago.

I personally bought a few of the /formerly/ $300k +- homes here in Phoenix for between $60-$75k (and on one $60k deal, the bank paid a 6% sales commission + 6% towards closing costs + back taxes & other fees, so their "net" on a $300k investment was in the $50- something range).

The homes I bought sold new for $80-$90k in 1985-1987~ish.

I wouldn't assume the "most" you could lose on any $350k investment is $70k.

Nor would I assume any drop would be "gradual", giving you time to get out. <------- everyone in Phoenix thought the same thoughts, said the same things you're saying in your post.. so did people in LA, Detroit, Atlanta, Vegas, New Mexico, on the coast of Florida, etc..

your "worst case" isn't the worst anyone has seen in the past 10 years, not even close.
Where was I in 08-11? I was buying all the stock I could get that's where I was. I bought Big 3 stock for a song. I made a killing later when I sold it. And I did nothing more than hit a few buttons. I had RE investments and I didn't want anymore at the time. It's a lot faster and easier for me to sell stock than to sell a house if I see things going bad. I did start looking but I was looking for a personal purchase rather than investment.

Unless you had the cash to buy those houses you talk about you either leveraged or borrowed to buy. To me RE investing is a long term investment. Lots of people pump and dump.

I was simply giving a possible scenario using the presented figures. I assumed no such loss as being the bottom line. It was simply putting some numbers in a possible perspective. It can be worse it can be better. Lots of people lost effervescent value anyway in the bubble years. I simply don't use the bubble pricing as a guide simply because everything was so overinflated in those days it's just a apples to watermelon comparison. When you have a house that would normally sell for 150k going for 590k and the wages do not follow thst increase eventually something has to give. You don't need to be a financial guru to figure that one out. I know I'm just a stupid construction worker, but I saw the unsustainability of that market a long time before it happened. And I was smack dab in the middle of the housing bubble. I was doing work on houses no bigger than mine selling for 4x what I paid for mine a few years ago. I weathered the storm just fine. It literally had no effect in me. Well I did get a complete remodel in my house for about 35k which is 1/2 the normal cost of what it would of been so I guess it did positively affect me.

In the bubble days my personal residence was valued at 680,000. For a property we bought for 175k. I had friends HELOCKING their asses off. I mean I'm talking 100,000 dollar plus remodels. A family member bought a house for 350,000. Within a year he HELOC'ED his way to 680,000. New kitchen new entertainment room, 50k pool, 50k truck, 85k boat, $9,000 plasma TV (at the time they were stupid expensive)
His income never went up. He has since lost the house sold the boat (at a huge loss). He still has the truck lives in a little apartment. I know exactly what bad investing does to people.

Lots of people that got in trouble post bubble were idiots. They either were too ignorant too arrogant or simply were clueless in what they were getting into. Does it really take a genius to figure you can't really buy a 350,000 dollar house on a 45k a year income with zero down? Or having a mortgage of 500k and borrowing 200k on the "value" of your house is a bad idea if your income or finances haven't gone up to match the borrowed money? Most of those people thought it's ok they can handle it. Or the house will pay the debt because RE only goes up.
But there were plenty of people who weathered the storm. I know I did. And I worked constantly and my rentals were always occupied.


The market may have dips here and there but Dodd-Frank will not allow lenders/banks to reinflate the bubble as it was in 00-07. Unless the lending standards get thrown out the window again and bring back interest only, neg-am, NINJA or stated income with no proof of income or some funds to back up you're not gonna get a loan. You won't see what once was. Lots of people saw the light and got out. Lots of people thought it will get better and didn't. Lots of people were so deep underwater they couldn't sell or come up with money to walk away. Why, and how the bubble started and eventually failed is well known. Banks also have figured out how to staunch the bleeding IF it were to happen again. What will shake house prices a bit is higher interest rates or investors dumping REITS and flooding the market.

As I stated I don't like to leverage in such a way as OP wants to. But everyone has different investment strategies. What works for us someone may say we're crazy. And ultimately it's his money his decision. It doesn't mean it can't work great as long as his spending doesn't outpace his income. Lots of people that leverage as such probably shouldn't. But I understand some have to leverage somewhere. If it's a calculated risk, and the buyer has a understanding of what he is committing to, and is financially stable and understands the consequences then it's a reasonable risk. And ALL investing has some risk.

Last edited by Electrician4you; 06-21-2015 at 11:59 AM..
Reply With Quote Quick reply to this message

 
Old 06-21-2015, 07:12 PM
 
183 posts, read 281,832 times
Reputation: 176
We looked at doing this as well, but I was more concerned with the tax ramifications. So I guess depending on your personal financial situation (tax wise) ........

If you obtain a non owner occupied loan for the investment property, the interest paid can directly be deducted as a business expense lowering/adjusting your taxable rental income from that property. But the interest rate may be higher than the HELOC.

If using your HELOC to purchase, you won't be able to deduct the HELOC interest from the rental income. You can try to itemize the HELOC interest but technically you are not supposed to do that because the monies were not used to improve your home. Not to mention, depending on the amount of HELOC interest paid, you may or may not even use it as a deduction if your total itemized deductions do not exceed your standard deduction.

That being said, you need to consult with a tax accountant, which I am NOT.
Reply With Quote Quick reply to this message
 
Old 06-21-2015, 07:55 PM
 
Location: Cary, NC
31,646 posts, read 55,374,605 times
Reputation: 30193
Right now, I have 3 mighty fine property listings I would be DEEE-lighted to sell to the OP, and my clients would take his HELOC money and never look back.

Other than that, I really don't care if he follows the great advice given, or not.
Reply With Quote Quick reply to this message
 
Old 06-21-2015, 08:18 PM
 
3,483 posts, read 4,623,002 times
Reputation: 2259
Quote:
Originally Posted by MikeJaquish View Post
Right now, I have 3 mighty fine property listings I would be DEEE-lighted to sell to the OP, and my clients would take his HELOC money and never look back.

Other than that, I really don't care if he follows the great advice given, or not.
So, you too are against it i take it?
anything to add that hasn't already been covered?

thank you.
Reply With Quote Quick reply to this message
 
Old 06-21-2015, 08:23 PM
 
Location: Cary, NC
31,646 posts, read 55,374,605 times
Reputation: 30193
Quote:
Originally Posted by Thinking-man View Post
So, you too are against it i take it?
anything to add that hasn't already been covered?

thank you.

Nothing new to add. I fall squarely into the camp that says you don't hock your primary shelter to fund a speculative real estate venture. The driving impetus for a consumer to own real estate is to have unencumbered shelter, pure and simple.

Wanna buy a house in a red hot rental market with that HELOC cash that is burning a hole in your pocket?
~$360,000 and will rent for about $2300+. Low HOA fees. Great school assignments.
Reply With Quote Quick reply to this message
 
Old 06-21-2015, 08:46 PM
 
3,483 posts, read 4,623,002 times
Reputation: 2259
Quote:
Originally Posted by MikeJaquish View Post
Nothing new to add. I fall squarely into the camp that says you don't hock your primary shelter to fund a speculative real estate venture. The driving impetus for a consumer to own real estate is to have unencumbered shelter, pure and simple.

Wanna buy a house in a red hot rental market with that HELOC cash that is burning a hole in your pocket?
~$360,000 and will rent for about $2300+. Low HOA fees. Great school assignments.
Would you (and others) still be against my original idea if i locked in the rate at 3.9% on a 10 year term and/or found a property in the 275k range (instead of the 375k)?
Reply With Quote Quick reply to this message
 
Old 06-22-2015, 06:08 AM
 
Location: Mount Laurel
4,146 posts, read 8,395,935 times
Reputation: 3410
Quote:
Originally Posted by Thinking-man View Post
Would you (and others) still be against my original idea if i locked in the rate at 3.9% on a 10 year term and/or found a property in the 275k range (instead of the 375k)?
and what would you get in rent for a property $100K less? I've stated in your other post before, $375K to get around $2K a month in rent would never be something I would be comfortable putting my money into.
Reply With Quote Quick reply to this message
 
Old 06-22-2015, 06:24 AM
 
3,483 posts, read 4,623,002 times
Reputation: 2259
Quote:
Originally Posted by sj08054 View Post
and what would you get in rent for a property $100K less? I've stated in your other post before, $375K to get around $2K a month in rent would never be something I would be comfortable putting my money into.
I think it's around 1700 to 1800
Reply With Quote Quick reply to this message
 
Old 06-22-2015, 06:48 AM
 
Location: Mount Laurel
4,146 posts, read 8,395,935 times
Reputation: 3410
Quote:
Originally Posted by Thinking-man View Post
I think it's around 1700 to 1800
and monthly carrying cost of owning the $275K rental property?
Reply With Quote Quick reply to this message
 
Old 06-22-2015, 07:07 AM
 
3,483 posts, read 4,623,002 times
Reputation: 2259
Quote:
Originally Posted by sj08054 View Post
and monthly carrying cost of owning the $275K rental property?
10 year fixed at 3.89%
2769 in prfor interest and principle
300 taxes and HOA
50 insurance

About 3100 total
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top