Posted by Hal Roark on September 21, 2002 at 08:39:27:
It only truly hurts if the check doesn’t clear the bank. (Smile)
Hal
“Bubble theory” is full of hot air . . . - Posted by William Bronchick
Posted by William Bronchick on September 17, 2002 at 20:10:29:
A lot of discussion has been going on lately about the “bubble” theory in the media (and on this board). A lot of people have been asking me, “what if the market crashes”?
Here’s my opinion: “The market is almost meaningless”
Now, before you take that statement out of context, think about it . . .
If you buy and hold for the LONG TERM (15 + years), you aren’t likely to lose. According to Fortune magazine this month: "Since the major housing organizations began keeping records in the 1960s, there has never been a year in which the average existing U.S. residence lost value. Sure, local values go up and down, but they always go up in the long run, almost without exception. The same is probably true of the stock market in the long run, but there’s one problem: there’s no guarantee any company you invest in will be in business in 15 years - not even Xerox, IBM or AOL.
If you buy and flip, the market appreciation or decline is not relevant to your profit. I had this discussion on CNBC last month; if the local market you are in is “hot” you can sell it quicker, but you can’t buy it as cheap. If the local market you are in is weak, you can steal properties, but you have to account for a longer hold period. Bottom line - know where your market is CURRENTLY going (up or down), but don’t worry so much about the “bubble” bursting - real estate markets don’t explode or collapse in 3 to 6 months.
If you buy properties with negative cash flow with the expectation of the values increasing over 2-3 years, SHAME ON YOU! What if the values decrease? What’s your backup plan? Can you rent it for break-even cash flow? Can you sustain negative cash flow until the market rebounds? If so, then don’t sweat it - you’ll pick up a whole bunch more properties when the market tanks. If not, then you are at the whim of factors beyond your control and will eventually be a “motivated seller” calling on my ads . . .
Bottom line folks - the real estate market may go up, and then again, it may go down. So what . . . don’t bank on appreciation, buy below market (yes, you can even do that in a “hot” market), and have a “plan B.” Do this, and the “bubble theory” seems like hot air.
Re: - Posted by Jeremy FL
Posted by Jeremy FL on September 18, 2002 at 11:18:28:
Couldn’t agree more. It will be interesting to see what other responses we get. RE market cycle experts are every where right now. They make me laugh. These are the same guys that claim they sold everything in the stock market at the very topppp. They saw the signs of a crash. Didn’t you???
You can find news just about everywhere… - Posted by hg-nyc
Posted by hg-nyc on September 17, 2002 at 22:29:45:
and here is one that I like.
You can even setup FREE email alerts with keywords. The have a weekly “Real Estate Weekly” newsletter too.
Go here if you want to set up email alerts. During the login setup they will give you an option of newsletters to subscribe to.
Hear, Hear. - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on September 17, 2002 at 21:44:17:
William Bronchick–(CO)-----------------
I have felt like a lone voice in the wilderness as I have for the past couple of months been posting the same message as you just did. Thanks for eloquently providing your views.
In fact, I think that your discussion of the quick turn-over artists’ situation is better than my prior discussions. I guess I’ll have to borrow some of your discussion if I write about it again. With attribution.
And I agree with you, there are two real investment approaches, long-term holding and quick resale. For the longer-term investor the local market preturbations are really meaningless, in my view. They might influence the quick-resale investor a little more, but not much, as you said. Right, the markets move only a small amount in the five or six months between acquiring and reselling the property, if you price it right.
I suppose the media has to have something to write about. The stock market downturn is now about 30 months old so that is “old hat.” The real estate market effects many people, so they will be inclined to read articles about it, I imagine. So now we have the “Real Estate Bubble” stories. What a lot of bull…t.
Hmmm. Do you suppose it is a lot of investors getting together spreading this stuff so that people will panic and sell their properties cheap now, hoping to beat the downturn? Not you and me, of course. Who could be doing this? Conspiracy theoretists, here is another one to investigate.
Good Investing and Sensible Educating**********Ron Starr***********
Re: - Posted by PeterN
Posted by PeterN on September 17, 2002 at 21:35:14:
I believe there are two things driving real estate prices higher. The first is some money flowing from the stock market to real estate investments. It is the latest “in thing” to do.
The second and most important reason, is the extremely low interest rates. Lower interest rates means lower mortgage payments.
Instead of a bubble, I expect a slowing in the pace. Some areas are experiencing 10 to 20 % appreciation over the last year. Other areas are only in the single digits. The prices will not come down in most cases, just stabilize for a while.
Investment real estate has seen lower rental incomes offset by lower interest rates (if you refinance or have an adjustable rate loan). This will slow the price appreciation a bit. Many landlords are dialing back the rents to levels received two years ago to avoid losing rental income. When the jobs recover, the rental scenario will improve. Also, notice that it is becoming harder to get into the best colleges due to a higher number of applications. The baby boomer’s kids are soon going to need apartments.
I had a much harder time with vacancies and turnover last year than this year. Of course, my strategy this year was to renew all existing leases at the same rent for another year. I reduced my tenant turnover by about 50 %.
However, I had more sublease situations this year due to job loss, job transfers, etc. Luckily, I was able to get a few dollars more in rental income each time. I also saved in not having to do as much touchup painting, carpet cleaning or changing, etc.
I recommend anyone with adjustable loans try to switch to fixed rate loans. The interest rates will rise when capital spending and job creation begins. The rents will rise but you will lose the benefits if you have higher mortgage payments.
However, some people will point out that their adjustable loans are much lower than the fixed rate loans. Just check your adjustable loan’s interest rate history. For example, my home has a 5.7 % adjustable rate. Two years ago, it was about 8 %. I was offered a 6.625 % 30 year fixed rate with the same lender (Wamu). I only will have to pay title charges ($500-600). They do not want to lose my business. I didn’t even need an appraisal since we were only modifying the terms of the loan.
Yes! I sold in Jan. 2000 - Posted by BaldRepublican
Posted by BaldRepublican on September 18, 2002 at 18:16:18:
Listen to Bob Brinker’s MoneyTalk program on the weekends for great stock market advice at www.bobbrinker.com
I also saw him on CNBC with his own one hour show a couple of weekends ago.
The unspoken conflict of interest… - Posted by Hal Roark
Posted by Hal Roark on September 19, 2002 at 11:20:20:
Years ago, when I was getting started in real estate, I started comparing it to other money making avenues to see if they were more worthy of my time.
The one question that puzzled me (there was more than one) was: if real estate is so great, why isn’t it promoted more by the investment shows?
I won’t bother you with all my thoughts, conversations, and research on the subject. Here’s just the Cliff Notes Bottom line:
Stocks are incredibly easy to buy and sell, and most people are lazy.
It really is that simple (almost).
Think about it. Why are stocks, bonds, mutual funds, etc so popular? Because they return such stellar returns with low risk? No. While stocks have given decent returns, real estate does far better. (I won’t even do a deal without a minimum 20% cash on cash return, not counting depreciation, appreciation, etc). So why are stocks touted so highly?
Because they are easy to buy, especially now with the internet. They are cheap. Anyone can do it. It requires no maintenance or managment or business skill (but does require some investment skill, if one does anything other than indexing profitably). You also can buy the same stock, at the same price, whether you live in San Francisco or Bogalousa, Louisiana.
In short, there has been a whole, HUGE industry created around the buying and selling of stocks that has made it appealing to the American psyche: fast, quick, easy, instant gratification, and you can even have someone else do it for you (ie broker) for a reasonable fee (yea, right).
Now compare real estate. It takes genuine knowledge and skills. To do it well, one must run ones rei biz like a biz. So, one must learn how to run a biz.
Real estate markets vary. Who is ever gonna buy a Money Magazine that says, Hot Real Estate Picks in Slidell Louisiana"? (Only me and my buddy, Redneck; that’s who). Who’s gonna buy a magazine entitled, “The 10 hottest mutual funds for the coming year”? Everyone across the country.
It began to dawn on me that real estate ain’t promoted because of any flaw in rei, but because it didn’t fit the business needs of the HUGE promotional machine (that makes HUGE profits itself): all the magazines, talk shows, websites, brokerages, etc.
So, now that the truth is out on the Machine: it’s corrupt to the core; overexpensive; you can’t even perform due diligence because the numbers are corrupt at best or bent in the least; less profitable than other alternatives (ie real estate); high risk (as opposed to re), etc
So: why are we now surprised that that machine now wants to protect itself by maligning other investment strategies?
The Machine is losing BILLIONS each Month as people run from the market. There’s more to this story than meets the eye.
Hal
Re: Hear, Hear. - Posted by William Bronchick
Posted by William Bronchick on September 17, 2002 at 22:06:20:
Actually, I think the “bubble theory” is advanced by stock market seminar gurus trying to scare you into their courses. Of course, I’m guilty of scaring people away from the stock market to learn about real estate.
Re: What about un-bandit signs? - Posted by kawikaCA
Posted by kawikaCA on April 04, 2004 at 03:07:44:
I checked into the local ordinances here in san diego and the list of legal signs is short including directionals (for rent, for sale, open house) and political signs within a tight time period before and after an election. Generally a “we buy houses” sign is illegal everywhere.
Even car signs have some restrictions.
Re: What about un-bandit signs? - Posted by JeffGinFL
Posted by JeffGinFL on April 03, 2004 at 20:39:23:
I do Kristine.
I put them up with my for rent signs and I put them up at the houses I buy to rehab. Generally, the day I close I swing by and add a sign to the yard.
My city offices tell me I’m ok to do this because I own the property.
JeffGinFL
Re: What about un-bandit signs? - Posted by Rob FL
Posted by Rob FL on April 03, 2004 at 17:52:20:
Most places don’t allow bandit signs anywhere. Even in your front yard. They consider that a commercial business which normally isn’t allowed in a residential neighborhood. Legal “bandit signs” would include bus benches, side of car, billboards, etc. But a sign stuck in the ground is probably illegal no matter what unless it says For Sale, For Rent, or Garage Sale.
Re: What about un-bandit signs? - Posted by Anne_ND
Posted by Anne_ND on April 03, 2004 at 10:27:18:
Kristine,
Our city only allows us to put up signs on properties that we’re actively rehabbing. They can’t say ‘we buy houses’ they have to say ‘we buy and fix houses’, since the house under construction is obviously being fixed.
This has worked for us because we take so dang long to finish our rehabs, but it can also backfire if the irate neighbors want to call and complain about the dumpster in the yard they know where to find me. And they do.
good luck with the unbandit signs…
Anne
Re: What about un-bandit signs? - Posted by nick
Posted by nick on April 03, 2004 at 08:20:57:
What phone number do you guys put on your signs? I’m going to be purchasing some in the next week or so and don’t know what to do. I was told you should set up a voicemail account to have all your calls go to.
Well if I do that what should be included in the voicemail message?
Nick Richardson
Re: What about un-bandit signs? - Posted by rm
Posted by rm on April 03, 2004 at 08:03:56:
There was a discussion just a few days ago on this topic.
Some people post a “We Buy” and a “For Rent” or “For Sale” sign as soon as they sign a contract.
I’ve seen this done in my area… I think it looks stupid and confusing to have both, but that’s just my opinion; I’ve never tested it.
Re: What about un-bandit signs? - Posted by michael
Posted by michael on April 03, 2004 at 01:09:13:
Hi Kristine,
I have the same feelings about bandit signs as you. In most places a bandit sign in your yard is just as illegal as one on the median. Roofers and such have temporary variances for the signs one always sees on their underway projects.
One way to get around this that was suggested by a county worker, was to put up a for sale or for rent sign in front of your property that also had “I buy houses” on it. Just use a big sign so it doesn’t get too cluttered.
Re: The unspoken conflict of interest… - Posted by Houserookie
Posted by Houserookie on September 19, 2002 at 22:16:54:
That pretty much sums it up.
Stocks and mutuals funds are really for suckers.
The only reason why I spend a lot of time at it is because RIGHT NOW there’s a lot of emotional buyers/sellers out there.
My trades are based on emotional patterns, charts, and statistics. P/E ratios, CANSLIM, and long term advices are for lazy people.
Now that the market has tanked the market makers are still touting long term holding. Right.
For the most part I agree with you. However the same can be said about real estate brokers as stock brokers. Likewise real estate long term holding and stock long term appreciation.
So maybe this isn’t about stocks, real estate, paper, or a particular industry. Maybe it’s got more to do with how the game is played.
Austin
Yes, but WIlliam that is a good thing … - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on September 18, 2002 at 24:07:00:
William Bronchick–(CO)-----------
Yes, but that is a good thing to do for them. They should be scared of the stock market. You might start recommding that they read “Value Investing in Real State” by Gary W. Eldred. He shows that the projections of 10% annual return from stockmarkets is bull…t and there is no good analysis of the returns of stock investors–NONE. His best guess is that real-world investors make about 3-5% a year with stocks over the long term. Then he shows how real estate is a good investment. You might be able to save your voice on that argument–let his book carry the message to the ignorant.
Good Investing***Ron Starr
Re: What about un-bandit signs? - Posted by jasonrei
Posted by jasonrei on April 04, 2004 at 09:19:54:
I stumbled across my city’s sign ordinance. It’s over 60 pages long. Amazes me that something as simple as sign placement could have so many restrictions.
Seeing how much they want to control my actions really just makes me wanna put out lots of signs to spite them.
Re: What about un-bandit signs? - Posted by Qinvestor
Posted by Qinvestor on April 03, 2004 at 12:36:00:
Just to add to Michael’s comment -
For example here in Miami Springs, you cannot have a sign larger than 12in X 12in. Also ONLY for sale by owner signs are allowed or realtor signs or garage sale signs. Anything else they will issue a citation for everyday you have the sign on your yard. Yes they are very “nazi” about enforcing their rules on signs…they claim it has to do with the integrity of the neighborhood and they want to keep that conservative upper class feel. Not some flea market hoe down. Atleast thats what I was told by a code worker.
- Q