Housing Bust 2016

Leveraging, renting vs owning, making an investment or buying a home?
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Flaccidsteele
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Re: Housing Bust 2016

Post by Flaccidsteele » 20 Dec 2016 14:05

Just a Guy wrote:If you mean as a lender, it doesn't appeal to me. I don't get the leverage I'd want and I don't really want to lend to other people who make foolish decisions.
Aren't foolish individuals best for the rational lender? You get the points (on origination and renewal), yield and take their collateral/property?
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Re: Housing Bust 2016

Post by Just a Guy » 20 Dec 2016 15:53

While I generally profit from foolish people (I pick up many properties from them), I don't enable them in the first place.

I also still prefer the leverage I can get from owning the property.

My latest property, I picked up this month for $70k, spent about $1000 to renovate it (the place was nearly perfect to begin with) and just showed it today to a tenant. Got it rented for $1250, bank comes in later this week for the appraisal (I expect it to be well over 100k when I look at comparables). With an 80% ltv mortgage at under 3%, why would I want to lend my cash to someone else? I made money out of thin air and have none of my own money tied up.

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patriot1
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Re: Housing Bust 2016

Post by patriot1 » 20 Dec 2016 18:37

Flaccidsteele wrote:Aren't foolish individuals best for the rational lender? You get the points (on origination and renewal), yield and take their collateral/property?
Short answer is no and no. Mortgage lenders don't "take" defaulted properties, they are legally obliged to get the best possible price (i.e. market value) and pass on the surplus or deficit to the borrower (or the insurer). There is no profit in foreclosing. There is however a lot of bad publicity which scares people away from buying and is likely to lead to falling prices which just continues the cycle.

Canadian mortgages don't have "points" as well.

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Re: Housing Bust 2016

Post by patriot1 » 20 Dec 2016 18:41

B.C. is desperate to keep its housing bubble aloft. It won’t work

What's interesting about this article is not what it says, which we've heard before, but where it appears.

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Flaccidsteele
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Re: Housing Bust 2016

Post by Flaccidsteele » 20 Dec 2016 23:00

Just a Guy wrote:My latest property, I picked up this month for $70k, spent about $1000 to renovate it (the place was nearly perfect to begin with) and just showed it today to a tenant. Got it rented for $1250, bank comes in later this week for the appraisal (I expect it to be well over 100k when I look at comparables). With an 80% ltv mortgage at under 3%, why would I want to lend my cash to someone else? I made money out of thin air and have none of my own money tied up.
That is an insane yield! Amazing property! I haven't bought something like that since 2012. Congrats!

Quick question, when do you refi?
Retired @ 40 after reading Munger/Buffett. I avoided a fragile retirement by avoiding conventional volatility management (diversification, re-balancing and asset-allocation). "Put 90% in a very low-cost S&P 500 index fund...the long-term results will be superior" - Warren Buffett

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Re: Housing Bust 2016

Post by Just a Guy » 20 Dec 2016 23:25

I buy my properties on a line of credit for "cash" and make unconditional offers (one of the reasons I can get deals like that). I then renovate the place and contact the bank for financing after that. If I can get a tenant before the appraisal, all the better.

This deal all came together really well, most usually take a month to renovate at least, then time to get a tenant...it helps that I've got a bit of a waiting list for tenants.

This is the 4th property I picked up this year which had similar numbers, though the others took more time to fix up.

Right now I'm working on a deal with a guy for 5 units, it's an "investor" who just wants out of his bad deal.

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Re: Housing Bust 2016

Post by Flaccidsteele » 20 Dec 2016 23:27

Just a Guy wrote:I buy my properties on a line of credit for "cash" and make unconditional offers (one of the reasons I can get deals like that). I then renovate the place and contact the bank for financing after that. If I can get a tenant before the appraisal, all the better.

This deal all came together really well, most usually take a month to renovate at least, then time to get a tenant...it helps that I've got a bit of a waiting list for tenants.

This is the 4th property I picked up this year which had similar numbers, though the others took more time to fix up.

Right now I'm working on a deal with a guy for 5 units, it's an "investor" who just wants out of his bad deal.
Wow. Just wow. That's crazy. Is there a "gobsmacked" emoji? :shock:

I picked up 4 properties this year (closing last one next week), but the yields are NO WHERE NEAR yours.
Retired @ 40 after reading Munger/Buffett. I avoided a fragile retirement by avoiding conventional volatility management (diversification, re-balancing and asset-allocation). "Put 90% in a very low-cost S&P 500 index fund...the long-term results will be superior" - Warren Buffett

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Re: Housing Bust 2016

Post by DenisD » 20 Dec 2016 23:35

Flaccidsteele wrote:Wow. Just wow. That's crazy. Is there a "gobsmacked" emoji? :shock:
Take your pick:
https://www.google.ca/search?q=gobsmack ... A&dpr=1.25

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Re: Housing Bust 2016

Post by Just a Guy » 20 Dec 2016 23:40

To tell the truth, I'm not sure why this one went so cheap, it was in good shape, it's a two bedroom place, and one bedrooms in the same complex are asking around $100k. The only thing I could see is they wanted a quick close, it was listed for only a week.

My other properties are usually in the price range, but require more work.

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Re: Housing Bust 2016

Post by Flaccidsteele » 20 Dec 2016 23:41

Just a Guy wrote:For example I just bought a place for $70k, another smaller place recently sold in the same complex for $130k. The seller needed it to go quickly, so dropped the price accordingly. There are three other places in the same complex all listed over $100k.

I figure it should rent for around $1200-1300/month based on current market rates.
JaG, what would typically be your all-in cost for this property? $70k to purchase, how much to get rent-ready? I mean generally speaking. Not this white elephant $1000 reno deal ;)

I forgot that I typically mention my purchase price to include my reno costs. Which compresses my gross yield when I mention it. I never think to mention my pre-reno purchase price. For example, on one property, I purchased for $85k and had to spend $20k for reno. During reno I approved a tenant and got a 2 year lease @1050/mo. Not as spectacular as what you got, but perhaps I should increase my standards :(
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Re: Housing Bust 2016

Post by Just a Guy » 20 Dec 2016 23:50

I've found you can redo an entire place for $5k in materials. I've worked out deals with suppliers, so I'm not buying cheap crap. I usually do 12mm or thicker laminate and tile floor, good quality paint, and then fixtures. Some places don't need an entire redo.

The labour varies with the area, but I've got guys I use regularly so my costs aren't that high.

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Re: Housing Bust 2016

Post by Flaccidsteele » 20 Dec 2016 23:51

Just a Guy wrote:I've found you can redo an entire place for $5k in materials. I usually do 12mm or thicker laminate and tile floor, good quality paint, and then fixtures. Some places don't need an entire redo.

The labour varies with the area, but I've got guys I use regularly so my costs aren't that high.
Thanks JaG!
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Re: Housing Bust 2016

Post by Just a Guy » 20 Dec 2016 23:57

I buy what meets my criteria. Why buy a bachelor as part of a building if it costs more than I can buy a single two bedroom for?

If I can find a good deal on a building, I'll buy a building, but I'm not willing to overpay, especially in this market.

The cash flow on this door was really good, but if the market corrects, and I believe it will, I still need the property to make me money when rents are low. If others pay more, I can undercut the competition in a bad market.

Right now, I bank the profits and use them to buy more.

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Re: Housing Bust 2016

Post by Flaccidsteele » 21 Dec 2016 00:16

I'm guessing that you use PM companies as opposed to doing it all yourself, leaving yourself free to hunt?
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Re: Housing Bust 2016

Post by Just a Guy » 21 Dec 2016 01:00

I've developed a pretty good network and working relationship with people to get things done.

I do enjoy the hunt for properties. Finding the diamond in the rough, the overlooked treasure...

Of course, I also spend a lot of time dealing with the banks, managers, contractors, realtors, other investors, etc. I enjoy doing things others say can't be done like finding a 70k place in this market, or avoiding commercial mortgages when most banks won't fund more than 5 properties at residential rates.

Other people give up when things don't go the way they want the first time, me I keep looking until I find a way to do what I want to do.

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Re: Housing Bust 2016

Post by twa2w » 22 Dec 2016 01:32

patriot1 wrote:
Flaccidsteele wrote:Aren't foolish individuals best for the rational lender? You get the points (on origination and renewal), yield and take their collateral/property?
Short answer is no and no. Mortgage lenders don't "take" defaulted properties, they are legally obliged to get the best possible price (i.e. market value) and pass on the surplus or deficit to the borrower (or the insurer). There is no profit in foreclosing. There is however a lot of bad publicity which scares people away from buying and is likely to lead to falling prices which just continues the cycle.

Canadian mortgages don't have "points" as well.
Flacidsteele was referring to 'basis' points that a private lender can get at origination and at renewal.
With a foolish individual, you can get a big fee up front as well as at renewal.
As an example, a second mortgage of 50,000 could net you a fee of 5,000 ( usually register mortgage for 50 but only advance 45) and a renewal fee in 2 years of 1,000. Borrower pays all costs and an interedt rate can be 5 to 10 % higher than banks.
I believe he was referring to holding their property as collateral as opposed to forclosure.
BTW your assertion about defaulted properties depends on the the province. Some provinces allow both power of sale which is how you describe and forclosure which allow a mortgage holder to transfer the property to themselves and take position once legal procedures are complete.if they then decide to sell, any profit or loss accrues to the mortgagee in this case.

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Re: Housing Bust 2016

Post by Flaccidsteele » 29 Dec 2016 15:28

^ thanks I didn't want to say it and make the post look more OT and silly than it was already :?
Retired @ 40 after reading Munger/Buffett. I avoided a fragile retirement by avoiding conventional volatility management (diversification, re-balancing and asset-allocation). "Put 90% in a very low-cost S&P 500 index fund...the long-term results will be superior" - Warren Buffett

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