Washington housing market pretty crazy. How's your area? (bank owned, real estate)

[rkcarguy]

Originally Posted by MtnSurfer

Imagine if that was a stock. That's a great ROI. Now imagine if that same average house needed some work and improvements were made. This reminds me of the last big boom we had when many folks went into business as RE flippers. Buy a junker, do some basic cosmetic refinishing and make a great profit in a hot market. They even had infomercials telling you how you could do it too! And it worked for a season. Then, once the market crashed, you never heard from them again. That's not to say some didn't make out very well. But many others lost their shirt buying at the peak right before the crash. Then we had all those foreclosures during the great recession.

Markets do fluctuate and no one has a crystal ball. But something tells me that if you could pick up a distressed property on quick sale now, chances are with some work it could be flipped pretty quickly. I don't see anything changing in the other direction for while, especially in places like Bham, Seattle, PT, Bend, etc... But of course there is always risk involved. It also makes me wonder if investors are doing that already in some of these more popular areas just for sport.

Derek

A friend of a friend was doing that, bought a home, borrowed against the "new" equity, bought a second home, and another one to rent, and a new truck. He got stuck with all three homes when the "music stopped playing". Lost the two latter homes to the bank, and my friend ended up buying his first home and the truck for about 45 cents on the dollar.
FWIW, my uncle typically flips a couple homes a year. He'd pick up a modular or older home with issues that made them not financeable in the sub $200K range and bring them up to par. It was admirable in a way because it put homes on the market that first timers could afford and often he'd have buyers lined up before he even finished them. Recently though, he got out. Too expensive to get a fixer as there was lots of people bidding them up, margins were getting really slim due to materials prices, and he feels like we are headed for another "correction" soon and didn't want to be stuck holding the bag.

[MtnSurfer]

Originally Posted by rkcarguy

A friend of a friend was doing that, bought a home, borrowed against the "new" equity, bought a second home, and another one to rent, and a new truck. He got stuck with all three homes when the "music stopped playing". Lost the two latter homes to the bank, and my friend ended up buying his first home and the truck for about 45 cents on the dollar.
FWIW, my uncle typically flips a couple homes a year. He'd pick up a modular or older home with issues that made them not financeable in the sub $200K range and bring them up to par. Recently he got out. Too expensive to get a fixer as there was lots of people bidding them up, margins were getting really slim due to materials prices, and he feels like we are headed for another "correction" soon and didn't want to be stuck holding the bag.

I don't know if many of you have ever gambled for fun, but it feels a bit like that now. 'Gentlemen, place your bets and take your chances.'

While I haven't gambled recently even while in Vegas, I have enjoyed it with a few simple rules. That money is entertainment money only. So, win or lose, its the cost of admission. The hardest part is knowing when to quit while you're ahead. It sounds a bit like what we're dealing with now since everyone knows there will be a ceiling. Its the nature of the market. But how far do you ride the bubble until it bursts? Or how big that burst will be? So, I don't blame your uncle for getting out. It could flatten and possibly crash within a year or maybe not for another 5 years+. I guess you play to odds or just sit this one out and watch what happens next. But no wants to be left standing when the music stops playing. lol

My wild guess, if I were to bet my own money, which I'm not, is that we have a least a few years left of this upswing before leveling out or bursting the bubble. But the risk and potential rewards are high.

Derek

[rkcarguy]

It's too bad that housing has become such a commodity, traded and speculated, as it's not like housing is optional. People of all income levels need a place to live. The implants here love to complain about the poor service or lack thereof in retail, restaurants, car service and repairs, etc. Yet it's their own NIMBYism that results in most of these "middle class" people moving away to places with more affordable housing. We're left with service from unmotivated Section 8 recipients, whose incomes are subsidized with our tax dollars to afford them housing.....

[MtnSurfer]

Originally Posted by rkcarguy

It's too bad that housing has become such a commodity, traded and speculated, as it's not like housing is optional. People of all income levels need a place to live. The implants here love to complain about the poor service or lack thereof in retail, restaurants, car service and repairs, etc. Yet it's their own NIMBYism that results in most of these "middle class" people moving away to places with more affordable housing. We're left with service from unmotivated Section 8 recipients, whose incomes are subsidized with our tax dollars to afford them housing.....

Well, then you add in the college students who never want to leave that beloved college experience and town. So, they take any old job and remain 'underemployed' just to keep livin' the dream. It's actually a common occurrence in many college towns across America where you have people with freshly earned degrees working at the local pub or anything they can get their hands on. So, there's a lot more competition for lower end entry level jobs. Add to that alumni that want to move back because they loved the area while there. I have a native Washingtonian coworker who would like to do just that. From his perspective, his college years at WWU were the best time of his life. Therefore, BHam is the best.

Derek

[flyingsaucermom]

Originally Posted by MtnSurfer

I don't know if many of you have ever gambled for fun, but it feels a bit like that now. 'Gentlemen, place your bets and take your chances.'

While I haven't gambled recently even while in Vegas, I have enjoyed it with a few simple rules. That money is entertainment money only. So, win or lose, its the cost of admission. The hardest part is knowing when to quit while you're ahead. It sounds a bit like what we're dealing with now since everyone knows there will be a ceiling. Its the nature of the market. But how far do you ride the bubble until it bursts? Or how big that burst will be? So, I don't blame your uncle for getting out. It could flatten and possibly crash within a year or maybe not for another 5 years+. I guess you play to odds or just sit this one out and watch what happens next. But no wants to be left standing when the music stops playing. lol

My wild guess, if I were to bet my own money, which I'm not, is that we have a least a few years left of this upswing before leveling out or bursting the bubble. But the risk and potential rewards are high.

Derek

Personal finance podcasts don't advise buying real estate based on, or for, appreciation. You would be correct that it's a lot like gambling because it's absolutely speculative.

However I do own three homes, two of them mortgage-free in an extremely desirable family-oriented neighborhood. One has become a rental and we can go up and down with the rental market. Right now we profit about 50% of the revenue, but if things went upside down we could charge $1500 for a 4 bedroom and still break even. When was the last time you could find a 4 bedroom home with excellent schools for $1500?

Not since I've been here...

Our third home, a hobby farm, is purely indulgent. It's our version of a cabin in the woods or a condo on the beach.

[MechAndy]

Yeah Washington properties are hot.
Too hot.

I never once considered that my Washington property would go up at all.
That never crossed my mind one bit.

I mean there was no employment here.
The prices were not going anywhere for 30 or so years in the boonies where we are at and now it’s booming.

I don’t much care for “booming”.
I now have more taxes than I want.

For us it’s an extra $200 per month as of last year.

Shazbut!
I may now need to find a job just for new tax assessments.

Anyone need a fishing guide ?

[pnwguy2]

Yet your net worth has also increased. I know this is not something most realize but it is real.

[Ultrarunner]

Originally Posted by MechAndy

Yeah Washington properties are hot.
Too hot.

I never once considered that my Washington property would go up at all.
That never crossed my mind one bit.

I mean there was no employment here.
The prices were not going anywhere for 30 or so years in the boonies where we are at and now it’s booming.

I don’t much care for “booming”.
I now have more taxes than I want.

For us it’s an extra $200 per month as of last year.

Shazbut!
I may now need to find a job just for new tax assessments.

Anyone need a fishing guide ?

Property tax is my WA fear and spending time in never ending appeal isn’t conducive to me.

This year the prop tax hit really set me back... it is my single largest expense now.

[StealthRabbit]

Originally Posted by Ultrarunner

Property tax is my WA fear and spending time in never ending appeal isn’t conducive to me.

This year the prop tax hit really set me back... it is my single largest expense now.

You might need to 1031 your waterfront residence into one of the thousands of now vacant commercial props, with some sort of LT plan. (Which at the moment is elusive for commercial props). It is very easy to fight commercial assessments, but nearly impossible to fight residential tax assessments in WA.

Of course it needs to fit your 'end game'. And sounds like you need a really big space for collector cars (Museum?) with an RV sized apartment for your occasional stays, and a portion rented out to sustain the taxes, equity investment, and maint, insurance expense. A Boutique property!

If owning Residential Property in a high taxed WA area...(when retired, or without a job / income)
1) Find a income indexed way to fund the taxes (I had to buy rental properties in a cash flowing market (not PNW) to fund my bad habit of having a residential property in WA).
2) Sell, capture your gains and move to plan B (Out of a high tax county / state)
3) Realize an eternal 2x / yr drain on your expenses which dwarf your highest ever mortgage obligation.
4) Convert it to a tax exempt property (not easy but possible)
5) Donate it as a life estate to a charity (who wil have to pay the taxes while you remain there.)
6) Use the WA property tax deferral available to very low income seniors (Taxes and Interest due on sale or death)

[Pahn]

For reference, there's a mini-boom in the east coast town where I'm living now. Properties have historically had very little appreciation here, if any, but they're selling like crazy now. This is a pretty solid place to be a landlord, if that's your thing, with rents being relatively high compared to house prices.