Investing in Real Estate

scottigee said: "[img]http://www.reynolds-bed-breakfast.com/gifs/kent.gif[/img] ...a nice stable diversification tool for all you psycho day traders out there :D I started the ball rolling this week, with the intention of buying my first place in Southern California by the end of March. For those of you who have purchased a home before my question du jour is this: I have spoken with two realtors and two finance guys. I found one of each that come highly recommended and that I am very happy with. Do you recommend I keep going and interview some more to be sure? Or should I stick with these guys? Hopefully I'll get my question(s) answered, but this thread can also serve as a general discussion zone for Real Estate. Maybe there should be a forum for it."

bobjitsu said: "I personally think your insane for buying anything in California but hey, that's just me. I lost about $200,000 in the early 90's there and hate California...the politics are socialist, the place is more than 50% illegals and they are dead broke with a bad actor for a Governor. Did I mention I hate it there. I'm just waiting for the next real estate bust to hit Cali and watch the suicide rate skyrocket there.....it was fun the first time. If you want to buy investment property try Phoenix AZ or Austin TX, Vegas just had our boom now things are going back to normal...no $$ to be made here right now."

Piper said: "I think the California housing market is very close to being capped. If you want big returns come to Arizona or Nevada. I built a new house 6 months ago, the same house around the block is selling for $100,000 more than what I paid. I am not saying you can't make a $ in California, but the return on investment will be much greater in AZ or NV."

scottigee said: "For pure investment I would have gone with something in an area like Phoenix. I have still heard good things about Vegas but I could be wrong; I don't live there. This isn't a pure investment thing though, it's a "Hey my lease is up, it's about that time, buying beats renting" decision. I'd say the California housing market capped about 6 months ago...maybe a little less. It has come down since. There is much more available in my price range now. But (according to my finance guy - and I believe it) we're still seeing 10% appreciation. Like I said - I'm not expecting anything huge here buying at this point in time but a) it beats renting by a longshot b) I should still see some gains c) it lets me stay in LA and finish my MBA and get into the game."

bobjitsu said: "Scott, to be honest just keep renting then when your done with school don't just walk....RUN out of there. Cali is about to go bust again, with 30 million people wanting .gov giving them a handout and less than that paying taxes it can't keep going for long. If you buy don't expect an increase, expect a loss, bigtime. I'll give you the golden California real estate saying if you promise not to share it with anyone else. Promise?"

misterjover said: "Scott, My corp owns and manages a real estate territory with over 60 agents, and my business partner and I both agree.... ... that the long term curve of the real estate here in Southern California is headed downward. Do not buy property unless it is a foreclosure, fixer-upper, or probate deal that is at least $50000 below market value because since the end of the summer, there has been an increase in sellers and a shortage of buyers. Property prices here in L.A. county have diminished by about 12% on average since June 15th although in some places in the valley and Glendale and Burbank have maintained their prices. If you're in Orange County or San Diego, the game is the same, and you need to be very cautious. My mom and one of my good friends are in the market for houses at the moment, but I'm having them hold off until the prices have stabilized in certain areas. If I were just a regular realtor who is hunting for his next deal, sure I would sell you the first place that I can get you in, but since the people I deal with are valuable to me, I give them superior advice."

misterjover said: "Another contributing factor to the drop in property value is the fact that the Federal Reserve has hiked up rates about a quarter point, and you see... ... as rates go up, the demand for loans decreases. Consequently, the demand for homes decrease, and their prices and quantity sold will also decrease."

HappyHarry said: "Generally owning is better than renting, but I'm not at all familiar with the California housing market. Things don't fluctuate all that much in Ohio, you're pretty much guaranteed to get a positive return."

scottigee said: "[QUOTE=bobjitsu]I'll give you the golden California real estate saying if you promise not to share it with anyone else. Promise?[/QUOTE] It's between you, me, and the 50-something people on this board. ;) I just had a discussion about this with my Finance professor last night, who I respect immensely. The class was contributing some good evidence against buying...like you guys are. I respect your opinions, and thank you for them, and it scares me a little. But I am reminded that if I'm paying $18,000/year in rent then my $300k place can drop in value to $246,000 over 3 years and I would still be breaking even, AND I will have enjoyed the tax writeoffs for that time. Over 5 years if it's still going down it could drop to $210,000 and the same would be true. (I'm too lazy to discount the values back to today's dollars, so excuse the rough approximation over 5 years but you get the picture) There was a guy on the news who bought a place in LA in 1990 for $120,000. By 1993 (bad real estate times) it had fallen in value to $90,000. He was shitting himself, figuring he'd lost his shirt, etc etc.... Today it's worth $500,000. I'm sorry to start off the "Real Estate" thread with such a terrible investment but I contend that... a) It puts me in a better cash position b) It greatly increases my leverage c) If I am willing to hold onto this place for 7-10 years I [b]will[/b] make money. It's not what I'm looking for (I just want the writeoffs and equity) but I will make money in the long term. So that's my thinking. Bring on the scary replies that make me doubt myself....it can only help :o"

bobjitsu said: "The house I sold for $119k was worth $300+ 2 years before I sold, I was not willing to learn spanish and stick it out another 7-10 years to make money my money back. My quote that I hope to become famous for is "There are only so many lawns to be mowed in Cali" meaning there are so many illegals living there and the only thing they know how to do is mow a lawn. I still can't figure out how people are affording $500k homes that are in the ghetto.....it is insane there. The crash is coming and no matter how long you wait it out you will be paying a mortgage on a $500k house that is worth $150k......that is depressing. Also, the state doesn't want or care about you as you are just a peasant, the state government wants your money but could care less if you live or die...your not the "elite" or shall I say the "important". People like Mikey Moore are important....the state issued his bodyguard an almost impossible to get California CCW.. [url]http://www.foxnews.com/story/0,2933,144921,00.html[/url] Only the rich or famous ones in Cali matter to the state, you and your family can just die and it isn't that big of deal."

scottigee said: "thanks for the tip bobjitsu...I do appreciate your advice and believe you me there's a part of my brain that's singing the same song. So did you buy that place for $300k 2 years earlier or had you already owned it for some time when it was appraised at 300 and then watched it go down to $120? The time element is key in reaping the benefits of owning a home. Where was your $120k home?....I bet it's worth half a million now. Nobdy is forcing you to live in it (or learn spanish). You just have to keep paying it off but taking on some renters and moving to somewhere cheaper is a perfectly valid option. Seriously, look up the value of that $120k home ... I'm curious to see where it's at. When you consider that rent for a 3 bedroom house in LA is upwards of $3k/month I'm sure you could have had someone else paying your mortgage. [url]http://realestate.yahoo.com/re/homevalues[/url] [url]http://www.housevalues.com/SurveyA.aspx?[/url] (that 2nd one requires an email address....yahoo real estate used to work better, dang) Rising interest rates will result in lower home values, that's true, but the net effect on the entire mortgage payments is minimal. That means rental prices should remain stable and you can still find someone to pay your mortgage while you wait for the upswing."

scottigee said: "I should clarify that I sure as hell am kicking myself for not buying here 2 years ago...THAT would have been a good investment."

AlfredSokol said: "The timing issue is key. How long do you plan on living in the house, Scotti?"

scottigee said: "I will live there for at least 3 years but I'm keeping the bitch for a while! It will more than likely become a rental property."

HappyHarry said: "If you own the house for 10 years you're almost bound to make money."

scottigee said: "[QUOTE=HappyHarry]If you own the house for 10 years you're almost bound to make money.[/QUOTE] Eggsarktly But furthermore.... In Southern California we are much more likely to experience a decrease in the rate at which home values are increasing rather than an actual decrease in the value of homes. In other words values may not go up 20% again next year, but they most likely will be up 10% which is still pretty damn good. For them to go [b]down[/b] 10% is unlikely. (crosses fingers)"

HappyHarry said: "Plus you become a home-owner, which is much better than being a renter. Most landlords view renters as trash."

scottigee said: "....but I actually [b]am[/b] trash. [IMG]http://www.telusplanet.net/public/dperick/sunshine/thumb6.jpg[/IMG] I guess I'll be home-ownin' trash now! Yeeeee-haw!"

HappyHarry said: "It's always good to get more status."

bobjitsu said: "My dad bought the house in 1967 for $19k, in '86-'88 we had people knocking on the door to sell it for $300k+....the market crashed in 1990 or thereabouts and I had it listed for a few years (not even one offer) then in 1994 a guy who couldn't speak a word of English bought it. I had it listed at $136k, he offered $119k and I took it....I would have taken $50k just to get the hell out of there. Can any of you tell I hate California yet? :cool:"

misterjover said: "Keep in mind one thing about real estate: When it comes to STOCKS... firms can dilute them as much as they want... but when it comes to Real Estate... God isn't making any more of it... and eventually, you will get a positive return on your investment... especially in Southern Cali. Even if you don't time it right buddy, you'll still make out nicely if you hold it for a few years."

HappyHarry said: "[QUOTE=bobjitsu]My dad bought the house in 1967 for $19k, in '86-'88 we had people knocking on the door to sell it for $300k+....the market crashed in 1990 or thereabouts and I had it listed for a few years (not even one offer) then in 1994 a guy who couldn't speak a word of English bought it. I had it listed at $136k, he offered $119k and I took it....I would have taken $50k just to get the hell out of there. Can any of you tell I hate California yet? :cool:[/QUOTE] I'm starting to get that impression!"

Darren said: "good luck with your house. its a great feeling buying your own home"

scottigee said: "[QUOTE=bobjitsu]My dad bought the house in 1967 for $19k, in '86-'88 we had people knocking on the door to sell it for $300k+....the market crashed in 1990 or thereabouts and I had it listed for a few years (not even one offer) then in 1994 a guy who couldn't speak a word of English bought it. I had it listed at $136k, he offered $119k and I took it....I would have taken $50k just to get the hell out of there. Can any of you tell I hate California yet? :cool:[/QUOTE] Oh well that's totally different!! You made 526% on your original investment in 27 years! If you hate california, and the fact that the area became spanish speaking, that's a separate topic from investment. From an investment perspective you made a bad choice to sell in a down market (paco made a good choice to buy) but you still made money on the house. If you had held on to it I bet it would be in the half-million dollar range. You could have rented it to Paco and waited to sell this year and made 2,531% on your investment!"

scottigee said: "And misterjover makes a good point about real estate - it's different from stocks in that holding on will always result in an upswing in value. Stocks can fall to 0, real estate never falls on a long enough timeline. Usually that timeline is only 7 years but you can wait out a few cycles and make huge returns like bobjitsu did."

HappyHarry said: "Plus you get to live in the house. And truly, "pride of ownership" is a real thing. I would hate to rent a house, though. I bet it's tough to get reliable renters."

scottigee said: "[QUOTE=HappyHarry]Plus you get to live in the house. And truly, "pride of ownership" is a real thing. I would hate to rent a house, though. I bet it's tough to get reliable renters.[/QUOTE] Amen to the pride of ownership I'm still psyched to be able to add and remove things like walls, switches, light fixtures, etc. If I want to get to work on a built-in kegerator I can...and I just may. It may be tough to find good renters...I"ll cross that bridge when I come to it. I think when it's time to rent though I"m just going to let go of the pride of ownership and assume I'm going to have to re-carpet, patch and paint the place every year or so...I'll work that into the rent. I think that if I find someone with a good credit score though I should be ok, and with my knack for sizing people up in a brief interview I should be able to get some quality tenants. But like I said...that's down the road. First the place is MINE!"

bobjitsu said: "God hates California. I need to make tee shirts that say that and start selling them. :D"

scottigee said: "[QUOTE=bobjitsu]God hates California. I need to make tee shirts that say that and start selling them. :D[/QUOTE] Haha, he does man, he really does. I remember last year we had awful brush fires in October that burned away all the ground cover. Then there was an earthquake out in Redlands that loosened up all the now un-bound soil, then we got heavy rains and mudslides that washed it all away...it was a perfectly destructive sequence all over the course of a few weeks. Then this year we just had almost 30" of rain over the course of two weeks, and even worse mudslides and raging drainage areas that claimed a dozen lives. WON'T YOU SAVE US GOVERNATOR?! [img]http://galeriekulturistiky.webz.cz/arnold/TN_Arnold%2011.JPG[/img]"

Heather said: "I'd be worrying about Mudslides and Earthquakes. That is just me. Other than that, I am sure that it would be fabulous!"

scottigee said: "Earthquakes: can't help it if these come along. I was actually hoping for one the last few months to drive property values down :D Mudslides: won't be an issue where I'm at"

Heather said: "I hope that you find a great bargain, then. Good Luck!"

ToastMonger said: "If you don't like California I would suggest that you look into the Arizona market. I know that you are a hardcore republican, bob, and Arizona is just about as far off the wall as Texas :) . You can still find incredibly good deals over here. I saw a 4bed, 2 bath house in a reasonably nice part of town listed at like 120k. Reasonable part of town at that. If you're really looking for some good deals look west in the Peoria/El-Mirage area. That's where I live and my house value has gone up about 60k in 3 years"

bobjitsu said: "Toast, I live in Las Vegas....have for the past 10 years. I used to live in Cali, best thing I ever did was moving from there. :D"

scottigee said: "Wow, yeah Vegas is a great investment recently. You will make a killing on that place. Oddly enough I had a dream last night that I was hanging out with a buddy of mine who just bought an apartment in Phoenix (actually about 10 months ago now). He was suddenly loaded and had a garage full of nice cars - all due to his real estate investment! Can you tell I have real estate on the brain??!!! :D"

bobjitsu said: "Hey Scott, don't forget raw land too. It's cheaper and you will get a ton more of it, in 10 years if you buy right it may be worth a fortune."

misterjover said: "[QUOTE=bobjitsu]Hey Scott, don't forget raw land too. It's cheaper and you will get a ton more of it, in 10 years if you buy right it may be worth a fortune.[/QUOTE] That's an interesting point you made. My partner went to Vegas and neighboring cities to survey raw land this week for a development project. We are currently also working on a $5mil beachfront property construction deal on raw land in Venice, CA. There's more money to be made on raw land than on regular residential property or multi-unit property, especially if you can get your structure built for $75 per square foot or less."

Darren said: "man, how do you keep track of all these businesses you're in?"

misterjover said: "[QUOTE=ben]man, how do you keep track of all these businesses you're in?[/QUOTE] I'm actually severely behind on several transactions, but I deal mostly with real estate and mortgages. I wish I had time to set up other avenues of income since interest rates are on their way up, but lately I've just been spending my discretionary time with stocks."

pj94z said: "In real estate, you make money when you BUY a property. If you follow that, it doesn't matter what state you buy a property in - you will make money. You can make money when the RE market is going UP as well as when it's going down. ( I hear this is true for stocks too?) Find a few good books on REI and read them, then buy. Fyi, I am a full-time real estate investor - been doing it for 3 years"