Low inventory due to underwater owners? Not quite.

One of the best pieces I’ve seen yet on the inventory issue. Brings up a host of topics that haven never really been brought to light. Too much to paste in so click the link for the details:

Why is housing inventory so low?

There has been a great deal of discussion regarding the consistently low housing inventory levels throughout the nation. Very little, however, has been written about the reasons why inventory levels are so low, especially following the economic disruption of 2008-2011.

Understanding the why can be helpful in predicting how these factors might influence longer-term supply levels and future appreciation potential. This knowledge might also shed light on why inventory might remain constrained over the long run.

Capital gains exclusion on primary residence

Step up in basis

Sustained low rate environment

Value disruption/reset in 08/09

Values not at peak levels across the country

Sense that values will continue to climb

Where would I go? Move up

Stunted new development

This entry was posted in Economics, Housing Recovery, National Real Estate. Bookmark the permalink.

136 Responses to Low inventory due to underwater owners? Not quite.

  1. chicagofinance says:

    Frist bichez

  2. The Great Pumpkin says:

    Any questions? The Great Pumpkin strikes again.

    I guess I understand wealth building better than most. Any idiot telling you to rent as opposed to own good real estate is an idiot. Anyone trying to claim that stocks are a better investment than real estate are lost. They are using general avgs to prove their point, which results in them being totally wrong. Please show me how the stock market can compare to buying real estate in a good location, say manhatten 30 years ago. It can’t. The returns on your investment in these locations is insane. Nothing can touch it. But if you want to group all real estate together ( meaning crappy real estate in places like ohio or north carolina) and avg the increase, sure the stock market is better. But if you avg the increase in good locations like north jersey, you can’t beat the return, esp if you are collecting rent on top of it. Impossible to beat. Say you bought one investment property in ridgewood in 1970 and collected rent for 30 years and then sold that home in 2000, you would have made more money on that investment than you did prob working your whole life. With the rent collected and the appreciation on your home, you would be able to retire off that one investment, esp if you took that rent income and tossed it in the stock market(best of both worlds). If you had a couple of properties, forget it. Over and out.

    Those mit grads proving their worth.

    “Land/housing is really one of the only investments that give wealthy people a long-term leg up. According to the Economist, this changes how we should rethink policy related to income inequality.”

    https://medium.com/the-ferenstein-wire/a-26-year-old-mit-graduate-is-turning-heads-over-his-theory-that-income-inequality-is-actually-2a3b423e0c

  3. chicagofinance says:

    As I said, there is no black and white……while there is clearly a form over substance issue here in several cases, one thing sticks with me……you cannot just create cash from thin air (no snark please)…..you can’t if you are a company (Rags keep me honest)…..trapped cash is far different from a trapped accounting entry……..the idea that it is real cash that entered the firm’s bank accounts, and not just some bs net journal entry in Ireland or Bermuda, is the issue…….when I worked at AT&T, I was part of a team that worked on this puzzle (albeit 15 years ago), but follow the CASH as they say….that is all the substance you need……

    FKA 2010 Buyer says:
    April 1, 2015 at 4:41 pm
    [97] Chi

    These profits that are generating in the US and are booked in a subsidiary that is located in a country with tax advantages that are greater than the US. All legally done I might add. I totally agree there is no incentive for these companies repatriate these profits but I imagine they are waiting for a changing of the guard and hoping for a more favorable tax rate when they repatriate. The past year, the US has stepped up efforts against individuals who have set up similar structures offshore.

    Are you saying that the subsidiary wasn’t created with the sole purpose of avoiding paying taxes in the US?

  4. chicagofinance says:

    fka: as an example……Apple sells it’s product in every country in the world, but does not have offsetting expenses, hence trapped cash…..

  5. Wily Millenial says:

    I have an eye on downsizing eventually, but the handful of listings in the bottom half of the market are just utter trash, because anything halfway decent at the bottom gets snapped up in five seconds. Meanwhile anyone trying to sell a $2M house is getting real tired of waiting for the phone to ring.

  6. The Great Pumpkin says:

    I agree, the value is in the lower half of the market, way more buyer competition to increase price. Plus, the bottom wasn’t as quick to rebound like the high end.

    Wily Millenial says:
    April 2, 2015 at 8:13 am
    I have an eye on downsizing eventually, but the handful of listings in the bottom half of the market are just utter trash, because anything halfway decent at the bottom gets snapped up in five seconds. Meanwhile anyone trying to sell a $2M house is getting real tired of waiting for the phone to ring.

  7. anon (the good one) says:

    at the bottom half, one hr from NYC, you are paying mostly for the land

    it becomes unaffordable if you also want a nice house w the land

    Wily Millenial says:
    April 2, 2015 at 8:13 am
    I have an eye on downsizing eventually, but the handful of listings in the bottom half of the market are just utter trash, because anything halfway decent at the bottom gets snapped up in five seconds. Meanwhile anyone trying to sell a $2M house is getting real tired of waiting for the phone to ring.

  8. anon (the good one) says:

    “The chain, like its rival restaurants, has long been at the center of the controversy surrounding the minimum wage for fast-food workers in America.

    McDonald’s came under fire in late 2013 when, amid protests by fast-food workers demanding a wage hike, the company published its “McResource Line” offering financial and health advice for struggling employees.

    Among the tips for staff on a budget: singing in the shower to prevent stress, breaking food into pieces and attending church to lower blood pressure, Salon reported. The resource line has since shutdown.”

    @ReutersBiz: McDonald’s raising average worker wage to about $10 an hour

  9. anon (the good one) says:

    @ReutersBiz: U.S. jobless claims fall; continuing claims lowest since 2000

  10. Liquor Luge says:

    anon (8)-

    Don’t quit your McDonald’s job. It’s even worse at WalMart.

  11. JJ says:

    Stocks over long term ALWAYS outperform housing. However, places like Manhattan for instance with very limited inventory, very high rent and very low property taxes Real Estate is a great investment.

    My house I live in brand new was $13,500 in 1954. I did the calculation. If you bought my house for cash that day the house would be worth around $450,000 today. Plus all the headaches of tenants, repairs, updates, insurance, property taxes, maint. If you just put $13,500 in a stock fund that day you would have $5,000,0000 million dollars using average stock market returns. Over that 60 year period stocks would have outperformed housing by 1,000 percent.

    RE also has issue hard to diversify. Sure an Asian man who moved to America in 1990 right after last RE crash and start buying rentals in Brooklyn, Queens and Manhattan is loaded to max. But same man if moved to Detroit or New Orleans would have been wiped out.
    Remember Real estate sits stan
    The Great Pumpkin says:
    April 2, 2015 at 8:07 am
    Any questions? The Great Pumpkin strikes again.

    I guess I understand wealth building better than most. Any idiot telling you to rent as opposed to own good real estate is an idiot. Anyone trying to claim that stocks are a better investment than real estate are lost. They are using general avgs to prove their point, which results in them being totally wrong. Please show me how the stock market can compare to buying real estate in a good location, say manhatten 30 years ago. It can’t. The returns on your investment in these locations is insane. Nothing can touch it. But if you want to group all real estate together ( meaning crappy real estate in places like ohio or north carolina) and avg the increase, sure the stock market is better. But if you avg the increase in good locations like north jersey, you can’t beat the return, esp if you are collecting rent on top of it. Impossible to beat. Say you bought one investment property in ridgewood in 1970 and collected rent for 30 years and then sold that home in 2000, you would have made more money on that investment than you did prob working your whole life. With the rent collected and the appreciation on your home, you would be able to retire off that one investment, esp if you took that rent income and tossed it in the stock market(best of both worlds). If you had a couple of properties, forget it. Over and out.

  12. The Great Pumpkin says:

    Mcds gave a 10% raise to its’ workers. Wage inflation for sure. Tell me how I’m wrong again. Everything is happening just like I have stated on this blog for the past two years. They are starting to raise wages out of necessity. This will raise the wages of all above. Stand by my 2017-2018 wage inflation prediction.

    Liquor Luge says:
    April 2, 2015 at 9:10 am
    anon (8)-

    Don’t quit your McDonald’s job. It’s even worse at WalMart.

  13. Fast Eddie says:

    Why is housing inventory so low?

    The interest rate argument is bullsh1t. Let’s get that one out of the way. People are not making a move because they’re gonna lose the low rate. The lending rate has been dead for years and will continue for years to come.

    In our area, there’s no inventory because people can’t sell; they’re either unqualified sellers or they can’t tolerate the loss in financial or emotional terms.

    Lower inventory begets lower inventory. I agree because I lived it. I sold my house or tried to and looked for months for something… anything. The list became more and more looser and the selection went from bad to worse. I voided the contract and my buyers were gone in anger. There’s two transacations that disrupted the whole food chain. Now think about how many are in the same boat. They can’t sell because there’s nothing to buy. Thus, lower inventory begets lower inventory.

    And then there’s that other slight annoyance called property taxes. I’m not talking about Buttf.uck, Iowa, I’m talking about North Jersey. When a tax payment is on par with a mortgage payment, it’s a slight issue (cough).

  14. Fast Eddie says:

    Anyone trying to claim that stocks are a better investment than real estate are lost.

    What a m0ronic statement.

  15. Fast Eddie says:

    Say you bought one investment property in ridgewood in 1970 and collected rent for 30 years and then sold that home in 2000, you would have made more money on that investment than you did prob working your whole life.

    And let’s say that Jupiter is aligned with Mars and the sun is eclipsed by the moon during low tide at Sandy Hook as you sign the contract looking at the Eastern sky 30 degrees above Jerusalem.

  16. Juice Box says:

    One in three Boomers are single, mainly do their narcissistic ways.

    Now they are forming group homes like the Golden Girls.

    http://www.marketwatch.com/story/single-boomers-forming-golden-girls-households-2015-04-02

  17. jcer says:

    Pumpkin, tell your real estate spiel to some of my neighbors who paid obscene prices in 2006-2007 who are still 15% away from what they originally paid, wishing they could sell at break even. If you buy in the right place at the right price you are ok, but that isn’t how it always goes.

    15, Eddie to use hypothetical situation, but I have one I bought apple at split adjusted a bucks a share in 1996 that seems like a better investment than the Ridgewood home with property tax and maintenance, right? Cherry picking investments with hindsight always looks good, how about the guy who bough in Paterson in the 1920’s I’m sure his investment looks great….

  18. Fast Eddie says:

    jcer,

    Property taxes and maintenance don’t fit into the argument! ;) Everything is supposed to be profit! Just like a business owner! Every time that cash register rings, it’s pure profit! Overhead? Expenses?

    Just like it’s always a good time to buy. Except when you owe more than the joint is worth. Hey, nobody told you to buy at the peak! We should all know when to buy low and sell high. It’s easy!

  19. The Great Pumpkin says:

    It’s a lot harder to pick a winning stock than a winning real estate property. You are throwing darts at a board with stocks. They are not even based on fundamentals anymore. Don’t get me wrong, in terms of avgs, the stock market is much better than real estate. There is a lot of crappy real estate out there. So you must make sure to do your hw and get the good real estate, you don’t want to get stuck with a bad real estate purchase.

    JJ says:
    April 2, 2015 at 9:20 am
    Stocks over long term ALWAYS outperform housing. However, places like Manhattan for instance with very limited inventory, very high rent and very low property taxes Real Estate is a great investment.

    My house I live in brand new was $13,500 in 1954. I did the calculation. If you bought my house for cash that day the house would be worth around $450,000 today. Plus all the headaches of tenants, repairs, updates, insurance, property taxes, maint. If you just put $13,500 in a stock fund that day you would have $5,000,0000 million dollars using average stock market returns. Over that 60 year period stocks would have outperformed housing by 1,000 percent.

    RE also has issue hard to diversify. Sure an Asian man who moved to America in 1990 right after last RE crash and start buying rentals in Brooklyn, Queens and Manhattan is loaded to max. But same man if moved to Detroit or New Orleans would have been wiped out.
    Remember Real estate sits stan

  20. joyce says:

    The Federal Reserve is getting what it wanted from six years of near-zero interest rates ……… It’s also getting some less savory side effects. Asset prices are sky high, fueling fears of a chaotic reversal that could hammer the economy as wealth evaporates and credit dries up. This leaves Fed officials conflicted as they weigh when to lift interest rates.”

    Side effects?!?!! yeah so is this an after the fact as well as preemptive No One Could Have Saw This Coming
    http://www.wsj.com/articles/hard-decisions-on-easy-money-growth-now-or-turmoil-later-1427910870

    only thing worse than that piece of sh-t was Bernanke’s post:
    http://nypost.com/2015/03/30/bernanke-addresses-senior-citizen-critique-in-debut-blog-post/

    (I used to be able to access the brookings institute link, but now there’s no access)

  21. joyce says:

    14
    FE,
    The best real estate investments (via highsight) are better. Simple as pie.

  22. The Great Pumpkin says:

    Taxes and maintenance are a product of cost of living. If you are living, you are paying these costs. So why should it fit into the argument? If I rent, I have to pay these costs. If you could avoid taxes and maintenance, than let’s bring it to the table, but if you can’t avoid it, why should it be a part of the argument?

    Fast Eddie says:
    April 2, 2015 at 10:02 am
    jcer,

    Property taxes and maintenance don’t fit into the argument! ;) Everything is supposed to be profit! Just like a business owner! Every time that cash register rings, it’s pure profit! Overhead? Expenses?

    Just like it’s always a good time to buy. Except when you owe more than the joint is worth. Hey, nobody told you to buy at the peak! We should all know when to buy low and sell high. It’s easy!

  23. Pete says:

    #4

    “Anyone trying to claim that stocks are a better investment than real estate are lost. They are using general avgs to prove their point, which results in them being totally wrong”

    So instead of using averages you use outliers to prove your point. Much better. Thanks for contributing.

  24. jcer says:

    Real estate is an asset like any other, you need to know what you are buying and understand the long term fundamentals, we can point to many different cases, one thing is for sure as JJ points out the single family is usually FAR from the best investment. My grandfather was offered a 1000 acres of land in Saddle River in the 1940’s or 1950’s, he didn’t buy it because what would he do with all of this land so far away from NYC? Today that land is worth a tremendous amount back then not so much but it is all a function of buying a good asset when nobody else wants it. In the 1970’s nobody wanted the old rail yards in Pavonia, Jersey City, Mel Simon wants to build a mall there because of the PATH and brings in LeFrak who promptly buys up most of the land, today that is Newport in Jersey City and LeFrak stands to make upwards of a billion dollars there. Nobody wanted to be in Trenton in 1970, if I bought riverfront land there I’d be bankrupt.

  25. Anon E. Moose says:

    Pumpk [12];

    Mcds gave a 10% raise to its’ workers. Wage inflation for sure. Tell me how I’m wrong again.

    My 7th grade math teacher explained it to us when there happened to be a teacher’s contract fight raging in the news: 10% of nothing is nothing!

    How many McD’s workers with their 10% raises does is take to replace the consumption impact of several hundred six-figure Pharma and telecom middle management jobs off-shored?

  26. Liquor Luge says:

    gary (13)-

    We’ve had historic low interest rates (near 0%) for close to seven years. Many other parts of the world are sliding into a negative interest rate policy. When the fcuk are the necronomic geniuses around here gonna recognize that such interest rates are a sign of extreme financial sickness? This is money, priced at nothing, that cannot find a willing borrower (other than banksters and giant corporations, who take the handouts and put the money to no useful purpose, other than stock buybacks and mindless trading in risk products). On top of all that, we have wiped out at least one generation of savers and ground millions of little old ladies and pensioners into dust.

    Interest rate arguments in housing? Give me a fcuking break. It hasn’t been about qualified borrowers in seven years. Please direct me to the hidden pool of qualified, ready and able sellers, because someone seems to have kidnapped and hidden every single one in Amerika.

  27. Liquor Luge says:

    Sell? Sell to whom?

    – BC Bob, sometime around 2009

  28. Liquor Luge says:

    I think the phrase I’m searching for is “deflationary credit collapse”.

    Then again, we have a dicktard here who claims that Mickey D’s giving their drones a bump (for PR purposes) is a harbinger of wage inflation…

  29. jcer says:

    As for maintenance what about the required capital projects don’t tell me you can rent building for 20 years and you won’t have to spend a lot of money keeping it viable, mechanicals(HVAC, Water heaters) usually only last 15 -20 years and aren’t cheap to replace, same goes for roofs. What about vacancies between rentals, the cost of administering the rental property, etc. There are cost to running rentals, on apartments you can make it work on single families it has always been difficult to generate cash flow. All said and done the rental of the single family in Ridgewood from 1970-current would not generate that much income after the taxes and maintenance, it would all be capital appreciation.

  30. Liquor Luge says:

    I’ll stand corrected, in that the automobile market- in its need to continue to stim “record” growth for Gubmint Motors- needs both ZIRP and completely obliterated borrower standards to keep that hamster wheel spinning.

    Of course, payday-loan-outfit-masquerading-as-bank Santander leads the charge in the subprime auto loan space…

  31. grim says:

    Jobless claims solid

  32. Liquor Luge says:

    jcer (29)-

    The only thing that really juices those kinds of investments is the protection of 1031-ing them…

  33. jcer says:

    Actually the MIT genius blaming in inequality on housing is missing the interest rate argument. Near zero rates have gotten institutional investors more involved in the small multi and single family market than ever before, that’s driving the bus to higher rents and housing prices and with the natural scarcity in some markets the single entity owner can really influence the market. The high cost for the average schmuck is taking real money out of the economy and putting it in the hands of wall street bankers, who cannot possibly spend it all.

  34. Liquor Luge says:

    I’d suggest to all here to take a 1-2 week hiatus from the board.

    When you come back here, the first thing you’ll realize is that the Punkin/anon contingent is at least twice as fcuktarded as you originally thought.

  35. The Great Pumpkin says:

    If you pay attention to what I’m saying, then you would understand why you use outliers when it comes to real estate. Most of the real estate out there is garbage!!! So why should I count it in the avgs when it is common sense to anyone that follows real estate that most of the properties out there are garbage. I’m not talking about avg properties, so why should I use avgs. A person with knowledge of real estate looking to make money on a purchase is not looking for an avg property.

    Pete says:
    April 2, 2015 at 10:11 am
    #4

    “Anyone trying to claim that stocks are a better investment than real estate are lost. They are using general avgs to prove their point, which results in them being totally wrong”

    So instead of using averages you use outliers to prove your point. Much better. Thanks for contributing.

  36. The Great Pumpkin says:

    I’m in the landlord business, so I know how lucrative it can be. Make pretend you get 4,000 a month for a house in ridgewood right now. You have 20,000 in property taxes. So you are getting 28,000 after property taxes. Add that up, along with property tax and mortgage deduction, you are telling me that you can’t cover maintenance? How much are you spending on maintenance that you can’t profit?

    jcer says:
    April 2, 2015 at 10:17 am
    As for maintenance what about the required capital projects don’t tell me you can rent building for 20 years and you won’t have to spend a lot of money keeping it viable, mechanicals(HVAC, Water heaters) usually only last 15 -20 years and aren’t cheap to replace, same goes for roofs. What about vacancies between rentals, the cost of administering the rental property, etc. There are cost to running rentals, on apartments you can make it work on single families it has always been difficult to generate cash flow. All said and done the rental of the single family in Ridgewood from 1970-current would not generate that much income after the taxes and maintenance, it would all be capital appreciation.

  37. jcer says:

    35, you have no clue. You aren’t purchasing investment properties on the open market. Most properties are just that avg. properties. Being a good real estate investor is actually more difficult than being a good stock picker, the asset you are looking for isn’t always for sale and properties are rarely ever fungible(only for tax purposes). The residential market is the most difficult to make cash flow at, but offering the greatest chance for capital appreciation. Most of the people involved in real estate investment are suckers, very few buy without making mistakes like buying properties in the wrong towns/neighborhoods, or buying a property requiring so much construction investment that it eats profits going foward, etc

  38. Anon E. Moose says:

    Pumps [36];

    I’m in the landlord business, so I know how lucrative it can be. Make pretend you get 4,000 a month for a house in ridgewood right now. You have 20,000 in property taxes. So you are getting 28,000 after property taxes. Add that up, along with property tax and mortgage deduction, you are telling me that you can’t cover maintenance? How much are you spending on maintenance that you can’t profit?

    Keep pretending its lucrative. You’re $28k FCF net of taxes, before maintenance expenses and vacancies. What is the property worth? Is it worth $500k? Take away 1% per year for maintenance ($5k), another $2k per year if you have one month vacant every other year; $1k per year for non-OO insurance. That means you’re profit is $20k a year on $500k invested; a 4% return.

    Pop the champagne corks!

  39. jcer says:

    36, house in Ridgewood is worth 750k, probably just in land alone, so 28k is 3.7% ish return, I probably need to budget between 5-8k in reserve for maintenance,repairs, future capital expenses every year, so now it’s 20k on a 750k investment, that’s like a paltry 2.5% net cash flow and I have to worry about tenanting and all of the hassle that goes with that, I can sell get my 750k invest in stocks and get a better tax advantaged yield without havign to worry about the complexities of being a landlord. Now in a building with 10 apartments it might be a different story, more risk dispersal, one tenant doesn’t kill your rent roll, etc.

  40. Anon E. Moose says:

    Con’t [38];

    I forget to mention that many amateur landlords have to service a mortgage on the property as well. Say (generously) they have 40% equity, floating 60% of the value at 3% rates; that costs them $9k out of $20k that was left.

    The only thing working in their favor there is that their piss poor equity position actually increases the return on equity rate to 5.5%.

  41. Anon E. Moose says:

    jcer [39];

    Different assumptions, but same thought process.

  42. joyce says:

    Re: taxes

    For your rental properties, there is no property tax deduction.

  43. jcer says:

    It works better for the home owner because they can by with 20% or less in equity, borrow at 2.75%and actually need the home to live in. My father has been in the real estate business for 40 years, he’ll tell you residential homes are not an investment for cash flow, they eat money in the form of vacancies and capital expenses and are a hassle, they are place to live and it is a good decision to buy for your own comfort because renting is no fun, too much uncertainty. Will he buy pools of residential housing from a bank because he thinks he can make a quick buck in appreciation….yes….hold for cash flow….no way. Some of the retail and industrial stuff will be held forever unless something else comes along for a 1031.

  44. 1987 Condo says:

    Don’t forget Depreciation Recapture…that gets paid one day…if you ever actually want to cash out…

  45. JJ says:

    In late 1979 when my condo complex was built folks bought condos as an “investment” at a time when the 30 year US Treasury risk free rate was 10%. So in effect you are betting the condo would rise in value greater than 10% a year for 30 years right off the bat.

    RE is a better investment as you have 30 year treasuries at 2.5%. So you only need it to rise great than that.

    However, when I did transfer pricing at a bank on risker stuff I wanted at least 200BPs higher than risk free rate (profit/risk adjustment) plus all expenses covered.

    It is around 1% of purchase price usually to maintain a house annually.

    So take 10% risk free rate + 2% (adjust for risk/profit) + 1% (maint) so I would need a guarantee the condo purchase would return a minimun of 13% ROI every year for 30 years.

    Today I only need that number to be 5.5% or greater

  46. jcer says:

    41, quick back of the napkin ROR calculation tells me that his scenario doesn’t yield anywhere close to good returns. 4% at best, probably closer to 2% with considerable risk. When I can make 5% FCF net of taxes and maintenance, with the opportunity for capital appreciation, I might concede that it is a good investment, especially if I think the purchase price is undervalued.

  47. Fast Eddie says:

    Sell? Sell to whom?

    Best statement ever uttered on this blog.

  48. Anon E. Moose says:

    Condo [44];

    Can always leave it after you go. Inherited property basis is the market value at the time of passing. I think that avoids the recapture. Spend the cash, leave the property.

    Anyways, doing a little googling on depreciation recapture, and cam across this oldie from 2005:

    DEAR BOB: About two years ago, my sister and I inherited our late mother’s house. Because it is in a great neighborhood where homes are appreciating in market value like wildfire, we decided to keep it as a rental. When our tenant recently moved out, my sister said she wants to sell the house. But I don’t want to sell because the house appreciated at least 15 percent in market value in 2004 and will probably do likewise in 2005. It is a great free and clear investment. However, my sister went to a real estate lawyer who says he can force me to sell if I don’t buy out my sister’s interest. Since I don’t have that kind of cash, what can I do? – Richard S.

    Richard S. should kiss his sister’s @$$ if she did make him sell in 2005 after 15% annual appreciation, “wildfire” notwithstanding. Ahh, the good old days.

  49. Anon E. Moose says:

    Con’t [48];

    Yeah, no recapture on inherited 1031 property. “The ultimate strategy is to defer, defer, die.”

  50. Fast Eddie says:

    When you come back here, the first thing you’ll realize is that the Punkin/anon contingent is at least twice as fcuktarded as you originally thought.

    lol! Amen!

  51. jcer says:

    49, unless the stepped up basis rule changes. Obama was looking to kill it. When dealing with taxes Defer is almost always the goal.

  52. The Great Pumpkin says:

    I’m done wasting my time. You guys are right, real estate is a terrible investment. Go play in the stocks. Leave the real estate to me. Have no problem being a landlord. I will never ever buy a real estate property that doesn’t produce more than it costs. I have seen so many people (polish immigrants) build up a real estate empire based on residential real estate purchases. You guys can keep thinking that it’s a waste of time. Less competition for me.

    jcer says:
    April 2, 2015 at 10:43 am
    36, house in Ridgewood is worth 750k, probably just in land alone, so 28k is 3.7% ish return, I probably need to budget between 5-8k in reserve for maintenance,repairs, future capital expenses every year, so now it’s 20k on a 750k investment, that’s like a paltry 2.5% net cash flow and I have to worry about tenanting and all of the hassle that goes with that, I can sell get my 750k invest in stocks and get a better tax advantaged yield without havign to worry about the complexities of being a landlord. Now in a building with 10 apartments it might be a different story, more risk dispersal, one tenant doesn’t kill your rent roll, etc.

  53. Jason says:

    Does anyone on this board believe for a moment pumpkin owns a house paying $28,0000 in property taxes?

    He sounds to me like a recent college grad, head filled with the indoctrinated idealistic gobbledygook he learned from his professors. He’s umemployed, living at his parents house, and THEY are the ones paying $28,0000 in property taxes.

  54. jcer says:

    52 being a landlord can be lucrative just not single family homes and it is usually a pure capital appreciation play, which is not a bad thing but you have to really know how to buy and it is not free of risk.

  55. clotluva says:

    I realized Pumpkin’s m.o. is to troll behind a veil of earnestness. It seems to be quite effective.

  56. Anon E. Moose says:

    Pumps [52];

    Leave the real estate to me.

    I’m happy to, but for your sake, how many home-owning grandmothers do you have left?

  57. The Great Pumpkin says:

    Not 28,000 on one property. 17,200 in wayne, and 11,200 in clifton. Yes, I’m making it up. I have nothing better to do, but come on some blog and lie about what I have or pay.

    Jason says:
    April 2, 2015 at 11:27 am
    Does anyone on this board believe for a moment pumpkin owns a house paying $28,0000 in property taxes?

    He sounds to me like a recent college grad, head filled with the indoctrinated idealistic gobbledygook he learned from his professors. He’s umemployed, living at his parents house, and THEY are the ones paying $28,0000 in property taxes.

  58. Anon E. Moose says:

    Jason [53];

    You may have missed Pumps’ (nee Michael) backstory. He is young and earnest. Got into the “landlording” business when his grandmother left her house to the grandkids, and he bought them out for some fraction of a family price. Talk about born on third base…

  59. Juice Box says:

    Meanwhile consequences European Central Bank chicanery of negative interest rates.
    Banks don’t need main st anymore!

    Take deposits and make loans? Nein, nein! We don’t need Main St anymore, we will focus on the Derivatives Casino instead. Main Street go bank online no more tellers, dummkopf!

    http://www.bloomberg.com/news/articles/2015-03-23/deutsche-bank-said-to-weigh-strategy-shift-with-consumer-retreat

  60. Juice Box says:

    grim # 59 in Mod..

  61. The Great Pumpkin says:

    I’m not the only one in my family in the landlord business. Rule no1 taught to my family. First real estate purchase is always a multi-family. Then during each cycle of the real estate market, you buy low and sell high. If a property is especially lucrative in the rental department, you never ever sell. You also don’t want to get caught with your pants down, meaning having all your properties paid off. You always want to have a mortgage. Otherwise, everything is profit and you will get killed when it comes to tax time.

    Anon E. Moose says:
    April 2, 2015 at 11:38 am
    Pumps [52];

    Leave the real estate to me.

    I’m happy to, but for your sake, how many home-owning grandmothers do you have left?

  62. joyce says:

    tomorrow’s headline suggestion:

    free of debt = being caught with your pants down

  63. anon (the good one) says:

    “American companies have around $2.1 trillion in untaxed profits stashed overseas, according to a new report by the Center for Effective Government and the Institute for Policy Studies. About half of that amount is held by 26 large companies like GE, and Microsoft.

    If these companies paid federal taxes on their offshored profits from 2014—and got refunds for taxes they’ve already paid to other countries—they would owe an estimated $364 billion.”

  64. The Great Pumpkin says:

    Single family homes are a lot more dangerous than multi. The thing with single family is that you better know the area hands down. If it is a location that will not really appreciate, you are screwed. But if you know what you are doing, it can be very lucrative. If you bought residential in the sf area in 2000, you would have made an insane amount of money. Same thing with north jersey. With real estate, it’s all about long-term. It’s not a short-term play. You have to ride the cycles.

    jcer says:
    April 2, 2015 at 11:31 am
    52 being a landlord can be lucrative just not single family homes and it is usually a pure capital appreciation play, which is not a bad thing but you have to really know how to buy and it is not free of risk.

  65. jcer says:

    Pumpkin you have it backwards, unless your entity can get finance the lion share of the property you want to own all of it otherwise when things go south you can lose your equity. Most small time investors cannot get good loan terms on properties owned in LLC’s, which is the way you really want to own.

    The ideal way to play it is to get the banks to take all of the risk and you only get the upside, that is how the smartest players work it. They use their knowledge so that they can put up 5 million in a hundred million dollar project while bank put up 70 million at low interest rates and 25 comes from hedge fund or private equity in return for half of the profit. So the real estate guys risk 5 million to make 25, the wall street guys risk 25 to make 25 and the banks risk 70 to make 10 and if it goes bad everyone loses pretty much everything maybe the bank recovers 10 million on the sale of a failed real estate project.

    So for safety, i.e not getting caught paying rather than getting cash flow, I wouldn’t want debt on my investment property. The bank will ask for too much equity and charge too high a rate on an investment property to be worth it. But if you have manipulated it to use a regular residential mortgage than keeping the mortgage makes sense but it is not really how you are supposed to be operating.

  66. anon (the good one) says:

    “In 2004, Congress passed a one-time “tax holiday” as part of the American Job Creation Act, enabling companies to repatriate profits at a 5.25 percent tax rate instead of the usual 35 percent corporate tax rate.

    Evidence shows that this economic experiment didn’t work so well. According to a Center for Budget and Policy Priorities report from 2011:

    Firms mostly used the repatriated earnings not to invest in U.S. jobs or growth but for purposes that Congress sought to prohibit, such as repurchasing their own stock and paying bigger dividends to their shareholders. Moreover, many firms actually laid off large numbers of U.S. workers even as they reaped multi-billion-dollar benefits from the tax holiday and passed them on to shareholders.”

  67. jcer says:

    64 if you bought any number of assets in 2000 when treasury rates were nearly 7% you would make money. Again hindsight makes it easy to cherry pick areas that expanded SF was a function of tech company explosion and resurgence. That has made wealth and driven economic activity in northern CA which has correspondingly caused out sized gains in property values. I still would rather roll the dice on multi-unit buildings, commercial, retail, or just land before I buy single family properties unless the prices are really depressed.

  68. jj says:

    Also a lot of pure luck involved. Also where you live is important and income tax bracket.

    A very high income NYC resident, pretty much from 1980 to 2012 NYC Muni bonds were a big part of your investment portfolio.

    My broker from years ago who was rich and pushed stocks would admit his biggest investment each year was in NYC Muni Z coupon bonds. All 30 years. Last I spoke to him around 2-3 years ago he was pushing 55 and was looking forward to the next 30 years of z coupons maturing and fact his three bedroom coop and Hampton house would be paid off by retirement.

    Funny he was a Stock Broker but he himself was mainly muni bonds and real estate. He also would buy on the dips S&P funds.

    What also sucks it is all tax free income. He will pay no taxes pretty much in retirment.

    But what if he picked Trenton and Bronx real estate and auction rate securities instead? Or Internet stocks in 90s. Or even GM bonds.

    And someone starting today cant do what he did. The time to buy Muni bonds, Hampton houses, Three Bedroom coops is over. A new person has to find three new wins for investment

  69. Anon E. Moose says:

    Pumps [61];

    So much I could say that’s wrong. Let me just stick to this

    You also don’t want to get caught with your pants down, meaning having all your properties paid off. You always want to have a mortgage. Otherwise, everything is profit and you will get killed when it comes to tax time.

    Please explain how spending $1 in interest to save $0.30 in taxes is a profit-maximizing strategy.

  70. 1987 Condo says:

    A lot is timing, or my stupidity:

    1984: Robbinsville townhome $92,000……Sold in 1999..$92,000…ZERO gain
    1987: Belleville Condo for $140,000…………Sold in 1999 $92,000…$48,000 loss
    1993: Home for $195,000…additions of $200,000..worth $400,000..ZERO gain

  71. Anon E. Moose says:

    Juice [59];

    I found that out at a consumer level at the end of last year. I moved my checking account to Citibank early 2013 because they offered gold-level customer service being they serviced my mortgage.

    Late 2014, they changed the deal; mortgage balance doesn’t qualify to waive fees — needed to leave 5 figures with them at all times earning 0%. They closed their consumer branches in Morristown, then Florham Park, Chatham, Summit. Nearest branch to Morris Co. is Ridgewood. This told me loud and clear they were severely cutting back their reliance on consumer demand deposits.

  72. Anon E. Moose says:

    Tool [66];

    How dare they spend their money some way other than what you wanted. Don’t they know its only theirs because you let them keep it? They should be more grateful to the omniscient overlords.

  73. Juice Box says:

    re # 71 – Because they don’t have anywhere to lend the money.

    http://research.stlouisfed.org/fred2/series/EXCSRESNS/

  74. Juice Box says:

    re # 71 – JPM isn’t much better. I have my mortgage with them as well as United card for miles etc. I was hit with a $75 fee do to some lien NY State tried to put on me. I got the lien off but not the $75 fee. I have to head to the branch with my paperwork from NY State to argue with them about it. Pain in the arse, I haven’t been inside a branch in years.

  75. Juice Box says:

    re # 71 – Moose I almost forgot Citi is the bank that successfully lobbied to change the 2010 Dodd-Frank law on Derivatives and repeal those financial bailout protections.

    They have some book these days double 2009 leverage, why take deposits, make loans and and have branches anymore?

    http://www.futureofcapitalism.com/2015/03/citi-derivatives

  76. jcer says:

    Citigroup should change their slogan to Citigroup “We’re still functionally insolvent!”

  77. The Great Pumpkin says:

    Because you are purchasing another property with their money that generates more income. If you pay in cash or all your homes are paid off, you go into a much higher tax bracket. Every little savings makes a difference, and every new income generated makes a difference in the long term generation of your wealth.

    Anon E. Moose says:
    April 2, 2015 at 12:45 pm
    Pumps [61];

    So much I could say that’s wrong. Let me just stick to this

    You also don’t want to get caught with your pants down, meaning having all your properties paid off. You always want to have a mortgage. Otherwise, everything is profit and you will get killed when it comes to tax time.

    Please explain how spending $1 in interest to save $0.30 in taxes is a profit-maximizing strategy.

  78. The Great Pumpkin says:

    Bingo!!! Type of financing is everything. Obviously, you want to work your magic and avoid investment loans which require 30% down and rip off rates. You need to get dirty to get ahead. Most people won’t have the network or the know how to do it right.

    “So for safety, i.e not getting caught paying rather than getting cash flow, I wouldn’t want debt on my investment property. The bank will ask for too much equity and charge too high a rate on an investment property to be worth it. But if you have manipulated it to use a regular residential mortgage than keeping the mortgage makes sense but it is not really how you are supposed to be operating.”

  79. The Great Pumpkin says:

    Here is my philosophy on purchasing in a place like sf in 2000. When you purchase single family, make sure it is on the coasts in a place you would want to live. Meaning, the location has to have major desirability. Any west coast location within commutable distance to work and the beach would have fit my criteria in 2000. Today, I would do the same thing. I would only purchase real estate in the following metro areas; dc, nyc, Boston, sf, la/sd, Seattle, Miami, and philly. All these places should be worth significantly more in the next run up of the real estate cycle. Staying away from Texas and all the other flavor of the month locations.

    jcer says:
    April 2, 2015 at 12:17 pm
    64 if you bought any number of assets in 2000 when treasury rates were nearly 7% you would make money. Again hindsight makes it easy to cherry pick areas that expanded SF was a function of tech company explosion and resurgence. That has made wealth and driven economic activity in northern CA which has correspondingly caused out sized gains in property values. I still would rather roll the dice on multi-unit buildings, commercial, retail, or just land before I buy single family properties unless the prices are really depressed.

  80. JJ says:

    If I had a mortgage on my investment property I can’t write off the interest expense. So lots of folks don’t declare income and call it a vacation home and write off mortgage on their taxes. I also don’t get to write of the property tax.

    Depreciation alone on a new property guarantees the property breaks even or runs at a loss even without a mortgage and low property taxes.

    I also notice a lot of these type of homes near me are either part of estate and pass tax free or they get “sold” to the kids at a below market rate.

    The Great Pumpkin says:
    April 2, 2015 at 2:01 pm
    Because you are purchasing another property with their money that generates more income. If you pay in cash or all your homes are paid off, you go into a much higher tax bracket. Every little savings makes a difference, and every new income generated makes a difference in the long term generation of your wealth.

    Anon E. Moose says:
    April 2, 2015 at 12:45 pm
    Pumps [61];

    So much I could say that’s wrong. Let me just stick to this

    You also don’t want to get caught with your pants down, meaning having all your properties paid off. You always want to have a mortgage. Otherwise, everything is profit and you will get killed when it comes to tax time.

    Please explain how spending $1 in interest to save $0.30 in taxes is a profit-maximizing strategy.

  81. jcer says:

    79, Jersey city was the best investment, You could have bought row homes downtown for 175k that were worth between 700k-1m by 2007-2008 and have largely recovered. NYC was also a good bet, DC, as well. It is all about the availability of good paying jobs.

  82. The Great Pumpkin says:

    Luge, you are absolutely right about it being a sign of sickness, but you are making a major blunder. These rates were lowered to save the economy from collapsing. So the economy was very sick, which is why you are seeing low rates. What you are missing is that the economy has been slowly coming out of this sickness. By end of the decade, rates will be much higher once the economy is healthy enough to handle it. Savers and the like, were indeed screwed over by this policy, but what was the alternative? They lose everything, or make no interest from the bank for 10 years? We survived a major crash, be happy!!!

    Liquor Luge says:
    April 2, 2015 at 10:11 am
    gary (13)-

    We’ve had historic low interest rates (near 0%) for close to seven years. Many other parts of the world are sliding into a negative interest rate policy. When the fcuk are the necronomic geniuses around here gonna recognize that such interest rates are a sign of extreme financial sickness? This is money, priced at nothing, that cannot find a willing borrower (other than banksters and giant corporations, who take the handouts and put the money to no useful purpose, other than stock buybacks and mindless trading in risk products). On top of all that, we have wiped out at least one generation of savers and ground millions of little old ladies and pensioners into dust.

    Interest rate arguments in housing? Give me a fcuking break. It hasn’t been about qualified borrowers in seven years. Please direct me to the hidden pool of qualified, ready and able sellers, because someone seems to have kidnapped and hidden every single one in Amerika.

  83. Anon E. Moose says:

    Pumps [77];

    What you can do with that money elsewhere is a different analysis. See above, if you own the property clear, you’re making 4% return on $500K (kind of chintzy to put up with the headache of tenants).

    If you borrow, the return on equity increases to 5.5% after paying the note, and you have $300k to invest elsewhere. Where? Another 1.5 properties with $200k equity each also earning 5.5%? Yeah, 5.5% is better than 4%, so the leverage strategy increases the overall return of the portfolio.

    It also multiplies the downside risk, like any margin play. And oh, yeah, you can easily beat 5.5% return in the markets and you don’t have to shovel anyone’s walk, clear their toilets.

    Any then you retreat to the “capital appreciation” line, which means you’re in violent agreement with jcer, that its NOT a char flow investment, but a capital one. Which may be good, but is FAR more speculative. I prefer my gambling with cards and dice; and I don’t mistake it for an investment strategy.

  84. FKA 2010 Buyer says:

    Good spirited convo data with plenty of data to back it up. Like that.

  85. jcer says:

    83 also note if property taxes are anywhere near approaching 20k it isn’t a 500k investment. That would be closer to 12k, 20k is at least 650k if not 750k based on Bergen county tax rates, maybe even a million, my parents(Bergen) and my sister(Morris) both have million dollar homes and they pay around 20k.

  86. The Great Pumpkin says:

    Great conversation today. Anyone reading this blog today, just gained an enormous amount of valuable free information on how to build wealth.

    You are right, it’s about personal approach. There is no “right way” of doing it, it’s what works for you. You know I like stocks too, that’s where I invest(gamble lol), stocks and real estate. My problem with stocks, they totally bust every now and then. Real estate, unless you bought in a bubble, it’s very difficult to lose. Yes, it’s a lot more work than stocks, but for me, it’s a lot less risk. Granted, I was around real estate my whole life. My mother was in it. So I have a lot more knowledge and connections when it comes to real estate. So for me, it carries much less risk than the stock market. I can get burned in real estate, but it’s much more difficult for me to get burned in real estate as opposed to stocks, due to my experience in real estate.

    Anon E. Moose says:
    April 2, 2015 at 2:25 pm
    Pumps [77];

    What you can do with that money elsewhere is a different analysis. See above, if you own the property clear, you’re making 4% return on $500K (kind of chintzy to put up with the headache of tenants).

    If you borrow, the return on equity increases to 5.5% after paying the note, and you have $300k to invest elsewhere. Where? Another 1.5 properties with $200k equity each also earning 5.5%? Yeah, 5.5% is better than 4%, so the leverage strategy increases the overall return of the portfolio.

    It also multiplies the downside risk, like any margin play. And oh, yeah, you can easily beat 5.5% return in the markets and you don’t have to shovel anyone’s walk, clear their toilets.

    Any then you retreat to the “capital appreciation” line, which means you’re in violent agreement with jcer, that its NOT a char flow investment, but a capital one. Which may be good, but is FAR more speculative. I prefer my gambling with cards and dice; and I don’t mistake it for an investment strategy.

  87. NJT says:

    Re: The landlord business. My method:

    Purchase local, small, two or three family homes that are fundamentally sound but in need of cosmetic or non-major renovations with 20% down.

    Do renovations myself (at this point there isn’t much I can’t do).

    Perform regular preventive maintenance so there are no surprise, expensive repairs.

    Provide no appliances. Tenants pay for ALL utilities.
    All tenants are on month to month leases with NO pets and preferably no children. Preferably no single men under 40, either.

    Rent increases EVERY year. If property is reassessed rent is raised to cover it.

    Yes, you cannot deduct the property taxes or mortgage but there are many other deductions.

    My rules for what to buy:

    1) If the monthly PROFIT (based on first years rent price) doesn’t at least match the
    monthly mortgage payment, forget it.
    2) If there is major renovation work I cannot do by myself within two months
    from purchase (nights and weekends) forget it.

    Again, if you’re not VERY handy find another investment vehicle as contractors will kill your profit margin again and again. *Recently for the first time in over a decade I had to hire a plumber do something that I couldn’t (now I do – no, there were no youtube videos for it). WHOA! $100 just to show up!

    As far as furnaces, hot water heaters, fixtures ect. cheap, slightly used and sometimes steeply discounted brand new units can be found on craigslist and e-bay.

    I’m two properties from my goal which is to make as much as a landlord as I do at my day job.

  88. jj says:

    NJT first what type of tenants bring their own Fridges, Ovens, Dishwashers? Also not renting based on mariage status or children is illegal. Plus used oil burners, used water heaters installed yourself is also risky, as you dont have permits and could be sued or arrested in a fire when folks are injured or die.

    I get it that is how it is done, that is how most folk do it. But you cant compare higher returns on an illegal investment to a legal investment.

    Provide no appliances. Tenants pay for ALL utilities.
    All tenants are on month to month leases with NO pets and preferably no children. Preferably no single men under 40, either.

  89. joyce says:

    What data has the Great Idiot presented?

    FKA 2010 Buyer says:
    April 2, 2015 at 2:34 pm
    Good spirited convo data with plenty of data to back it up. Like that.

  90. The Great Pumpkin says:

    Nice job and good luck. Great write up too. Follow most of the same rules.

    NJT says:
    April 2, 2015 at 3:16 pm
    Re: The landlord business. My method:

    Purchase local, small, two or three family homes that are fundamentally sound but in need of cosmetic or non-major renovations with 20% down.

    Do renovations myself (at this point there isn’t much I can’t do).

    Perform regular preventive maintenance so there are no surprise, expensive repairs.

    Provide no appliances. Tenants pay for ALL utilities.
    All tenants are on month to month leases with NO pets and preferably no children. Preferably no single men under 40, either.

    Rent increases EVERY year. If property is reassessed rent is raised to cover it.

    Yes, you cannot deduct the property taxes or mortgage but there are many other deductions.

    My rules for what to buy:

    1) If the monthly PROFIT (based on first years rent price) doesn’t at least match the
    monthly mortgage payment, forget it.
    2) If there is major renovation work I cannot do by myself within two months
    from purchase (nights and weekends) forget it.

    Again, if you’re not VERY handy find another investment vehicle as contractors will kill your profit margin again and again. *Recently for the first time in over a decade I had to hire a plumber do something that I couldn’t (now I do – no, there were no youtube videos for it). WHOA! $100 just to show up!

    As far as furnaces, hot water heaters, fixtures ect. cheap, slightly used and sometimes steeply discounted brand new units can be found on craigslist and e-bay.

    I’m two properties from my goal which is to make as much as a landlord as I do at my day job.

  91. The Great Pumpkin says:

    I do the same thing. I provide ovens, but everything else is on them. My first floor apartment I supply them with everything because I used some program from Honeywell to put in energy efficient appliances for free. Well, it bit me in the ass last year. Fridge broke, and I had to purchase a new one. I didn’t stipulate that I’m not responsible for the fridge in the lease and I had to eat it. Another mistake made, another lesson learned.

    I also only pay for water. Everything else is on the tenants. You are asking for trouble if you provide utilities. They will blast the heat and ac, killing your profit margin.

    jj says:
    April 2, 2015 at 3:27 pm
    NJT first what type of tenants bring their own Fridges, Ovens, Dishwashers? Also not renting based on mariage status or children is illegal. Plus used oil burners, used water heaters installed yourself is also risky, as you dont have permits and could be sued or arrested in a fire when folks are injured or die.

    I get it that is how it is done, that is how most folk do it. But you cant compare higher returns on an illegal investment to a legal investment.

    Provide no appliances. Tenants pay for ALL utilities.
    All tenants are on month to month leases with NO pets and preferably no children. Preferably no single men under 40, either.

  92. joyce says:

    “Anyone reading this blog today, just gained an enormous amount of valuable free information.”

    As long as they skipped half the posts.

  93. The Great Pumpkin says:

    What’s your problem? Mad that you have nothing to offer in the conversation?

    joyce says:
    April 2, 2015 at 3:47 pm
    “Anyone reading this blog today, just gained an enormous amount of valuable free information.”

    As long as they skipped half the posts.

  94. Juice Box says:

    What kind of crazy renters buy their own appliances? You two must also be excluding lawyers along with single men, families and pets.

  95. JJ says:

    I can guarantee you if I kept my rent stabilized apt in Gramercy park and never bought a house and put all the money I threw away on purchasing the house, buying insurance on house, taxes on house, additional commutation expenses, having a car, paying for heat and gas and water and threw it all into the stock market I would be way way richer.

    My aunt who is in her mid 90s owns no property. She is far richer than anyone. Never got a drivers license, has a rent controled apartment in Gramercy Park for 70 years and never paid for heat, gas, water, mortgage or property tax in her life. Not a single repair, no shoveling, no lawn mowing nothing. Her husband who passed away in 1988 left her with a 100K a year pension. Two of her sons, one a retired CFO the other owns a Hedge funds manages her money.

    Her living expenses are under 10K a year, her 100K income is tax free as her husband died due to a work related illness. So basically she has been investing only in stocks and bonds 90% of her income for 70 years.

    She actually did briefly own a home, her and her husband had a Hamptons house. Lasted three years. I visited her, she was like I need a car, pay for the lawn, pay to heat water, pay a mortgage, property tax what for so I can sit in a yard a few minutes each day. She thought it was a waste of money to own. Mind you she bought that place in 1983 and I think sold it in 1986. So no loss or nothing. She just could not get over the carrying costs and all the bills.

    Her rent controlled apartment is a real rarity in Manhattan, her original lease from 70 years ago includes electric. Her landlord for like 30 years forbid AC in units as he was paying bill. Now they allow it. As the old tenants died off new ones dont get same deal. She is one of the last left. So she does not pay Electric either. And it is a three bedroom, two bath unit with a formal dining room. Bet when guy rented it to her 70 years ago he did not expect it to be occupied this long.

    he Great Pumpkin says:
    April 2, 2015 at 8:07 am
    Any questions? The Great Pumpkin strikes again.

    I guess I understand wealth building better than most. Any idiot telling you to rent as opposed to own good real estate is an idiot. Anyone trying to claim that stocks are a better investment than real estate are lost. They are using general avgs to prove their point, which results in them being totally wrong. Please show me how the stock market can compare to buying real estate in a good location, say manhatten 30 years ago. It can’t. The returns on your investment in these locations is insane. Nothing can touch it. But if you want to group all real estate together ( meaning crappy real estate in places like ohio or north carolina) and avg the increase, sure the stock market is better. But if you avg the increase in good locations like north jersey, you can’t beat the return, esp if you are collecting rent on top of it. Impossible to beat. Say you bought one investment property in ridgewood in 1970 and collected rent for 30 years and then sold that home in 2000, you would have made more money on that investment than you did prob working your whole life. With the rent collected and the appreciation on your home, you would be able to retire off that one investment, esp if you took that rent income and tossed it in the stock market(best of both worlds). If you had a couple of properties, forget it. Over and out.

  96. joyce says:

    93
    Earlier, I offered a correction to one of your posts.

  97. joyce says:

    Idiot

  98. JJ says:

    He must only rent to Germans. They bring their own ovens.

  99. joyce says:

    I think it’s common in Europe, perhaps other regions as well, I wouldn’t know. But around here, no way. You’re right. I’ve never heard of someone in NJ bringing their own appliances.

    Juice Box says:
    April 2, 2015 at 3:50 pm
    What kind of crazy renters buy their own appliances?

  100. jcer says:

    94. I don’t know how that works. I would think without appliances it’s a hard deal. I’d try to carve out responsibility for appliances explicitly in the lease. Rent the apartment with the appliances but try to get out the responsibility to fix in the event they break. Don’t rent to Lawyers, in anything you try to do conducting business with Lawyers is the worst they always resort to lawsuits and if you aren’t a lawyer it is going to cost you. The JJ school of land lording is where it is at unmarried 20-35 year old women professional types are the ideal tenants, anyone else could be trouble.

  101. The Great Pumpkin says:

    95- jj, first, she barely owns anything and has no life. I’m sure she has money, all she does is purchase stocks with her money.

    Now imagine if she was buying up Manhattan property from the early 80’s to 2000. She prob would be just as rich, if not more. The rents she would be collecting right now would be insane compared to purchase price.

  102. The Great Pumpkin says:

    Thanks, Joyce!!

    joyce says:
    April 2, 2015 at 3:52 pm
    93
    Earlier, I offered a correction to one of your posts.

  103. homeboken says:

    Renting bare bone’s apartments, with no amenities and no appliances. It can be done but your tenant quality represents what you offer as does your asking rent.

    And I can’t believe I am agreeing with JJ but he is correct – You do not want to get caught discriminating against someone due to age, marital status, race, etc when they apply to rent. Yes it is very hard to prove but nothing will kill you profit margin fast than a civil settlement or lawsuit defense.

  104. The Great Pumpkin says:

    Well, I’m glad you learned something new today. Your welcome.

    joyce says:
    April 2, 2015 at 3:55 pm
    I think it’s common in Europe, perhaps other regions as well, I wouldn’t know. But around here, no way. You’re right. I’ve never heard of someone in NJ bringing their own appliances.

    Juice Box says:
    April 2, 2015 at 3:50 pm
    What kind of crazy renters buy their own appliances?

  105. NJT says:

    JJ #88

    I said I PREFER not to rent to certain types of tenants. Didn’t say I WON’T or haven’t.

    No repair permits required in my area except main electric box.

    Sorry, oven is included as it must be by law.

    I follow everything to the letter of the law (which is pretty lax in Warren County outside of Pburg.).

  106. jcer says:

    101, I kind of agree with the old lady. When I’m old I don’t want a house and don’t want to know about any of it and don’t want to plan for it. My plan is to get a house when my daughter gets a little older, rent out my high rise apartment and 20 years from now I’ll move back in when I’m retired. Owning stuff doesn’t make a life, she lives in the middle of the greatest city on earth and doesn’t have to pay all of her money for it and has no hassle. It is you who has no life totally consumed with material things. What she actually does would determine if she has a “life”. What do I know I’m a cheap skate, but I hope to be a retired cheap skate sooner rather than later.

  107. The Great Pumpkin says:

    Clearly, NJT and I are the only landlords here in the multi family segment. I’m not renting out to wall st type. Providing refrigerators is asking for trouble. I provide the ovens, but nothing else. Anything you provide becomes your problem. Try to limit the headaches.

    homeboken says:
    April 2, 2015 at 4:00 pm
    Renting bare bone’s apartments, with no amenities and no appliances. It can be done but your tenant quality represents what you offer as does your asking rent.

    And I can’t believe I am agreeing with JJ but he is correct – You do not want to get caught discriminating against someone due to age, marital status, race, etc when they apply to rent. Yes it is very hard to prove but nothing will kill you profit margin fast than a civil settlement or lawsuit defense.

  108. Juice Box says:

    re # 100- re: “Don’t rent to Lawyers.”

    Yup friends of mine who relocated from Hoboken several years ago rented their condo instead of selling it for a loss (purchased during bubble). Current tenant is a lawyer. Well the washing machine broke. My friends replaced it with another brand new but less expensive model. They received a threatening letter saying a lawsuit would be coming if they did not put in a more expensive washer.

    I asked them if they had an out clause in the lease like for example they were moving back in. Nope, some boiler plate relator office rental agreement. No way to get rid of the lawyer…

  109. The Great Pumpkin says:

    Lol…exactly!!! Great example.

    Juice Box says:
    April 2, 2015 at 4:06 pm
    re # 100- re: “Don’t rent to Lawyers.”

    Yup friends of mine who relocated from Hoboken several years ago rented their condo instead of selling it for a loss (purchased during bubble). Current tenant is a lawyer. Well the washing machine broke. My friends replaced it with another brand new but less expensive model. They received a threatening letter saying a lawsuit would be coming if they did not put in a more expensive washer.

    I asked them if they had an out clause in the lease like for example they were moving back in. Nope, some boiler plate relator office rental agreement. No way to get rid of the lawyer…

  110. NJT says:

    #100

    I sold a house to a lawyer once. NEVER again (if I can help it).

  111. jcer says:

    I know a lot of friends in my building who instead of selling at a loss, rent. Most have gotten really lucky with tenants but the best are people who are foreign nationals temporarily relocating for work, usually their employer pays the rent and considering they know absolutely no one and are here to work, they almost are never in the apartment. Also since the employer is paying they tend to pay the absolute highest rents. Lawyers are to be avoided in business transactions. Too easy to wind up in court and too hard to evict, Wall Street types are good too, they spend a lot of time at work and are generally too busy to really become a headache.

  112. NJT says:

    I was sued for discrimination once, back in 1997. Won. I went with the people that had the best credit scores and salaries. Provided all the applications and supporting documents. Easy.

  113. jcer says:

    108 they are only on the hook for the term of the lease. The owner of the condo is specifically carved out of the anti-eviction law in NJ, so provided after the year term(most commonly a year lease) they want to move back in they can give the tenant 1 months notice if they intend to move back in. They could also try massive rent increase at the end of the lease term but it must be justifiable.

  114. Juice Box says:

    re # 113- They are never moving back, I figured they could try and get the lawyer out before they lose even more money renting to a douche. They are just hanging onto their condo until their 2007 purchase is no longer under water. Not sure when that will be if ever.

  115. JJ says:

    Her son who lives a few blocks away bought a five story brownstone on Gramercy Park with the key to the park back in 1991 and he also bought beach front property in Montauk where he built a house right on the beach. Both places cash purchases and only two real estate purchases.

    She gave both sons IVY league degrees and both sons did well. One was a CEO and one a CFO. The other son the CFO made a mistake and bought a huge house in NJ years ago.

    I have a first cousin who is like 56 who owns at least 1,000 rental properties she bought over a 30 year period. She looks miserable everytime I see her. My Aunt with millions and million in the bank and no bills always looks happy.

    My other cousin at one point bought Canary Wharf, he current lives on the thames river in a mansion. I have a cousin who owns tons of brownstones all in Brooklyn and Harlen all bought pre 2003. Honestly, that cousin only two kids what a hassel to inherit. I rather inherit 100 million in blue chip stocks and bonds than 100 million in properties dispersed all over that need work.

    The Great Pumpkin says:
    April 2, 2015 at 3:58 pm
    95- jj, first, she barely owns anything and has no life. I’m sure she has money, all she does is purchase stocks with her money.

    Now imagine if she was buying up Manhattan property from the early 80′s to 2000. She prob would be just as rich, if not more. The rents she would be collecting right now would be insane compared to purchase price.

  116. jcer says:

    114, Hudson county is on fire prices are with 15% of peak, and values are going up by 2% a year. They’ll probably be above water soon, but the name of the game is getting the tenant to leave. Even if they can claim a cousin, parent, or sibling wants to live in the apartment they can evict as long as there is no standing lease.

  117. jcer says:

    JJ my point exactly, all those properties you really need someone to manage. At the end of the day it’s all money and it’s just what’s advantageous. Buying a huge house in Jersey, CT or NY is all the same a pain. I’d rather not have to worry and just live in high rise. Not super practical with children when you need space but for a retiree? It’s just easier.

  118. nwnj says:

    I never heard of people bringing their own appliances until recently. But it’s apparently common in NJ with perpetual renters. I’ve know a few people who do.

    The type of mentality who gets into a long term rental and brings their own appliances is the “spend it if you got it” type.

    They’d rather rent a house long term and spend every dollar in between than live with any type of fiscal discipline and buy a place of their own. Or do to bad decisions they aren’t able to qualify for a mortgage and buy their own place. They settle into rentals for 10-20 years.

    Don’t ask me how I know.

  119. jcer says:

    118. Less hassle for landlord but they are leaving money on the table.

  120. nwnj says:

    Of course but if you have a stable tenant who could be there for 20 years and is subsidizing your lifestyle then you’ll leave a little on the table. It’s low risk cash flow, good luck finding those.

  121. Liquor Luge says:

    1987 (44)-

    The goal is to die…with all your RE holdings 1031’d. 1031’ers never sell; they swap.

    “Don’t forget Depreciation Recapture…that gets paid one day…if you ever actually want to cash out…”

  122. Liquor Luge says:

    Punkin (82)-

    Once again, it is you who is the fcuktard. Have you not noticed that every time some Fed gubnor as much as jawbones a 1/8% jump in rates, Wall St pulls the same sad, predictable Chicken Little routine? If ZIRP is a sign of sickness, it shall remain a sign of sickness until such time as one of the chimps in charge decides that the value of money should be somewhat north of 0.

    What do you think the effect of the first tiny interest rate jump will be on a Wall St full of people who have never experienced one? Hint: it will not be pleasant.

    It’s ZIRP 4eva, bitch. Thanks to a nation full of indoctrinated, testicle-free sheep such as you.

    Enjoy it, pal. Looks like you’ve already mastered the forced smile and canned attitude in the midst of complete necronomic torpor.

    Have a nice day.

    “Luge, you are absolutely right about it being a sign of sickness, but you are making a major blunder. These rates were lowered to save the economy from collapsing. So the economy was very sick, which is why you are seeing low rates. What you are missing is that the economy has been slowly coming out of this sickness. By end of the decade, rates will be much higher once the economy is healthy enough to handle it.”

  123. Liquor Luge says:

    The best landlord is a slumlord. Rinse and repeat.

    That is all.

  124. Liquor Luge says:

    joyce (97)-

    There’s nothing wrong with Punkin that I can’t fix with a coat hanger, a bottle of whiskey, a set of pliers and a magnifying glass.

    “Idiot”

  125. JJ says:

    Happy Easter Everyone I am Audi 5000 – Wall Street closed for Good Friday like everyone should do.

  126. Libturd at home says:

    Bring your own appliances? I clear 1,000 a month on my one multi. If a refrigerator breaks every ten years, I spend $500 to replace it. Big deal. Who the heck brings a refrigerator and dishwasher with them? Heck, it would cost me a day to do all of the plaster repairs from idiot hipsters who think they can move a fridge themselves. You guys are on crack. Plus you can write off half the stuff you purchase anyway. If I tried to rent a place without a fridge, I would end up with crack ho’s as tenants. Which in retrospect, does not sound so bad.

  127. jcer says:

    126 my point exactly, without the appliances you are not getting the best tenant nor the best rent, maybe if you are renting a single family you’ll get away with it but not an apartment.

  128. Comrade Nom Deplume, who needs to stop screwing around and get back to work says:

    sickening. . .

    http://www.cnn.com/2015/04/02/africa/kenya-university-attack-scene/index.html

    The only way it would be more sickening is to hear Dear Leader call it “workplace violence” or the anon/footrest/small caliber crowd blame it on the NRA.

  129. Comrade Nom Deplume, who needs to stop screwing around and get back to work says:

    [111] jcer

    ” the best are people who are foreign nationals temporarily relocating for work, usually their employer pays the rent and considering they know absolutely no one and are here to work, they almost are never in the apartment.”

    My BIL used to have tons of rental properties and his favorite tenants were the foreign trainees for companies like McKinsey and Arthur Anderson (RIP), much for just that reason. He also rented to foreign medical residents a lot.

    Occasionally, he’d let his soft heart get to him and rent to some welfare mom. Then I’d have to get them kicked out.

  130. NJT says:

    Adding to and clarifying my earlier post re: Landlording

    Back in the 90s and up until 2003 I rented out small, high quality (mostly Craftsman and Cape Cod style – with all amenities) single family homes in Morris county. Majority of tenants were professional couples or singles who worked in the city. Margin wasn’t great but property appreciation was (wish I held them a few more years…).

    Around 2001 tenant quality dropped like a rock along with rents. With anyone who could breathe getting a mortgage the Landlord business was going bust, for me so, sold everything off over the next couple years.

    A few years ago I sold my primary residence there and moved to Warren county. Got back into the Landlord business when I saw there was a niche rental market that wasn’t being exploited.

    The margin was/is much higher and demand greater than the single family stuff but tenant quality nowhere near what Morris county was. Not a problem though as the County (Judge and police, too) is pro landlord and tenants know it (havn’t had to complete an eviction process yet). *Most of the tenants are young people just starting out or recently divorced.

    As far as repairs, maint. ect. I learned all about house mechanicals while renting out the single families (cost of contractors forced me to). Furnaces, hot water heaters, radiators, plumbing are not rocket science but then I’m mechanically inclined. Wish youtube existed back then! Instead I used to go to Home Depot classes and/or pay local contractors to instruct me.

    Sheetrock, spackling, painting and carpentry I learned while in college working part-time for a contractor buddy on weekends.

    After all these years there are few things I can’t do as well as a professional when it comes to home repair or renovation.

    A big plus here (re: Landlording) is permits. In the smaller towns unless you are radically altering a residence they are not required. One example: I wanted to add a couple closets, seal up a stairwell, take down a wall, put in a window, add a sink and redo a chimmney at a rental. Went down to town hall with blueprints and talked to the official in charge. His only question was “Is it a load bearing wall?…No? Looks good, go for it”. WHAT!? I needed a permit and inspection afterwards to replace a hot water heater in my home town!

    It’s really not a hard business if you stay on top of things but you don’t have to, everyday. Other areas are different. As is always said in real estate “Location, Location, location”.

  131. NJT says:

    #129

    Section 8s are a crapshoot. Yeah, you always get the money but repairs can eat it up, quick (even if you DIY).

  132. NJT says:

    #126

    “Bring your own appliances? I clear 1,000 a month on my one multi. If a refrigerator breaks every ten years, I spend $500 to replace it. Big deal.”.

    $1000 profit per month is my minimum. Who wants to lug a frig. around or pay someone to do it? Or, get a call about one not working on a Saturday night? Not worth the aggravation or money plus no tenants (here) ever complained about it not being supplied but then my renters are mostly young.

  133. NJT says:

    #126
    “… I would end up with crack ho’s as tenants. Which in retrospect, does not sound so bad.”.

    I had a tenant offer ‘services’ in lieu of short rent once. Funny thing about it…she was a lesbian! Sorry honey you’re heart just won’t be in it (of course I didn’t say that and had no interest in the exchange). One and only time encountering that kind of offer (as a Landlord).

  134. NJT says:

    BTW – I was trapped under a fridge once for hours. Yeah, tried to lug it down a twisting staircase (‘Jersey winder’) alone. Good thing my Father-in-Law wondered where I was (wife and tenants were away over a long weekend) as we were supposed to go fishing at a certain time and I’m never late.

  135. . Questa è un’epoca di reputazioni fatte rapidamente, e altrettanto rapidamente perso. Nel mondo professionale, un uomo nuovo aumenta con ogni luna. Ma questo non è necessariamente così nel tuo caso, ha sottolineato. Con Sir Bernard come il tuo capo, si è sicuramente in una posizione sicura. Prendendo la sua fiducia nella mia, le dissi del mio ideale di un practiceone paese accogliente di quelle in cui l’assistente fa il lavoro notturno e partecipa al popolo del club, mentre

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