Ask tommy2 about Real Estate
 

The posts about RE flipping lead me to believe that I might have something to offer to the forum for once.

Me: 7 years of commercial development and redevelopment experience. Have a JD & Masters in Real Estate and Urban Economics FWIW.

Fire away...

Also posted in OOT

Post deleted by Mat Sklansky
 

Re: Ask tommy2 about Real Estate
 

10-30%. I'd start picking through the rubble once the ARMs reset in 2007. Buy the stuff that is always desirable in any market--good location, 2brm 2bath, safe areas, etc. There should be plenty to pick from very soon.

Re: Ask tommy2 about Real Estate
 

Tommy, my fiance and I want to buy a house. I live here in Orlando, FL. Right now a late 1990's 3-4 bedroom/2 bath in the area we like(pretty nice) is going for about $325,000-$500,000.
Right now we live in pretty much the nicest apartment complex in Orlando and it costs $980/month for 1 bedroom/1 bath+study +$130/month for my 1 car garage add-on so about $1100 total/month. Our lease on the apartment is up July 31'st.

My question is what advice could you have for me? I suggested to my fiance that we should probably wait maybe 6 months to wait for housing to go down a little bit. Please let me know any and all advice you may have for us. Thank you very much,
-Boosted J

Re: Ask tommy2 about Real Estate
 

I'd try to sign a month to month or 6 month lease if they would let me. Sometimes you just have to ask. RE markets aren't at the bottom yet, but are trending down. I'd wait 6 months, if you can. Start looking now, though so you know a good deal when you see one. Plan on looking at 20-30 houses before you make your first offer. Make sure you treat it like an investment--don't let yourself get overly emotional about housing. Seeing dozens of houses takes the glamour out of it and each house is just any other. This level of dispassion is a key to making a good decision. Go to lots of open houses, kick lots of tires.

Re: Ask tommy2 about Real Estate
 

So buying a house in 6 months is really good right? Just making sure my logic is not flawed by thinking about there being probably at least a $25k+ drop in the average price of the houses we are looking at within the next 6 months. I am correct, yes?

Re: Ask tommy2 about Real Estate
 

Assuming your lease is no issue, I'd start looking in 4-6 months with the intention of buying in 6-12 months. Let more of this adjustable rate money crush the market a bit more.

Re: Ask tommy2 about Real Estate
 

What do you think about NYC real estate right now? I'm thinking about buying in Brooklyn, mostly because the rental market is non-existant in my neighborhood. There are basically zero nice rental units.

Post deleted by Mat Sklansky
 

Re: Ask tommy2 about Real Estate
 

This year, more than $300 billion worth of hybrid ARMs will readjust for the first time. That number will jump to approximately $1 trillion in 2007, according to the MBA. Monthly payments will leap too, many beyond what homeowners can afford.

Foreclosures may jump as ARMs reset

Post deleted by Mat Sklansky
 

Re: Ask tommy2 about Real Estate
 

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I'm gonna go to hell for it, but this:

[ QUOTE ]
As more ARMs adjust upward and housing prices begin to dip, many Americans like Britten can't refinance and are finding themselves trapped in too-high monthly payments. For those who can't make their payments, foreclosure — the legal process by which the lender reposseses the house because the owner has defaulted on payments — is the only way out.

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Makes me almost as happy as hearing there are going to be 10,000 people in this years WSOP Main Event.

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100% agreed. Just need to stay ready and be willing to find the good buying opportunities that are going to exist.

Re: Ask tommy2 about Real Estate
 

Tommy. Real Estate Timing question. Is it a good time to buy right now or is the federal reserve going to raise interest rates again? Do you see prices dropping?

Re: Ask tommy2 about Real Estate
 

What's a JD? Sorry, I'm a newbie.

What would be your advice in getting into development in the real estate field? I have no experience except for a year of estimating/project manager for a sub-contracting firestopping/fireproofing/spray-on insulation company 2 years ago.

Re: Ask tommy2 about Real Estate
 

I live in the Chicago suburbs. I've always found real estate interesting. Could you give me names of companies that you would want to work for in the Chicago area?

Re: Ask tommy2 about Real Estate
 

how about a region like Atlanta that wasn't as hot as others, and is predicted to be somewhat stable. Would you recommend waiting 6-18 months to purchase a house?

Re: Ask tommy2 about Real Estate
 

Why does the ARM loan coming to the end of its interest-only period seem to equal a doomsday scenario? Can't people just refinance and be housebroke for a while instead of selling for a $100k loss? Also, most arms have a 2% cap per year, is there something I'm missing here?

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
Why does the ARM loan coming to the end of its interest-only period seem to equal a doomsday scenario? Can't people just refinance and be housebroke for a while instead of selling for a $100k loss? Also, most arms have a 2% cap per year, is there something I'm missing here?

[/ QUOTE ]

I think he is referring to people who did interest only arms and can't even make the payments now at a higher rate and have no equity built up to borrow against.

Re: Ask tommy2 about Real Estate
 

The real estate market is on the verge of crashing , having freinds who sell loans they keep saying on how people cant afford to pay there loans and interest rates are goin through the roof. Also just take a trip around your town and notice how many homes are for sale(alot more than you would see a year ago). so i would wait just a tade bit more then buy.

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
Why does the ARM loan coming to the end of its interest-only period seem to equal a doomsday scenario? Can't people just refinance and be housebroke for a while instead of selling for a $100k loss? Also, most arms have a 2% cap per year, is there something I'm missing here?

[/ QUOTE ]

I think you are underestimating the number of people who were already maxed out with their original loan payments. Refi does you no good if rates have gone up enough that you can't reduce your payment, which is exactly what is happening to many.

I'm not sure it's a doomsday, scenario, though, but I do think we will see some noticeable fallout.

eastbay

Re: Ask tommy2 about Real Estate
 

Why are mortgage brokers/banks allowed to fund such loose lending practices? Who picks up the tab when houses lose 20% in value and have mortgages with little/no equity and only 3 years of interest paid? Seems like some lenders are merely operating a get rich quick scheme with no integrity.

Re: Ask tommy2 about Real Estate
 

Have heard it is still overheated, but I am in the Midwest. If your hold time is over 5-6 years you should be fine unless you really rush and don't do your homework.

Re: Ask tommy2 about Real Estate
 

For sure this month and almost certainly one more time this year. Prices are going to continue to drop--we are licking our chops for 2007.

Re: Ask tommy2 about Real Estate
 

A law degree.

Are you any good at sales? If so, look into becomming a broker for a couple of years.

Are you good at running numbers? If so, look at becomming an analyist for a bank or REIT for 1-3 years.

Developers are ususally looking for someone who can come in with leasing or analytic skills.

Otherwise, hook up with a small developer and be the guy's gopher for a year or two. Learn the business from him.

Re: Ask tommy2 about Real Estate
 

To scotchnrocks

Most lenders sell on those mortgages to the secondary markets - many mortgages get packaged into CMOs (Collateralized Mortgage Obligations) which spread the risk of default for the many borrowers amongst many lenders.

Example - 50 mortages for $250,000 for a total of $12.5mn. If 5 (or 10%) default, then you lose some of that money (remember you can repossess the house), and maybe lose 2.5%, tops. These then get packaged up into $1000 units and spread around.

All of a sudden the risk doesn't look so big. Amazing what economies of scale can get you. It sucks to be the borrower who gets foreclosed on, but the lender isn't risking that much.

Re: Ask tommy2 about Real Estate
 

Agreed. Many people who have ARMs are first time buyers who don't qualify for a 30 year fixed now anyway. Those people are in a world of pain soon.

Re: Ask tommy2 about Real Estate
 

Also, everybody in the process has a vested interest in seeing a hot market continue: obviously the brokers and mortgage brokers benefit, but so too do the bankers who make higher bonuses, appraisers who do make their clients (banks usually) happy when their appraisal allows a loan to get done, CMBS guys who need product to package, on and on. Nobody wins when transactions stop.

Re: Ask tommy2 about Real Estate
 

I would also like to get your opinion on condos on the Gulf Coast. They are flying up in my area. Is there money to be made or are they just for rich snow birds?
Avg costs im seeing are 250 and up. All are brand new and most likely on the beach. This isnt a hot spot for young people vacations and there arent many attractions left since Katrina. Should I get in before the area really starts booming or wait? Waiting would see a large rise in prices, but buying early could also lose money with lack of occupants(vacationers/renters).
and Whats the deal with shared properties?(I know alot of FL is shared ownership) good/bad

Casinos are gonna sky rocket prices when they start being completed. You should see all the crazy plans, Booming.
thanks for any info
Biloxi

Re: Ask tommy2 about Real Estate
 

2% cap == 5% rate to 7% rate which is a 24% change in monthly payment.

Re: Ask tommy2 about Real Estate
 

I'm interested in Real Estate. I would like to know if you are familiar or have any opinions on Dolf de Roos - Real Estate Investor's home course or Carlton Sheets?

Also, do you have any insights into the Real Estate Appraisal field (another area of interest).

Thanks.

Re: Ask tommy2 about Real Estate
 

Know anything about realestate in vancouver, canada? The olympics are coming and i'm looking to buy a condo to live in for about 300k, the market is really crazy right now, but with the olympics coming and everything i'm not sure that it will cool down. Any thoughts?

I really need to get a new place as i'm 19 and living with my parents now haha.

Re: Ask tommy2 about Real Estate
 

Tommy,

I live in the bay area, but I'm thinking of investing in real estate in North Carolina because it seems like it's a growing market and there are plenty of positive cash flow opportunities.

Specifically, I'm looking at University condos and townhomes. Management fees look to be around 8%. For a first time investor (I will continue to RENT an apartment for myself here in the bay area) does this sound like a prudent plan to invest so far from home?

Re: Ask tommy2 about Real Estate
 

Don't know de Roos. Sheets has been around forever, most of the easy money that he is talking about has been made. If you are really interested in finding deals, you would have an easier time if you were a broker.

Appraisers do steady business, but don't make tons of $. The money in RE is in development/redevelopment, brokerage and syndications.

Re: Ask tommy2 about Real Estate
 

The old adage is that your property should be no more than a few hour car drive away. There are all sorts of reasons why. Management companies never run the property anywhere near as well as ownership.

All that being said, I love buying rental properties in University areas. What about Berkley?

Re: Ask tommy2 about Real Estate
 

Can't speak to Canada specifically, but it seems illogical to buy into a market that is overheated by a one time event. Why not just wait until the Olympics are over?

Re: Ask tommy2 about Real Estate
 

Hey Chris,

From my own real estate experience the NYC markets are different from the general trends from the rest of the US. Right now most major cities in the NE are shedding population (for example Boston which has been leading the pack) which has had an effect on the market with all the condo conversions increasing the number of units at the same time. NYC has gone against this trend with everyone moving back to the city and the population and number of homeowners have increased. Brooklyn has already seen a ton of apprication in value, hard to say that's going to continue, but on the other hand hard to say its going to significantly decrease. I'd feel comfortable buying in Brooklyn (and I might soon as I'm moving back to NYC in september and have begun reseaching some) if I was comfortable with the area and knew I was going to stay in the unit for the long term, 5+ years (NYC also has high closing and transfer costs and taxes related to each sale relative to other areas). There is also definatly value in having total control of your space and having something nicer for your family, even if it costs you more month over month, just don't fall in love with one of brooklyns grand old brownstones if you don't like getting your hands dirty...

SteveOMS

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
The old adage is that your property should be no more than a few hour car drive away. There are all sorts of reasons why. Management companies never run the property anywhere near as well as ownership.

All that being said, I love buying rental properties in University areas. What about Berkley?

[/ QUOTE ]


Housing costs in berkeley are about 4x that in other areas such as NC.

These are rough numbers, but a place in berkeley that rents for 2k would probably cost around 600k. In NC you can buy a 4 bdrm for 150k that rents for 1400.

Plus I can't borrow enough to afford a 600k place.

I have a friend here who has used a NC management company for over a year, and she is happy with them. They are the ones I have been talking to.

Are there management companies out there who actually do a good job that you can trust?

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
Tommy,

I live in the bay area, but I'm thinking of investing in real estate in North Carolina because it seems like it's a growing market and there are plenty of positive cash flow opportunities.

Specifically, I'm looking at University condos and townhomes. Management fees look to be around 8%. For a first time investor (I will continue to RENT an apartment for myself here in the bay area) does this sound like a prudent plan to invest so far from home?

[/ QUOTE ]

geormiet,

Sounds like a good plan. Ya, you won't find many cashflow opportunities out there on the west coast. I had been looking at a lot of stuff in AZ(for flips not cashflow), but the numbers were crazy tight, and with the slow market out there right now didn't want to be stuck holding something that would be an alligator.

I've actually spent the last few days doing a lot of research on NC. There are also a few areas I've been looking into that haven't "boomed" much yet, that are seeing a lot of growth in population due to the high costs of places like CA, AZ, etc... as well as the scare of a bubble in those areas. These places I'm looking at sounds similar to what you are looking at getting into, as I was a little leery of buying and renting to college students before, but have since changed my mind looking over a lot of the numbers. They also have good chance for appreciation, and cashflow.

And yes, management fees should be somewhere around 8%. They charge different rates, but are almost always negotiable.

By the way, how do you like living in Costa Rica? What made you move there?

I don't know how much research you've done on the markets where you are looking, but another investor showed me some extremely good articles today. If you are looking for more info, let me know and I'll find the links for you.

-Bill

Re: Ask tommy2 about Real Estate
 

Hey T

Lookin to get a second residence (townhome) in Vegas. Summerlin or Henderson. Finding 2 bd 2 baths we like for about 280-300K. Is Vegas still going up or would you wait? We're in no hurry.

Summerlin Townhouse

Re: Ask tommy2 about Real Estate
 

Opinions from Locals or Real Estate pros in Vegas appreciated as well......