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Here is a great example of what I am referring to. This home just closed recently and was purchased by someone I know. The home is in a GREAT area and sold for under 90 dollars a square foot. The home sold in 2005 for around 1 million dollars I believe and he purchased for 381K (It might have been less but I have not seen the final docs if there was a rebate of some sort in escrow). This is a great example of looking for the right deal at the right time. I also believe this house had gone down in value over the previous 6 months contrary to the popular belief prices have been spiking. The reason this home is right for this owner is he is considering putting his kids in this house. Yes, I know, another investor getting a fantastic deal but he waited for it. He also waited for his main house which was a smoking deal as well only bigger. He has been offering low for many years, is patient and knows the market in Vegas. The home only needs cleaning and paint for the twenty somethings to move in though he will probably do some updating.
In the above example a prospective owner (Not this owner) coming in with 20% down and good credit has a mortgage of approx. 305K. At 3.5% interest for 30 years this comes to 1370 dollars per month. Add in insurance, Taxes and some normal maintenance along with a bit more monthly costs associated with owning such a large home and the owner is out less than 2K per month and a lot less once we account for the tax deductions. In this example one has to determine how much the house might depreciate to make this a bad investment however based on the need of the owner, his high tax bracket, the need to house some kids who would otherwise need to have apartments or live at home and we find this was a great buy even if the market goes down 10 or 20%. The same might be said for a renter who has been waiting to locate his 2.4 children and wife in a nice neighborhood. Per my equations the home easily would have a good ROI should the owner decide to rent to others especially after the tax deductions. Perhaps not as good an ROI as the lower priced homes but will easily beat out most any other investment regardless if the market declines or not. For me as a pure investor this is not the best use of money but for this individual and his needs it works out fantastic and appears to be a good investment even should the market drop significantly. This is not an individual who would need to bail and sell at a huge loss. With the low interest rate and mortgage for the next 30 years an owner occupier is relatively safe even if rates go up and prices fall. The monthly payment can easily be covered in the future if he just rents it out to strangers with an additional monthly income.
Once again, forget geniuses telling you there are no great deals out there below market price in this price spike period as there certainly are. But on the other hand jumping into this market without getting a smoking deal seems to this investor to be a mistake. The Fed is giving hints it does not plan on raising interest rates even beyond 2014 so you are not under the gun to purchase immediately. Owner occupiers make sure you are getting the right deal, in the right neighborhood, at the right monthly payment for your income levels and expected income levels make sure "Owning" a home is right for you. After that its just a matter of putting in your own time and energy to learn and look along with allowing an agent who understands what you are looking for do the leg work for you. Of course you can also look for 4 sale signs as well and call the listing agent directly. You owe nothing to your agent or agents who did not bring the deal to you. No matter what the geniuses say you can still save most if not all of the buyers agents commissions if you come without an agent and are smart enough to handle your own documentation (It really is not that complicated just ask the escrow officer questions). For those of us who have done this before the paperwork is NOT intimidating and most of the work is done by the escrow company. Do some research on what you should include in your offers and what the escrow docs mean and you are well on your way to owning a great home that will not break your back.
Best of luck to everyone. This is a great time for those who can afford to buy and can find the right deal.
FOD
Wow that's my zip code but our house didn't cost that much.
That house sold for $381K cash. No finance. Probably very difficult to finance. I would have not been surprised at any appraisal on that house from $275,000 to $400,000.
These are lovely places. Small palaces. And better than McMansions. But they are treacherous.
If it was in pristine shape it was a deal. But it almost certainly was not. And note that a 4,000 SF house can run through 200,000 in upgrades with little trouble. And if you don't upgrade it the value continues to slide. Section 10 and 4 are very difficult RE areas. Unless the place is pristine it will be very difficult to buy because of the cost of the upgrade to bring it up to date.
If you do the upgrade perhaps 25 cents of each dollar flows through to house value.
I really cannot imagine such a place as an investment. You buy one of those to live in or you have lost your mind. The actually cost to maintain it with a reasonable mortgage are more like $3000 a month and that is without reserves for the huge updates that will eventually be needed.
Things are different though in FODs world. And reality never intrudes.
Ahhh yes,
The captain. You must have a very deep voice with that very puffed up chest. Please proved a reasonable comp in that immediate area for 275K or anywhere close to it. Cummon genius. Almost 4300 sq. feet, reasonable condition, pool, big lot, great street where homes are all way more money.... Please provide. I am sure you will go well away from that section but its okay.... You will just come up with some other self aggrandizing nonsense like normal. Also curious how you come up with 3K in costs for that home. My numbers were based on utilities costs over and above an average rental. I am sure you have an interesting sense for math.
In your over zealous need to puff up your chest you failed to look at the point of the post.... As usual. You are so excited to prove me wrong for the first time in all these years regarding real estate you failed to note I wrote specifically this is not MY kind of investment however for some it can pencil out as the timing of low interest rate mortgages might just make this kind of thing worthwhile for the right kind of buyer. This particular buyer will save a fortune in other costs and have an ROI that blows anything else outside of real estate you might try and come up with out of the water as it saves on paying rent for his kids, he gets a great tax deduction as a rental or second home and he is not earning that wonderful 1% or less in a CD. He is not looking to place his kids in a lesser quality home or lesser quality area so for him this works. For a buyer like this having money in the bank is not a brilliant strategy. In the case of the actual buyer there is no cost to obtain money or pay interest. However, my example showed what a similar buyer who needed to borrow might incur as far as costs/mortgage on the same property. Try thinking out of your MLS box for a change and maybe you might help a client or two rather than just trying to show how good you are to a bunch of retiree's. Silly man.... Trix are for kids and yours are still rather stale.
Markets are constantly in flux. At least you are no longer showing how we reach a bottom... every week. You actually might have learned something from this site and from those of us who showed geniuses like you where you were dead wrong. Now try and learn something from this post about why it might not be so bad to buy a home like this if you have the right reasons and are in the market. Of course I will be waiting for your comps which I assure you will not be from the immediate area. Zip codes in Vegas/Clark county mean nothing when you have a 10 million dollar property next to a 381K property. Million dollar properties next to tear downs. Get a clue and get out of your Realtor induced stupor. One must be exact area specific and knowledgeable when dealing with Vegas but then again all your silly data does not take stuff like that into consideration. Rather your data deals with Zip Codes which cover waay too many neighborhoods and specific areas. Verrry Baaad idea in Vegas to deal in general zip codes rather than street specific. Please stick with Mobile homes or lesser priced homes for retirees and leave the higher priced homes to folks who actually understand the ins and outs of finance and Real Estate.
By the way, I have been watching your web site for some time. Why is it you almost never have homes over 300K since you clearly are such a high priced specialist?? Just curious. Funny the homes you show as sold in that 275K range are not even close to what this home is but oh well its your site you can claim what you wish. Also interesting to look up when some of those actually sold.... Hmmm
As usual I will not get in a battle of words with you. I have made my point and you can keep on prattling about whatever you wish. But realize, those of us who actually deal with Real Estate on a daily basis and make money at it simply laugh at folks like you and cry for your clients.
FOD
Last edited by fishordie; 09-01-2012 at 12:30 AM..
What kind of people have 381k cash to pay for a house?
People who eschewed renting an apartment and throwing away money for decades and instead bought a "starter" home with a mortgage and then moved up through the years using their equity to finally purchase a house for cash.
I know that this runs contrary to all the blustering by confirmed renters who never tire of claiming that when you have a mortgage you don't really own your house, and that's fine with me. They can continue to live in their own little fantasy world and continue to write their monthly rent checks to their landlord. I was much happier paying a mortgage through the years and then using that equity to pay $400k for my house in Las Vegas.
That's how people have $381k cash (or more) to pay for a house.
People who eschewed renting an apartment and throwing away money for decades and instead bought a "starter" home with a mortgage and then moved up through the years using their equity to finally purchase a house for cash.
I know that this runs contrary to all the blustering by confirmed renters who never tire of claiming that when you have a mortgage you don't really own your house, and that's fine with me. They can continue to live in their own little fantasy world and continue to write their monthly rent checks to their landlord. I was much happier paying a mortgage through the years and then using that equity to pay $400k for my house in Las Vegas.
That's how people have $381k cash (or more) to pay for a house.
To add to that.
Out of all the people in my family that have started their own business, I asked them all, how did you get the start up money? Their reply, saved the money or used the equity that was in the house. Majority used the equity in their house. Have an uncle with 3 car dealerships because of the equity in his home.
I realize the last two posts were responding to a question in another post, but let's not steer off into a general, non-LV related discussion of buying vs renting or how equity in a house is used.
We have not seen the official numbers yet but they should be out tomorrow.
They are however pretty firm at this point. SFR Median is now at 137.9 up from 133 last month. In January it was 118. So up 3.5% month over month and 16% since the start of the year. This is not "up a little" or a "small increase". This is hyper appreciation.
^^^
I was reading a blog by your favorite local Realtor (Plantone) who was talking about a client of his who was waiting for an NOD from the bank so they could list their home for short sale but instead received a court summons. In less than 2 months they lost the home and were forced to declare bankruptcy.
This judicial foreclosure scenario creates less likelihood that large numbers of homes will go to market but instead would create a steady flow that will not dramatically drive prices down (or up). IMO, this would be good as it would deter the "flippers".
^^^
I was reading a blog by your favorite local Realtor (Plantone) who was talking about a client of his who was waiting for an NOD from the bank so they could list their home for short sale but instead received a court summons. In less than 2 months they lost the home and were forced to declare bankruptcy.
This judicial foreclosure scenario creates less likelihood that large numbers of homes will go to market but instead would create a steady flow that will not dramatically drive prices down (or up). IMO, this would be good as it would deter the "flippers".
All very improbable. Before judicial foreclosure they have to get a NOD. And a judicial foreclosure can easily take 6 months or a year if you simply fight a bit. And after a judicial foreclosure the bank can't get title insurance for a year.
So I guess I still don't see how this is going to be a big part of the market dynamic. And note that the documents required for a judicial foreclosure are the same or worse than a non-judicial.
All very improbable. Before judicial foreclosure they have to get a NOD. And a judicial foreclosure can easily take 6 months or a year if you simply fight a bit. And after a judicial foreclosure the bank can't get title insurance for a year.
So I guess I still don't see how this is going to be a big part of the market dynamic. And note that the documents required for a judicial foreclosure are the same or worse than a non-judicial.
Do you play chess? Have you ever heard of a "Fried-Liver Attack"?
...it is especially effective against weaker players who may not be able to find the correct defense.
Do you play chess? Have you ever heard of a "Fried-Liver Attack"?
...it is especially effective against weaker players who may not be able to find the correct defense.
You will know if such an attack is actually launched by the banks. How? Watch the lawyer ads. This will be a real money maker for defense attorneys. And I would not be surprised if a good defense team could make it so expensive that the banks compromise.
It is nice as the defense can virtually be automated and defended with little expense and a couple of sharp eyed paralegals checking all the docs.
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