yep - Posted by Anne_ND
Posted by Anne_ND on August 12, 2004 at 06:52:41:
yep - Posted by Anne_ND
Posted by Anne_ND on August 12, 2004 at 06:52:41:
Re: what are you scared of- success? - Posted by Barbara
Posted by Barbara on August 11, 2004 at 17:55:30:
Thanks Anne…very helpful…and you’re right.
Re: what are you scared of- success? - Posted by Nox
Posted by Nox on August 11, 2004 at 11:12:58:
I feel that you have to take into consideration the way in which we are taught and raised, everything to get to this point.
From what I see, the majority of ppl on here are on the same boat, “I am sick of working for nothing, where did my life go, etc”. Because of this discontent with the norm of working we begin to investigate other alternatives. This is a MAJOR deal, career altering decisions, the answer we have all been looking for. History can state just how profitable and realastic REI can be.
Rather than being afraid of being successful, I am afraid of failing. If you account for what has drove most to this point, they feel what they have done in the past could be viewed as failing (20 yrs working nothing to show). Whith that being the case, it is very difficult to just "Go make offers"
due to the fear of “What if I do this and fail, where does that leave me”.
I am worried about 2 answers that may arrise from failure.
I possibly may face more debt as a direct result of me getting involved uneducated
If this fails I have exhausted all opportunities, as I see them. This is very scary, because I am not holding on to much at this point from a mental perspective. The esteem factor is low, recently seperated, bills are tight, everyone is asking of me, and I do not have me fixed yet.
With that all said, I AM a risk taker, I AM willing to take the chance, I have nothing else to loose at this point. In retort to my statement of what if I fail, my answer to myself is “TRY AGAIN UNTIL IT WORKS”
I just wanted to put my 2 centes as to why I AM afraid.
I am taking it one day at a time as was suggested to me, I have been reading and getting docs ready, I am meeting / looking for my lawyer that is investor friendly, I have built the website, scoped the price for ads, looked at neighborhoods I want to be in, meet with my uncle, who is a general contractor guy, so that I can do repairs / rehab myself. (I used to work with an electrician / roofer / plumber so I can actually do alot of the work myself, now, I am in charge of internet security for a heating and air cond. wholesaler, more leads as I see it.)
We DO need to be pushed, we DO need to just do it, we DO need to start making offers, those that are serious about it will find a way to make it happen.
I know what you’re saying… - Posted by mtd1523
Posted by mtd1523 on August 11, 2004 at 10:01:30:
Anne I feel your frustration.
Out of most of my friends, I am the only one who really has a goal in mind and a willingness to do what it takes now so that I can have my fun later on. My best friend wants to learn about business and making money, but he doesn’t have the discipline to do it. I helped him for a little bit, to teach him, but after I saw that he wasn’t willing, I stopped being his “mentor.” Now he buys clothes, and spends his money as soon as he gets it on alcohol, movies, and going to parties.
So in essense, I stopped talking about business with him and basically, I do everything on my own. I try to stay away from negative people as they always have something bad to say about the risks I like to take.
It doesn’t bother me though because I keep in my mind that I am doing something I want to do and I’m going to do what it takes to be successful. Everybody else is just scared of taking those risks.
I was talking to a friend last night about real estate and I was giving her an example of a $30,000 property that I could fix up and maybe sell for $60,000. And she said “Where are you going to get $30,000 to pay for it? It’s too much of a hassle!” And I also told her how I could make $30,000 in that one deal, whereas, some people don’t make $30,000 in a year! But obviously she isn’t educated to know that you can get a lot of property for little to no money down, and the mortgage is paid off for 25-30 years down the road. She also hates when I talk about Finance (my major at school) so I just let her think her own ways while she struggles for money the rest of her life. Oh well…her choice.
Let it be known that when I was a senior in high school I was also voted as “Most Likely to Succeed.”
Take care and Keep your head up!
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Re: Your friends are right… - Posted by Carl CA
Posted by Carl CA on August 12, 2004 at 13:03:32:
What if you’re wrong? What if the CA market continues to grow? It’s very possible it could go further. Look at Tokyo and London. Prices there have risen to the point where lenders are writing 50 and 100 year mortgages. Seems impossible, I know,… but it’s happened. Do you think the residents of those areas predicted property values of those heights? Do you believe that CA is immune to the same price growth those areas have already experienced?
Comparing securities to real estate is difficult, it’s really apples to oranges. No one needs a company stock to live in. Real estate is also immune to quarterly earnings expectations, and the huge short-term value fluctuations brought on by an emotional Wall Street.
Irrational exuberance is certainly a contributor to the sky-high values we’re seeing now. I would argue that the lack of supply has a much greater influence, and has for at least the last decade. I’m not saying that the CA market is immune to fluctuations, but until people stop moving to California (not likely), or supplies are radically increased - I think a MAJOR downward movement is very unlikely. Sideways movement for a long period of time is much more likely.
Re: Go in the shallow water first - Posted by Patrick
Posted by Patrick on August 11, 2004 at 16:08:49:
Thanks. I’ve read about “Sub-to” and seller financing, of course, but even THAT scares me, just because I haven’t done it before - though that won’t stop me. I’ve been pre-approved for 100% financing with Countrywide, and thought that might suffice?
Re: Go in the shallow water first - Posted by Patrick
Posted by Patrick on August 11, 2004 at 16:06:46:
Thanks. I have employed a very reputable property mgmt co. who found what appear to be great tenants right away - tenants who have been in another of the company’s properties for over a year, but who need to move because the property is being sold.
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Re: what are you scared of- success? - Posted by mtd1523
Posted by mtd1523 on August 11, 2004 at 12:12:49:
I am 21, I had 3 part-time jobs starting when I was 14. Dishwasher at a country club, Pizza/food delivery/cook, and maintenance at a nursing home. I personally hated every one of those jobs, except that the delivery job was like getting paid two times (hours and tips), but that is besides the point.
I have been in the Army National Guard for 4 years in the Infantry.
For as long as I could talk I wanted to get into Law Enforcement, be a police officer or get into the FBI, and go to college to major in Criminology. That was my mindset, nobody was going to pull me away from that.
March 2003, my Guard unit was actived to go overseas to Kosovo. I had to withdraw after a week of starting college and was stuck in in the south for 4 months for training. One month into our training in the south, in April, I was talking to a friend who was a Finance major and ever since that day I’ve been hooked on investing and generating money, making my money work for me. I already hated having a job, and Finance seemed like the perfect solution to everything I dreamed of. By the end of April I was investing in the stock market, and by the end of my deployment a year later, I read a countless number of books and I feel like I can’t learn enough about investing. I love to learn about it. I love knowing everything about it.
After 4 years in the Infantry I am trying to transfer to a Finance unit. No luck yet in the response. “Hurry Up and Wait.”
But there is also that fear of the unknown since I only have a little over a year of my own education, teaching myself.
I never thought I would ever leave Criminology, but I am glad I did and I will never regret it. I’m hoping (with fingers crossed) that Real Estate investing can pull me through so that I never need a job again. I’m hoping to generate enough money through this that each deal can supplement me. I enjoy what I do and I’m willing to take the risks and failures.
I may be crazy, but sometimes I tell myself that I want to fail. I tell myself I want to do something wrong. Because the way I see it, if you do everything successful, then you don’t know how to fail, and you don’t know what to do when you fail. Failing causes disinterest and giving up. I don’t want that to happen to me.
We are not too far apart… - Posted by randyOH
Posted by randyOH on August 12, 2004 at 19:38:09:
Actually, I tend to agree that a flat market for a long period is the most probable scenario. I hope you don’t think I am predicting a 50% drop in the market. I do think a drop of that magnitude is possible, not necessarily probable.
However, if you look at the numbers, it is really scary. As of May, the affordability factor in OC was down to 11% (LA was 18%). That calculation was based on a 30-year mortgage at 5.77%.
Now I have been watching the OC market a long time and I do not remember the affordability factor ever falling below 20%. A chart in the OC Register (7/9/04) does show it around 18% in 1989. This chart also shows it around 45% in 1994. I would guess the average is around 25 to 30% going back to 1988, again based on this chart. So, on a historical basis, I think you could reasonably say that 20% is quite low.
As I understand it, affordability is a function of three variables: price, personal incomes and interest rates. I think it is a reasonable expectation that the affordability factor for OC will get back up to at least 20% in the not-too-distant future.
There are only three ways the affordability factor can go from 11% to 20%: 1) prices can fall, 2) interest rates can fall or 3) incomes can rise.
I think most well-informed people would agree that mortgage interest rates are not likely to fall from current levels. In fact, most of the experts I listen to expect rates to rise over the next few years.
Personal incomes will likely rise in the future as they have in the past. But I think 5% is about the best you can expect for annual income growth.
So how do we get from 11% to 20%? I think the best we can hope for is that interest rates stay where they are (doubtful) and incomes grow at 5%. Of course, incomes will need to almost double to get the affordability rate back up to 20%. And, at a 5% growth rate, that will take about 14 years.
Another possibility (not totally unthinkable) is that interest rate increases will offset the growth in incomes and house prices will fall enough to get the rate back up to 20%. Assuming linear relationships, that would require a drop in prices of around 50%.
Now keep in mind, I am only talking about the affordability factor going back up to 20% (historically very low). What if it goes back up to a more normal level of 30%? Or, to consider a real nightmare scenario, how about 45%? Think that can’t happen? I would not be too sure about that, because it actually happened in 1994.
As to your comment about lack of supply, that is based on the current level of demand. If demand falls off, there will suddenly be an oversupply of houses. How could that happen? Well, here in OC, the only justification I have heard for anyone buying a house lately is that prices will be even higher in the future. I mean how else can you justify paying $315,000 for a low-end, two-bedroom, one-bath condo that you could rent for $1,200 a month?
Now, suppose prices just stop going up, which they apparently have here in OC. Think that might cause a few people to rethink whether they really need to buy a house right now?
As to your comment about Tokyo and London, I know nothing about London, but I believe the Tokyo RE market has been falling for over 12 years. Very good example to support my case. Exactly the kind of thing I am talking about.
So who knows what the future will bring? We can only look at the past and think in terms of probabilities and possibilities based on the numbers that we know about. Again, my main concern is an 11% affordability factor with 40-year low interest rates. I just don?t know how anyone can look at that and be optimistic about this market going forward.
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Re: We are not too far apart… - Posted by Carl CA
Posted by Carl CA on August 12, 2004 at 23:19:35:
Being a prisoner to history could be harmful to you. You MUST concede that just because it’s never happened, doesn’t mean it WON’T ever happen. Using Tokyo again as an example, do you think that RE prices there rose consistently faster than wages for a protracted period? If so, what do you believe happened to the affordability factor in Tokyo, even considering the recent price declines? I actually don’t know, but my bet is Tokyo?s affordability factor is below what OC is right now.
I also believe there are more than three ways the affordability factor can rise. You’re assuming that a 30-year mortgage is a constant in your equation, when it may not be… 50 and 100 year mortgages change the “affordability” factor by changing the root of the equation. Randy, I dislike bringing foreign cities into our argument, I would much rather bring up a domestic example. Of course I can’t; I believe California will be the first domestic example of this type of price growth.
I’m a supply-and-demand guy. If the demand is there, and the supply is limited (which I think we both agree), then prices will be supported. HOW they will be supported is another matter. Longer term mortgages? Baby-boomer wealth being passed down at death? Upwardly mobiles cashing in on the equity growth they’ve already realized, moving up to a larger property, and placing more “lower-end” or “starter” properties on the market?
Heck Randy, I don’t know, my crystal ball doesn’t work any better than yours. I just don’t see the possibility of doom ahead. Demand is just too high. With more and more wealth moving down the chain as the baby-boomers pass on, I just don’t see a significant change to this.
I’m with you - I agree that sideways is a stronger possibility. If you purchase positive cash flow for the long term, who cares about 5 to 10 years of sideways?
Faith is a wonderful thing… - Posted by randyOH
Posted by randyOH on August 13, 2004 at 12:34:54:
You seem to really be grasping at straws to support your faith in the CA market. But, as stated, we seem to generally come to the same conclusion that somehow, someway the market probably won’t fall very much.
I would be surprised if we don’t see at least a 5% to 10% drop in prices sometime over the next five years. And, also as stated, I don’t see any upside potential for at least 10 years.
I also agree that if you can get positive cash flow it doesn’t matter much what happens to prices. I just don’t see how that would be possible around here. Again, 2 BR, 1 BA condo sells for $315,000, rents for $1,200. You would need to buy it at least 60% below market to get a postive cash flow. And that’s the low end of the market. As you probably know, the higher end is even worse.
But I know your strategy is to go inland a couple hours drive. And I am also looking at that possibility. So I may give you a call and try to get some ideas about how to make that work.
Hope I haven’t caused any hard feelings with my negative comments about the coastal CA market.
Re: Faith is a wonderful thing… - Posted by Carl CA
Posted by Carl CA on August 13, 2004 at 13:55:47:
No hard feelings here. And I agree, buying in coastal California for positive cash flow is about as likely as hitting it big in the Lotto. Of course, you could always put 50% down for a 0% cash-on-cash return, but not many guys are lining up for deals like that.
In my market however, I’ve been buying an average of 5 units per month for the last year - ALL with positive cash flow - and no end in immediate sight (although it’s getting harder).
When it finally does end - and it will - I’ll probably join you in Ohio.
BTW - You’re welcome to call. You’ve got the number.
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Re: Faith is a wonderful thing… - Posted by Patrick
Posted by Patrick on August 16, 2004 at 02:35:08:
Nice discussion you two have been having. And to think, it alls started with my question, which itself was a response to a discussion about fear. : ) MY situation, if you recall, is that I already OWN a property (in Long Beach), so don’t need to buy at today’s high prices. And after I move out, I can rent it out with very good positive cash flow, due to the low mortgage I have on it, and the high rent I will be getting. (The renters have signed a 1-year lease, by the way.)
So, my original question was: Should I sell the house in Long Beach, then buy another primary residence in Florida, and fish around for investment property there? Or should I KEEP the house in Long Beach, rent it out, and buy another property in Florida as my primary residence? I think you’ve both answered my question. My friends MAY be right that I should sell the house and cash out now at the supposed top of the market - but I’m going to hold onto it for the long term, with the immediacy of becoming a landlord/investor, the positive cash flow, and the diversification of owning properties in more than one market.
Thanks for all the input. This site is great.