Where's MY Bailout? Or, How to Make a Fortune in Real Estate with No Money Down!
Available on Amazon.com
After the real estate meltdown, 2010 through 2015 was the best time to invest in real estate in more than 50 years. Where's MY Bailout, published in 2012, showed you how to locate, purchase and renovate foreclosed properties throughout the country. This site is an ongoing commentary on the real estate market and life in general. Though dated, the book is still for sale on Amazon, and it's FREE on Smashwords! Just click on the link above.
July 21, 2023 Emma Morris Congressional Testimony
If anyone had any question that the government corruption machine is out of control, listen to the testimony of Emma Morris. Ms. Morris worked for the New York Post and broke the Biden laptop story.
Aside from beltway insiders coordinating the coverup with big tech as accomplices, the unofficial fourth branch of government (print and telecom media) failed miserably at independent verification and fact reporting.
We knew politicians are generally scum but now we know reporters are either lazy or have been beaten into submission by their big media overlords. As a former member of the press, this testimony made me sick.
Former New York Post Editor Laughs When Detailing Censorship Of Bombshell Hunter Biden Laptop Story - YouTube
Independence Day in America and Looming War with China July 4, 2023
Happy 4th of July America! I hope citizens home and abroad celebrate this day and remember the freedoms we still have.
I've been posting warnings about China on the blog for some time. China is moving quickly to isolate itself from the free world and exert pressure on others to support its totalitarian regime. Like the dark days prior to the second world war, Chinese and Hong Kong citizens who dare to think freely should flee as soon as possible. The Chinese central government is facing an economic crisis and citizens are not happy. Young adult unemployment now exceeds 20 percent. The Chinese real estate crisis is much worse than our Great Recession. The real estate crisis here resulted in housing deflation of 50 percent or so but many Chinese real estate investors are paying for houses that don't even exist or are crumbling because of poor materials and craftmanship.
In the midst of the crisis, China has resorted to a tactic used by countless authoritarian rulers - blame outside forces for internal problems. Through strict government control of all media, citizens are told the United States and western allies have conspired to attack China economically and politically. If conditions deteriorate in China much more, Beijing will use the western attack narrative to justify an invasion of Taiwan. The invasion will be coordinated with simultaneous digital attacks on western governments, financial markets and citizens with the aim of disrupting our ability to respond.
Last November I urged Hong Kong citizens to escape as soon as possible. Many of the Hong Kong freedom protesters that were able to evade arrest and escape are actively being hunted by Beijing which is offering bounties of $128.000 for information on the locations of dissidents according to numerous news reports. Chinese and Hong Kong citizens can come to the United States and hide. Our boarder is open and we have a spare room.
In response to trade sanctions imposed by western governments on technology transfers to China, the Chinese central government has issued orders to ban exports of gallium and germanium. China has been flooding the world with subsidized raw materials driving outside producers out of business. With little regard for human rights or environmental protections, these minerals can be produced in volume and at a very low monetary cost. China now controls over 80 percent of world production according to Reuters. Once the ban goes into effect in September, chip, solar panel and battery factories will have to find alternatives or shut down.
China has been gearing up for an Internet attack for years. On this blog in 2021 I warned of Trip.com and direct ties to China (below). We have seen TicTok bans on federal electronic devices as well as some states.
A company called TEMU ran an ad during the Super Bowl touting incredible prices and direct-to-factory access. The TEMU app was the most popular download on the Apple and Google stores and has been installed in over 50 million devices. Aside from selling counterfeit and potentially toxic products - particularly lead filled children's toys made by slave labor, the app itself may contain malware compromising users' personal data, including financial data.
TEMU is owned by PDD Holdings which also owns Pinduoduo. PDD Holdings is controlled by China. Google banned the Pinduoduo app in March because "..malicious behavior was detected." according to CNN. Cyber experts have been raising alarms about TEMU as well urging users to delete the app.
During the cold war Lenin was quoted as saying "The Capitalists will sell us the rope with which we will hang them." The Chinese have modified lenin's failed strategy with "The Capitalists will give us the data we will use to destroy them."
When the war starts, China will unleash a cyber-attack like we have never seen and are ill prepared for.
Thoughts on the Latest Banking Crisis April 6, 2023
Fifteen years after the last "Global Financial Crisis" we have another. And the government's solution is to guarantee all uninsured deposits through FDIC? Just one tiny problem - there's not enough money in the Federal Deposit Insurance fund to cover potential losses. Just a few steps away from nationalizing the banking industry.
Buckle up folks. It's gonna be a bumpy ride...
I posted this on my Facebook page last month in the wake of SVB bank collapse. Since then several more banks have been taken over. The implosion of credit availability coupled with a dramatic decrease in government debt interest rates (far below the Federal Reserve's current key interest rate), tells me the financial system is ceasing to function normally.
Economic reports are hinting at weakness in labor markets - weekly jobless claims topped 225,000 and the previous week revised upward to 249,000 from less than 200,000 and Purchaser's Manufacturing Index has been in contraction since October 2022. Meanwhile Congress has not started meaningful debate on the debt ceiling.
The Federal Reserve sought to reduce high inflation with an unprecedented rise in interest rates last year. Economists feared this may lead to an economic disruption - raising rates until something breaks. Well, something broke. In fact, the Federal Bull is in the china shop and has already broken a set of antique crystal decanters and aiming for the Ming Dynasty collection. Inflation is dead. It died four weeks ago but the Fed. hasn't recognized it yet. My last post three months ago discussed real estate price decline. It continues.
The 2008 crisis started in March of 2008 with problems at Bear Sterns. It wasn't until September of that year when the entire system melted down and the government stepped in with TARP to stabilize the economy. The economy stopped on a dime. Unemployment shot up. Credit vanished. We entered the worst recession and deflation since the Great Depression.
In response, the Federal Reserve introduced to the term "Quantitative Easing" which helped stem the crisis. QE continued for over a decade and in May 2022, QE was replaced by Quantitative Tightening because of the realization that inflation wasn't "transitory" resulting in the china shop bulls and beginnings of the new crisis.
The second quarter of 2023 will be interesting and fate of the economy and millions of jobs rests with Washington politicians and appointed Federal Reserve officials.
Just a thought - Politics is the only profession that does not require any qualifications - simply a majority of votes.
Since this Blog is primarily about real estate, home prices will continue to decline uninterrupted until the banking system is once again stable. I have no idea when that will happen but definitely not this quarter. It may also be a long, hot summer as well. Something else will break.
Real Estate Prices Have Peaked and are Heading Down, Down Down! January 1, 2023
Happy New Year! Fed quantitative tightening and rising interest rates have slammed the real estate market. With no end in sight to restrictive monetary policy, sellers will no longer see bidding wars and upwardly spiraling prices. Those halcyon days ended last summer. Open houses in the first quarter of 2023 will be as lonely as a Maytag repair shop. Builders are slashing prices by 30 percent or more in overbuilt areas such as Myrtle Beach.
If the long anticipated recession arrives this year, expect home prices to continue sliding. Like the Great Recession, real estate prices will lag the overall economy. The Great Recession bottomed in 2010 but home prices declined through 2012 and finally bottomed when my book was first published.
Covid stimulus money is drying up and foreclosure moratoriums have ended. Expect a huge wave of evictions and foreclosures by Thanksgiving and real bargains should start popping up in the spring of 2024 so be patient, stick to your offer price and let the sellers come to you.
Trip.com IPO and CEO Interview with Bloomberg. Update April 25, 2021
Last week Trip.com raised $1.1 billion through a Hong Kong Initial Public Offering. That day Bloomberg television interviewed Trip.com CEO Jane Sun about the IPO. Trip.com Group is based in Singapore and controls the largest online booking website in China. In addition to the new Hong Kong listing, Trip.com is also listed in America on the NASDAQ with the ticker TCOM.
The Bloomberg interview is just over five minutes and is one of the most bizarre interactions I have seen from a CEO. Considering the Trip.com Group ties in China the last thirty seconds convinced me that I should never do business with this company. The entire interview is available here: Trip.Com Has Recovered 100% From the Pandemic, Says CEO Jane Sun - Bloomberg
When booking services with Trip.com, you must provide a great deal of personal information that could include identity and banking information. We assume companies that hold sensitive information will secure that information to the best of their ability and certainly not volunteer it to a governmental entity.
According to Trip.com's privacy terms your personal information will be shared with affiliated companies, such as the Chinese affiliate Ctrip.com. My fear is that personal information is then shared with the Chinese government.
Here is part of the privacy statement:
Affiliated companies within our corporate family: We may share your personal information with our affiliated companies so that we best provide you with the requested service as well as information about other travel-related products and services. All parts of our company provide similar protection measures for your personal information that are no less stringent than this Privacy Statement.
We may also share your information in the context of complying with legal obligations, to protect our or your interests in legal matters, and in the case of a merger or acquisition.
Unfriendly governments have been hacking and collecting information from individuals and companies for years. Ultimately, when (not if but when) they decide to launch a massive attack aimed at crippling our financial system, they could be using the very information customers handed over when booking that beach vacation or trip to Disney World.
More COVID and Online Censorship December 21, 2020
Who’s Checking the Checkers?
“Why did China recover without a vaccine? And why doesn’t anybody talk about it?” The seemingly innocent questions posted by a friend on my Facebook feed were slapped with the “False Information” label stating: “The same information was checked in another post by independent fact-checkers.”
I wondered why a benign meme would warrant a virtual death sentence from Facebook fact checkers. A company called Lead Stories (leadstories.com) researched the meme with Mr. Arthur Brice holding the byline. Lead Stories concluded “China DID Recover With a COVID-19 Vaccine, Which Has Been Reported.” Supporting this conclusion Mr. Brice cited Chinese government officials and Caxin, a Chinese news organization which reported that up to one million Chinese received an experimental vaccine from late February to November 2020.
This conclusion would not stand up in a high school term paper review. The “vaccine” Brice cited was experimental and had not gone through efficacy or safety trials. With only a million recipients in a country of 1.4 billion (less than one tenth of one percent) there would be absolutely no impact on controlling virus spread. According to the Mayo Clinic at least 60 to 70 percent of the population would need inoculation to stop spread. At best Lead Stories could conclude China conducted a vaccine trial on a tiny percent of the overall population and find the meme true.
The sources Brice used - statements from Chinese officials and Caxin could not reasonably be used as sources to refute the meme. On April 20, 2020 the Washington Post published a story "China's investigative journalists offer a fraught glimpse behind Beijing's coronavirus propaganda" speculating that Caxin reporting could not be considered reliable because of founder Hu Shuli's close ties with the Communist Party. The Post story also detailed China's suppression of foreign press and false propaganda surrounding COVID-19.
The second question in the meme – “And why doesn’t anybody talk about it?” is obviously rhetorical, inviting debate on the draconian measures undertaken by the Chinese government to control the virus. Brice decided to address this question as well citing reports of citizen lockdowns, surveillance, movement restrictions, monitoring and detentions as evidence people had been talking about it.
Clearly this innocuous meme should have been given a pass and allowed to have its five seconds of Facebook fame and perhaps open intellectual discussion among Facebook users on Chinese verses Western government handling of COVID-19. Rather, Lead Stories deemed it too dangerous for public consumption and must be quashed.
Lead Stories is one of ten “independent” fact-checking companies contracted by Facebook to monitor and determine veracity of posts. Lead Stories is largely staffed with former CNN employees. Mr. Brice, according to his Lead Stories biography, has over 40 years reporting experience including national desk editor at the Atlanta Journal-Constitution, political editor at the Tampa Tribune and was at CNN for 11 years. Lead Stories has come under fire from media outlets for political bias and hiring biased staff. Lead Stories refuted bias claims with a statement: “Several of our staffers have worked previously at CNN, including Editor-in-Chief Allen Duke and we make no excuses for that. When looking for new employees it is only natural to reach out to unemployed former colleagues.”
On Facebook the consequences of spreading false stories such as this are significant including account suspension and distribution reduction. Users repeatedly posting items that are deemed false, misleading out-of-context will be exiled from the Facebook mainstream. For Facebook users and sites that rely on clicks, visits and sales to generate income, suspension and suppression reduce potential income or drive them completely out of business.
Regarding COVID-19 specifically, Facebook will “…protect people from harmful content and new types of abuse related to COVID-19. We’re working to remove content that has the potential to contribute to real-world harm…” according to Facebook. With the backing of these former reporters working in a virtual bullpen evaluating a sea of memes and posts, Facebook can wash its hands of direct censorship accusations. Censored users financially harmed by social media suppression have no recourse against Facebook and would have to prove malicious intent on the part of fact-checkers.
Mark Zukeberg addressed Georgetown University recently saying “When I was in college, our country had just gone to war in Iraq. The mood on campus was disbelief. It felt like we were acting without hearing a lot of important perspectives. The toll on soldiers, families and our national psyche was severe, and most of us felt powerless to stop it. I remember feeling that if more people had a voice to share their experiences, maybe things would have gone differently. Those early years shaped my belief that giving everyone a voice empowers the powerless and pushes society to be better over time.” Mr. Zukerberg may have forgotten or ignored his own words.
Open and vigorous debate is the cornerstone of free society. The ability to express and argue ideas and arrive at a thoughtful conclusion or to persuade others is crucial to progress and enlightenment. Dissenting and unpopular ideas may eventually be proven right through discussion and debate. Silencing and censoring voices that do not agree with the mainstream ultimately pushes society backwards and eventually to totalitarianism – like China is today.
Charles Dickins said it best almost 200 years ago in A Christmas Carol with the spirit showing Scrooge two children under his cape and stark warning: “They are Man's,' said the Spirit, looking down upon them. 'And they cling to me, appealing from their fathers. This boy is Ignorance. This girl is Want. Beware them both, and all of their degree, but most of all beware this boy, for on his brow I see that written which is Doom, unless the writing be erased. Deny it.' cried the Spirit, stretching out its hand towards the city. 'Slander those who tell it ye. Admit it for your factious purposes, and make it worse. And abide the end.'”
To the fact checkers I say Bah, humbug!
George Carlin Would Have a Field Day With COVID Communications - Cinco De Mayo, 2020: The Corona is on me
The Covid-19 worldwide epidemic has created a new lexicon of phrases and key words intended to educate and enhance public compliance with virus containment.
George Carlin would have a field day.
We’ve been told to engage in “social distancing” or a spacing of at least six feet away from each other. Social distancing sounds more like a high school dance policy. Boys and girls, mind your social distance and no inappropriate touching – For goodness sake let’s not see any of that grinding stuff on the dance floor! It is more like a kind suggestion than a life-saving barrier.
How about Personal Safety Zones? Hey man, you’re in my safety zone, back off before you get hurt! Safety Zone gives a sense of certainty and urgency – outside the Safety Zone and you’re fine, someone breaches it and we all get sick.
Wear a “face covering” to help stop virus spread. Face covering or face mask? As late a April, experts were advocating covering faces with bandanas (or bananas thanks to media typos). How about Gas Mask or Personal Respirator?
Face covering could be holding a napkin in front of your face as you talk to you friend who is sitting across from you at a social distance. Gas Mask or Respirator conveys an image of security and safety or even intimidation.
You would think twice about invading the Safety Zone of someone wearing a gas mask. Particularly if they were carrying an AR15...
The list goes on but I’m no George Carlin…
During these uncertain times, now, more than ever, we are all in this together. We are here to help – except our employees are at home in accordance with the government “shelter-at-home” order now in effect.
Shelter-at-home?? Don’t get me started…
Seriously, stay safe and use common sense as we live through this.
Corona Virus and the Market Turmoil of 2020 - April 9, 2020
The American economy stopped in March. Like a wildfire spreading across the nation, state after state closed down, issuing stay at home and essential services only orders. Unemployment claims surged to levels that will reflect an unemployment rate of 30 percent or more this month – The highest since the Great Depression. Businesses large and small saw revenues drop to zero in the past two weeks.
Unlike the 2008 financial crisis brought about by out of control speculation and voodoo debt packaging, this crisis was born from a contaminated bat in an obscure, primitive Chinese wet market. A “wet market” trades animals of every description, live and otherwise openly and generally in unsanitary conditions. Several worldwide pandemics originated from these markets.
In the midst of arguably the most partisan gridlock in generations, politicians came together and voted for the largest funding bill to support workers in our history. The Legislation including direct federal unemployment support and grants to small businesses that retain employees during quarantine.
Today the Federal Reserve announced unprecedented actions of over two Trillion (with a T) dollars for direct purchase of “junk” bonds and loans to mid-sized businesses. Disruptions to the economy caused by extraordinary events will result in credit downgrades this quarter. In many cases company debt will be downgraded from investment quality to junk. When that happens, covenants in many bond mutual funds will require them to sell newly downgraded debt.
Because of debt liquidity issues coming to light during the March stock market crash, federal officials fear wholesale debt downgrades will freeze the debt market, which dwarf the stock market in total capitalization. In short – the economy will crash.
This action will no doubt stabilize financial markets in the short term and could help avoid a depression as we sit at home and reconnect with family, Netflix and alcohol (pot in legal states). Long term is however more uncertain and dependent on the medical community. If there is a resurgence of the Chinese Bat virus in July or August requiring another shutdown, all bets are off.
What does this mean for the real estate market? Sales this spring will tank. Sellers will hold on as long as they can and creditors will defer payments for a time. At this point I have not seen any government program to assist landlords get through the next few months. All parties must “work it out” until money starts flowing from DC (us).
I have advised my wife to start looking for her beach house. I anticipate prices will decline throughout the year and August may be a buyers market for vacation properties. Next year should be an ideal time for purchase of investment properties. For those with big bucks, retail spaces are on sale now!
This blog is an update on current conditions in the real estate and financial markets. This is not to be confused with the best-selling book form 2012 “Where’s MY Bailout? Or, how to buy real estate with no money down” That book is way outdated. However, during a home sequester, it is a good read for an evening, and it’s FREE on Smashwords! (Link above) This August, if you are in the market for an investment property, this book could come in handy.
Update: October 27, 2018
Interest rates continue their steady rise and 30 year mortgages crossed the 5 percent mark this week. Rates backed off this week in a flight to quality amid a sharp selloff on world stock markets. New home sales are suffering as rates rise and early signs the economy may be slowing. New home sales for September decreased 5.5 percent from year ago levels and the lowest in two years. Luxury home sales in high-tax states are decidedly off with implementation of new tax laws limiting interest deductions with asking prices being slashed. On the other hand, low-tax states are benefitting from lost sales in the northeast and west coast.
Recovery from 2018 hurricanes will generate construction jobs through mid 2019 and builders may shift to smaller homes at long last.
Update: April 27, 2018
The first quarter has ended and companies are generally reporting good earnings because of a robust economy and positive effects of last year's tax cut. Real estate prices have now reached pre-crash levels and are now at inflation adjusted highs. Despite a stock market correction in January, interest rates have marched up with a 30 year fixed mortgage at five percent. Short term interest rates have increased even more, with a flattened yeild curve making ARMs on par with fixed rates.
Builders continue to concentrate on high-end construction resulting in a shortage of starter homes. I have been searching for new bargains but cannot find a discounted distressed home in the right neighborhood in Richmond. Speculators and flippers are bidding up everything! Auction.com concluded an auction in Virginia yesterday. I was interested in a townhouse a couple miles from work: 3 BR, 2.5 BA, 1900 Sq Ft, built in 2014 and sold occupied (which could mean the bank did not have clear title). It sold at auction for $204,000! In 2010 I would have paid no more than $100,000 for a similar home.
I saw an interesting interview with Alex Rodriguez (A-Rod), baseball player for the Yankees and others. Early in his career he began buying investment real estate. Over the years he bought more properties, refinanced and expanded his empire until his real estate investments produced more income than his quite lucrative day job. Rodriguez was inspired by unfortunate events in his youth. His family, headed by a single mom, was forced to move every 18 months or so because the landlord increased rents. As a boy, he wanted to trade places with the landlord and be on the receiving end of those rent checks. The rest is history:
https://www.cnbc.com/2018/04/25/how-alex-rodriguez-became-interested-in-real-estate.html
Cash flow is king! let your tenants pay for your investment!
Update: December 23, 2017
Merry Christmas and Happy Holidays! The real estate market continues to boom with the general economy. Tax reform will be the law next month which should spur economic growth but may have a negative impact on expensive real estate in high tax states with limits on property tax deductions.
Please click on the link above: BLOG - More Stories. This evening I'm sharing a couple holiday miracle stories from this past year.
Health and prosperity to all this coming year!
Update: October 1, 2017
Seven months since the last update is far too long! The real estate market in major urban centers continues to advance and prices have surpassed pre-crash 2008 levels. Zillow has a very interesting chart showing the median price of homes sliding from 2008 through 2012 and right back up to new records. Inflation adjusted, prices are slightly below the 2008 peak: https://www.zillow.com/home-values/. Banks appear to have been given the green light to lend as the new administration chips away at Dodd Frank regulations. Alternative lenders have emerged to take a major share of the mortgage market. Alternative lenders are generally not subject to Dodd Frank regulations and often offer much better terms, such as one percent down payment loans. Non-bank lenders include Quicken Loans, Freedom Mortgage, Sofi and Loan Depot.
The big question is: How long can this continue? Employment is near all-time highs and wage growth is picking up. Housing demand remains strong and supply relatively short. This year's hurricane season destroyed or damaged many houses in Texas and Florida which will result in a building boom in those states and possible shortages of construction materials and labor. Outside the mainland, U.S. Virgin Islands and Puerto Rico were essentially wiped out by hurricanes Irma and Maria. Once search and rescue and basic humanitarian needs are met and supply chain infrastructure is back in place, I would expect a minimum of $100 billion in new construction over the next couple of years. Unless there is another Black Swan event, the housing market should continue to modestly improve.
I am concerned valuations have gotten out of whack and are a little ahead of themselves but if lenders are making loans with low down-payments and interest rates remain low, the current housing boom can continue for a while longer. I do think interest rates will continue to inch up with demand for dollars to rebuild hurricane damaged areas surges.
Outside of the real estate, what in the world is going on with the country? Between Tweets, statues, football, demonstrations, terror attacks and internatioal conflicts, it is a wonder we leave the house at all! Of course, we don't need to leave the house anymore since Amazon or Walmart will deliver everything you need and even stock your refrigerator. I'm waiting for one of the meal-kit delivery services (Blue Apron, Plated, Hello Fresh) to include a chef with 12 months purchase agreement.
Amazon, Walmart?
Update: March 3, 2017
The late winter/early spring house selling season is off to a brisk start! Demand for starter homes is on the increase as new households are created and moving from apartments to homes. Builders are concentrating on high end (high margin) homes and are squeezed by a tight labor market. Houses that were scooped up by investers between 2008 and 2012 are still in the rental market. All this has resulted in bidding wars for new and existing houses.
With interest rates sure to go up, I can't see this pace continuing beyond this summer. If you are lucky enough to own some rental property that you have depreciated the past few years, now might be a good time to lock in some profits and give some young people an opportunity to get their piece of the american dream!
Update: January 14, 2017
Happy New Year and start of an excellent Real Estate year. Interest rates have inched up, employment remains high and housing supply is low. The past few years as construction rebounded, the concentration was in multi-family homes (condos and apartments). Demand for single family homes has increased more than existing supply or construction which leads to higher prices. Construction of single family homes has largely been in high end homes, leaving a huge demand for moderately priced single family homes. This is an opportunity for flippers to find distressed properties in decent neighborhoods and turn them over. Finding the right property at a bargain price is much harder now than in 2011 but with research and a little luck, great deals are still out there. Just be ready to jump on the deal and close quickly!
The only exception to the rosy housing forecast is high end Manhattan real estate (see May 1 update below). The building boom of exclusive condos has resulted in a glut of unsold, expensive condos. Prices are coming down and agents are giving generous deals. I offer this as an aside, as virtually none of the followers of this page would be in the market for a $10 million condo in New York. It is just interesting to see supply and demand at work in real time.
Update: September 23, 2016 - Take a Break, Go to the Beach! Please excuse the off topic post...
If you have followed these updates, you know we owned an investment property in Myrtle Beach that we sold last year. We bought the condo in 2012 and held it until August 2015 when the Myrtle Beach real estate market finally turned around. While waiting for the market to turn, we furnished and used it as a beach house. We would often drive down on Friday afternoons for weekends at the beach and I would tune in high school football games on the trip. One team we followed was the North Myrtle Beach Chiefs, which is also the high school two miles from the condo.
This year (as of this post) North Myrtle Beach has a record of 6-0 and are playing undefeated Myrtle Beach on Friday September 30. If you are in the market for a beach property or just want to enjoy a beautiful fall weekend at the beach, make plans to watch a high school football game! It will be at 7:30 at Myrtle Beach High School (not North Myrtle Beach).
The North Myrtle Beach quarterback is Ronnie Bass, Jr. His father was quarterback for T.C. Williams High School from the movie Remember the Titans. Is it possible the son of an undefeated team can lead another undefeated team? He is an impressive QB...
If you can't make the game, watch the live stream at: http://nmbchiefs.com/
The commentators are excellent and worth the price of admission, which is free...
Update: August 9, 2016 - Don't get Attached to your Investment!
After buying the Myrtle Beach condo and starting the renovation, my sister sold her lake house and had a huge yard sale. I bought several pieces of furniture from her house and took them to the condo. In 2012 it was obvious that the Myrtle Beach market was not turning around anytime soon. The homeowners association did not allow weekly rentals in our complex so vacation rental income was not an option. We also wanted to use the condo for our own beach trips so renting full-time was also out. I decided to try renting to northern snowbirds who want to escape the icy grip of winter.
The rent from December through April should cover our HOA fees, taxes, electricity and cable for most of the year. While waiting for the market to turn, we could use the condo for free! Unfortunately, we did not find a renter and the condo stayed mostly vacant. Between 2012 and 2015, we spent several weeks and some long weekends enjoying the condo and beach each year. We would also let friends use it for summer vacations. It was nice to have a beach house! We would take the dog with us and take her for walks on the beach each morning. We went often enough that the dog would get excited when we asked her if she wanted to go to the BEACH! Labs love the water!
What a wonderful thing - your own beach house! It was like living the American dream to have idle vacation houses to visit in our leisure time. Meanwhile, the Fayetteville condo was rented and generating a 16 percent return. That condo was not fancy or a great destination. It was in Fayetteville, NC! It was three miles from Fort Bragg Army base. Yet, the Fayetteville condo was a money maker and Myrtle Beach was costing about $5,000 per year to maintain!
I had lost sight of the goal of real estate investing - producing income while (hopefully) appreciating in value. Plus the added bonus of depreciation for taxes. Because Myrtle Beach was not rented, we couldn't depreciate it or write off repair expenses. When the Myrtle Beach market turned in 2015, we sold for a nice profit. Now, a year later I miss my vacation house and beach trips whenever we felt like taking off. The solution is simple! Take a fraction of the yearly cost to maintain the condo and rent a place at the beach. Find one that's pet friendly and take the dog, which is exactly what we did.
When investing in real estate - whether as a flip or long term - stay with your plan! Buy well positioned properties at below market prices and either flip for a quick profit or rent for a steady return on your investment. If you want to go on vacation, rent a vacation house!
The housing market remains strong and prices continue to rise. Interest rates are the lowest we have ever seen. As long as the economy continues to grow and unemployment remains low, the trend should continue. I am actively looking for a bargain but have not found one I like thus far. Aside from warnings earlier this summer, this new bubble doesn't seem to be ready to burst.
Update: July 15, 2016 - Finally something truely FREE!
I got an email today from one of my book publishers. They wanted me to update my cover picture because it doesn't meet the minimum requirements of their new system. While updating the picture and a few other things on the site, I saw a link to change the price of my book. One option is FREE! Last year on Amazon I tried to give the book away but Amazon won't let the price go below 99 cents. I guess a struggling company like Amazon needs every penny it can get! The other publisher, Smashwords, will allow authors to give their books away! While I will be giving up the potential of millions of dollars in royalties for this book, for the sake of universal knowledge, "Where's My Bailout" is now free at Smashwords: https://www.smashwords.com/books/view/165362
As an aside, we just finished a trip from Richmond to Kileen, TX by car. We went through TN, AR, NC, GA and a bit of TX. In every large city I noticed a huge number of construction cranes (see May 1 update), particularly in Nashville, Atlanta and Dallas. Like New York, it appeared a good number of new projects are luxury high rise condos. My guess is that they will get stale in the market by next January.
Housing prices are booming across the country right now. With negative interest rates and poor manufacturing data, a slowdown is sure to come.
Update: May 1, 2016 - Real Estate Market About to Crash!
I lived in New York City in 1979. My place was near Battery Park at the southern tip of Manhattan Island. My room had two windows, one with a view of the World Trade Center and Staten Island Ferry terminal and the Statue of Liberty from the other. A lot has changed in 35 years.
The Manhattan skyline has made a transformation. Twin towers have been replaced with the Freedom Tower and other buildings sprouted both down and midtown.
Then there is that “thing” on the east side of Midtown. I first noticed it watching a news story about the Big Apple. There was a view of the Empire State Building from the south. In the background was a godawful square building that looked like someone had stuck a giant toothpick in the ground. My first impression was that Trump had built another edifice to brand - except it wasn’t colored gold.
The Toothpick Building is a 1,400 foot apartment complex that Trump had nothing to do with. The Freedom Tower is just 300 feet higher. According to CNBC it is the tallest residential structure in the Western Hemisphere.
In a blunt commentary March 28, Ron Insana made the prediction that New York real estate is about to crash. He pointed out that Toothpick Building sales appear to be stagnating and UrbanDigs.com reported that February sales fell more than 20 percent to the lowest levels since 2009. He also noted that residential construction in the city is on a tear with 70 cranes erecting more Toothpick Buildings and adding over 5,000 high end condos.
Recalling advice from his late friend Ed Hart, Insana reminded readers that excesses often foreshadow future crashes. It happened in the S&L crisis, and virtually every time developers built record breaking skyscrapers.
The Toothpick Building could symbolize the next crash. Or it could be one of the other 70 toothpicks being planted in Manhattan. Oh, and Dubai is breaking ground on a brand new tallest building in the world.
New York is not the rest of the country but I’ve sold all of my property. Toothpicks may be cheaper in a couple years.
Here is the CNBC commentary: http://www.cnbc.com/2016/03/28/this-real-estate-market-is-about-to-crash-commentary.html
Update: March 11, 2016 - The World is Upside Down!
I got my 401K statements recently. The money I have in the money market account have negative interest rates. The money market company actually takes money from me for keeping cash with them! Japan has had negative interest rates for the last six months. Yesterday the ECU reduced interest rates more negative and announced they would start buying corporate debt. A central bank will be participating in the public debt market! Stock markets worldwide reacted with cheerful rallies but the US bond market tanked with 10 year yields zooming from 1.94 to 1.98 percent. This is a huge move in the bond market - in the face of European easing.
The move across the pond to increase negative interest rates is a sign of desperation. Economic activity is abismal. International trade is declining and the surging dollar has not made an impact on EU manufacturing. EU unemployment remains high with no end in sight.
Logically, our bond yields should decline to avoid further dollar increases, compounding EU problems. Instead, U.S. bonds crashed in reaction. Not a vote of confidence. Granted, the U.S. economy is recovering and reported unemployment is low but signs of recession are all around! China is in a freefall and Europe is a basket case. After the recent oil price collapse, debt defaults from corporations are inevitable.
Whatever the ultimate outcome, negative interest rates are not sustainable for the long term. Either EU economies will turn around or we have bigger problems on the horizon. If today's American bond reaction was any indication, I would say there is much pain ahead!
Update: November 2, 2015 - Timing is Everything (Vote early and often Tuesday)
The last update reported on an offer for the Myrtle Beach condo. We closed on August 13 at the offer price. Barely a month later, South Carolina was hit with historic flooding. North Myrtle Beach and Little River were particularly hard hit. My former condo had a drainage problem resulting in the parking lot being undermined and gully dangerously close to the foundation of the building:
http://wpde.com/news/local/sinkhole-created-in-little-river-because-of-flooding
I was very lucky to have sold just before the floods. Another unit in the building was also for sale. It has not sold and I'm sure it will remain unsold until repairs are made and the building can be evaluated for safety.
Buying the condo in 2012 when the market was at the bottom was good timing and selling after the market turned was good timing. Closing just before a flood was just lucky.
Update: July 22, 2015 - Real Estate Market on Fire!
That was the headline in my latest Real Estate market update for Myrtle Beach. It's the truth! Properties are listed and selling at 20% above last year's prices! This is the perfect time to list the condo! It went on the market on June 1 at $65,000. On July 18 we had an offer for $62,500. Sold!
CNBC had a Chart-of-the-Day in the last few weeks. It compared General inflation verses Real Estate inflation since the early 70's. Real Estate tracked exactly general inflation until the early 2000's. Real Estate spiked for several years. In 2006 the chart for RE crashed far below trend and bottomed in 2012. Since then prices for houses have improved to general inflation trend. I suspect we may overshoot a bit during this buying season but fall back in the winter.
http://seattlebubble.com/blog/2012/02/27/local-home-prices-outpaced-by-inflation-since-2000/ This is not the CNBC chart but it is an excellent graphic of the insane housing bubble. After 2012 prices continued to fall below inflation and rebounded to match the long term trend. If you expand the chart to the 1960's, housing and CPI inflation tracked together.
We are selling and advise anyone that purchased in the last three years do the same!
Update: March 2, 2015 - First Chinese Contaminated Drywall now Poison Floors??
It has been way too long since the last update to the Bailout Blog! Nothing of note has happened with the real estate market since the election. Home sales continue their slow recovery and home prices are increasing in most areas. Housing starts appear robust but construction is mainly "multi-family" units - apartments. Like all booms, Americans tend to take a good thing too far. Apartment buildings are popping up like weeds. Building at this pace will result in an oversupply within a year. Rent decreases will follow. Potential first time buyers remain saddled with debt and relatively low wages. Post recession bank regulations remain a hindrance to home ownership for young buyers.
The REAL reason for today's post is a story on CBS's 60 Minutes last night about Lumber Liquidators and potential contaminated laminate flooring. The story charged that some imported flooring has dangerously high levels of formaldehyde. When will we learn that the Chinese have absolutely no regard for safety or product quality? The Chinese have given us lead in children's toys, lethal pet treats, contaminated drywall, cyber attacks and financial support to terrorists. Why should anyone be surprised that the Chinese would export unsafe flooring? It is time for America to wake up and put a stop to the calculated Chinese export of poison and death!
I suggest a total ban on Chinese imports for at least six months. When imports resume, customs should establish an extensive testing routine for all Chinese products to ensure they are safe. Increase import taxes to pay for the testing. If we continue down this path, the Chinese will be selling us the rope that ultimately hangs us all. Make no mistake, the Chinese central government is determined to destroy this country. They will attack the financial system with computers and individuals with poison toys, pet treats and flooring.
Update: November 3, 2014
Election eve! Don't forget to vote tomorrow. Whether Democrats or Republicans win, real estate will still be the best place to make money for the next twenty years! The latest statistics indicate that homeownership rates continue to decline - good news for investment property owners. On the other hand, this trend cannot continue forever. Eventually renters will tire of spending money each month and have nothing long-term to show for it. As real estate prices continue to increase and the fear of freefalling prices fades into distant memory, Mellennials will put their toes in the water and buy that first house.
Bargain property investments can still be found but buyers must be more selective. Auction.com has started listing houses with no buyers' premium but include a statement that a Special Warranty Deed will only be issued if the buyer can obtain title insurance. My guess is that the properties have some issues and a lien or two against them. Typically these listings also include a statement that buyers must pay late HOA dues and fees. It sounds like these are similar to the Occupied properties Auction.com started listing last year. Unless you are experienced with clearing titles and expunging liens fairly quickly, I would avoid these houses.
Now that my book is almost three years old, I decided to offer it for free on Amazon. Unfortunately, Amazon doesn't give books away. Their minimum price is 99 cents. So, for the price of a McDonald's McChicken or Double Cheesburger, you can buy Where's MY Bailout online: http://www.amazon.com/Wheres-Bailout-Fortune-Estate-Money-ebook/dp/B0085MZP6Y/ref=sr_1_1?ie=UTF8&qid=1415032461&sr=8-1&keywords=where%27s+my+bailout
Vote early and often!
Update August 28, 2014
Where are the buyers, and does it really matter? We are getting mixed signals from the market lately. Housing starts are down for the latest period and new home sales are down. However, inventories are at the lowest level in years. Is it possible the resevour of bank owned properties is beginning to dry up?
I read an article recently about Millennials and their aversion to buying homes right now. High student loan debt, lower paying jobs, delaying families and a more cautious attitudes were given as possible reasons. Another article in Time magazine suggested now is NOT a good time for Millennials to buy homes! Some reasons include loss of flexability to quickly move in case of a job opportunity, no room for a growing family (assuming they bought a downtown condo or tiny house), buying a home and selling within five years would cost too much, and avoid too much leverage by putting at least 20 percent down!
Ironically, the article in the same Time magazine just prior to the sage advice to Millennials reported that the average home price increased 6.2 percent the previous year and interest rates can't stay as low as they have for much longer. So you could leverage your investment 90 percent (with a ten percent down payment) on an asset that is appreciating at over 6 percent and pay about 4 percent interest. Even if you move in a few years, this could be your first rental property and start of your retirement nest egg because Social Security will be long gone by the time Millennials retire!
Now IS a great time to buy a home or investment property! Prices have rebounded but are still far below 2008 highs. Interest rates remain low and lending standards have loosened some. With inventory as low as it is, short supplies will contiinue to drive up prices.
Go home shopping over the Labor Day weekend!
Update February 7, 2014
A lot has changed since my update last month. I became a grandfather to a beautiful baby girl. Mom, dad and baby are doing fine. The storm clouds shook the stock market with large swings and instability both up and down. A disappointing jobs report today caused the market to rally 165 points. This week the CBO estimated Obamacare would cut work hours by an estimated 2 million jobs. The White house said the report showed that Americans would have more choices and may choose to work less because of healthcare subsidies. The country has turned upside down.
This week I went to a real estate seminar held by the group inspired by the Rich Dad, Poor Dad books. I had just finished reading Who Took My Money? Which was obviously written before the 2008 housing meltdown. The book recounted Robert Kiyosaki's life struggles and how he made his millions. The book emphasized real estate but noted that all things have cycles and there a better times to invest in different sectors - real estate, stocks, commodities. Like all of his books, Kiyosaki urged readers to invest in assets that have a return. A boat or shiny new car looks nice but is ultimately a burden because it does not produce wealth. Investment property will pay for itself and pay you at the same time. With enough properties you will be able let them replace your regular job.
He dedicated several chapters to protecting wealth through corporations from LLC's to corporations. He did not go into detail but recommended two of his other books for more information. He spent half of a chapter telling readers that this strategy would only be suitable for a small minority of dedicated readers who would need to change their entire focus and mindset to make it work. He then explained the holy grail of the "money game" was to set up a corporation which could take full advantage of tax law and provide the ultimate protection for owners. He gave the example of his Rich Dad education business and how it had made him millions.
Ironically, I listened to the book on two trips to my Fayetteville condo to evict one tenant and welcome another.
I went into the seminar knowing that the two hours would be a pitch to attend another class to learn how to get rich. Typically, the cost of such classes are in the thousands of dollars. How else is Kiyosaki going to generate income with his education business? I was impressed with the presentation. Unlike most real estate guru seminars that pitch the american dream (new car, vacation, quit your job) by using complicated secret strategies, the Kiyosaki trainers talked about the shrinking middle class, income disparity, pension problems - sort of a rehash of the January 23 update. People should use this once-in-a-lifetime opportunity to purchase bargain real estate investment property and generate positive cash flow in order to guarantee a happy retirement and not run out of money. They hit every point in my book. In fact, the book I had just listened to sounded a lot like my book.
The presenter, John Kekal, was confident, well spoken and entertaining. Early in his presentation he mentioned that folks would not learn everything this evening but would have to come back for a three day "introductory" workshop. The workshop was only $495 for two people. John's use of the word introductory sent up red flags in my mind. There is no way $495 for two people would cover John's commission, rental of the facility, and other overhead and leave any profit for the Kiyosaki education company.
So I did some research. According to accounts (and a class action lawsuit), the workshops are simply vehicles to sell much more expensive courses that promise to train students how to find bargain properties and make huge profits. The parent company, Rich Global LLC. appears to have taken a page from Steve Martin's bit (google "how to become a millionaire and not pay taxes"). In 2012 Rich Global filed for bankruptcy after a court ordered it to pay $24 million to The Learning Annex. It seems Rich Global "forgot" to pay royalties to Learning Annex for its work setting him up as a real estate guru. According to the Forbes story, Kiyosaki is insulated from the company and will not have to pay a dime.
I guess the whole corporation thing IS a good way to protect your ass ets.
For the record, If you pay me $495, I'll give you a three day full-blown course on how to invest in real estate straight from my book and we won't even need to have a follow-up course! I'll even throw in a meal or two...
Update January 23, 2014
Storm Clouds on the Horizon
Some recent reports by the government and other credible
organizations indicate the fragile recovery now entering its fifth year may be
in danger of unraveling. The full story will be detailed later in the blog but
the headlines speak for themselves.
Today the National Association of Realtors released existing home
sales figures for December, reporting an annual rate of 4.87 sales. This figure
is lower than expected and 300,000 below the pace set in December of 2012. In
Virginia, RealtyTrac, an online housing data firm, reported that 22.4 percent of
sales in the commonwealth were cash sales. Fully one third of sales in the
Richmond area were all-cash deals and over 11 percent were either short sales or
repossession sales. While foreclosures and short sales are significantly lower
than the early days of the recovery, cash sales remain disturbingly high.
Why?
In December the government reported that the national median
income is $53,046, which is an 8.3 percent decrease from the inflation adjusted
2000 national income. Considering inflation, according to the government was
essentially nonexistent, wages actually declined for most families. As the
world’s elite meet in Davos this week, disturbing reports showing the recovery
did not raise all boats but only a few well-appointed yachts. The majority of
skiffs and fishing skulls actually took on water. The richest 10 percent in
America saw their new worth increase significantly while the other 90 percent
remained stagnant or actually decreased between 2008 and today. Now we know
where most of the trillion dollar stimulus money went.
Corporations are doing fine. The stock market is near all-time
highs and earnings are strong. Shouldn’t workers be seeing wage increases rather
than falling behind? One big reason for the disparity is one simple word –
outsourcing. Corporations are universally shipping jobs overseas to low-cost
countries. Accenture (the new contractor for the Obamacare website), has 80,000
Indian and 35,000 workers in the Philippines with only 40,000 in the United
States, according to the New York Times.
What are the 10 percent doing with all that wealth? Paying cash
for houses to rent to the remaining 90 percent. If incomes continue to decline
and the distribution of wealth continues as it has, the recovery is simply not
sustainable. Worse, there will be no one to buy your houses and won’t be able to
afford rent.
Then there is Argentina. This week the Argentine peso fell over
11 percent and threatens other South American countries. If they fall apart, it
could be a cold wake-up call for North America and unravel the fragile
“recovery” we are seeing.
December 4 Update: You Can't Get There From Here
That old phrase has come true for folks living on Hatteras Island, North Carolina. Yesterday NC highway authorities suddenly closed the Bonner Bridge which is the only direct access to the towns of Rodanthe, Waves, Salvo, Avon, Buxton, Hatteras and Ocracoke Island. According to reports, water coming and going through Oregon Inlet has compromised the bridge. The bridge could be closed for months. North Carolina will establish emergency ferry service to the Island with a round-trip time of approximately 11 hours.
In October I wrote on the blog an offer to sell my timeshare in Rodanthe because of rising water issues on the island. That issue is moot if you can't get there at all! If you want an oceanfront timeshare in Rodanthe, I'm open to offers. I'll even pay next year's maintenance fee. Your gamble is whether or not the Bonner bridge will be fixed by next June.
For real estate speculators, this may be another once-in-a-lifetime opportunity to get a bargain vacation property on Hatteras Island. In a worst case scenario the bridge will be condemned and a replacement bridge built, which could take years. Owners who count on vacation rental income to pay the mortgage will be inclined to sell at any price when facing the prospect of losing an entire season of income. I have no doubt that foreclosures will increase on the island.
One excellent realtor on Hatteras Island is Midgett Realty: http://www.midgettrealty.com/ I'm on their mailing list and used them as a resource for the book. Midgett has offices on the island and their employees are currently stuck there with nothing better to do. Give them a call!
October 11 Update: The Sky is Falling!
Mortgage applications are down 40 percent from last year! Oh, no! The government partial shutdown will reduce GDP by 1 percent if it extends into November! The headlines scream gloom and doom.
Applications are down because refi's are drying up as rates rise. First-time and transient applications remain strong as the economy tries to inch forward, but anyone living in a home with no intention to move soon, has squeezed as much as they can from these government induced bargain basement rates. Speaking of the government. With the shutdown, partial or otherwise, entering its second week, the impact on the economy is evident. The DC area will lose hundreds of millions in entertainment, hotel, and food income from missing federal workers and those involved in interacting with said workers. Across the country, the impact is similar although on a smaller scale. Hopefully the impasse will end soon so everyone can get back to work and buy a house! Hopefully government workers dedicated part of their paid vacations to home searches.
The housing market remains fradgile but IS moving forward. People keep getting married and are having babies (my grandchild is due in February). People outgrow their homes or need to move. If we can get over the problems in Washington, we might see more activity next spring...
September 15 Update: Throw the Bums Out - Banks Wage New War on Customers
The New York Times ran an editorial yesterday slamming a practice mortgage lenders are using to secure foreclosed properties.
http://www.nytimes.com/2013/09/14/opinion/deceptive-practices-in-foreclosures.html?_r=0
This story was making the rounds online last week but now the New York Times editorial makes the story official with paper publication with real ink.
According to the stories, lenders are hiring property management companies to assess and maintain properties owned by the lenders. Property management companies in turn subcontract various tasks to third parties. One task is to determine if a foreclosed property is occupied or vacant. Because the property management company makes more money on vacant homes verses occupied homes, there is a monetary incentive to find the homes vacant. Not that I am skeptical or suspect of underlying motives of either lenders or property management companies, but the potential problem is self evident - Monetary Incentive.
The state of Illinois filed suit against the nations larges property securing company - Safeguard. The name of the company itself conjures a secure feeling, Safeguard. The question appears to be exactly who is Safeguard protecting? According to the lawsuit, Safeguard knowingly and continuously engages in practices that appear to violate terms of the big bank settlements of last year. Specifically, banks are responsible for the practices of their subcontractors. The suit claims Safeguard illegally evicted homeowners who were in the process of working through the foreclosure process while continuing to live in their homes. According to the suite, Safeguard would change locks, destroy property, turn off utilities and just plain intimidate occupants. Kind of like jack-booted thugs (from my first blog).
The war between lenders and homeowners continues and appears to be getting nastier. So, what are you to do with a homeowner that is milking the foreclosure process and living rent free for months or years? Well, you could dump the property on Aucition.com or other auction sites and let the new owner deal with the problem (see August 26 update below). I believe two states still allow lenders to shoot home occupants that won't leave while other states appear to give deadbeat homeowners free passes for years.
Lenders can claim they had no idea Safeguard, the largest company of its kind in the nation, engage in such dastardly deeds, knowing full well they were paying Safeguard more when it secured "vacant" homes. Vacant homes can be sold easier and the bank gets to keep more money. Lenders contracted with Safeguard because, according to Safeguard, its practices meet “the highest standards in the industry.” Well, as the largest company in the "industry", it appears Safeguard can set the standards anywhere it pleases.
The whole thing just makes me feel dirty. I need a shower. I wonder what brand of soap should I use?
August 26 Update: Real Estate Market Slammed by Rates? And, What are they thinking??
Just last month I reported that interest rates have bottomed. Since then mortgage rates have increased sharply from their historic lows. While still artificially low because of government intervention, the higher rates slammed the new house market last month with sales falling over 13 percent to an annual rate below 400,000. If confirmed with August statistics, this could be a major setback to the slow economic recovery the last few years. My sources tell me we need at least 800,000 new homes per year to keep the recovery going. Robust car sales alone won't do the trick.
In the Richmond, Virginia market (where I live), I have noticed a growing number of property transfers at prices I would consider bargains - at least by Richmond metro standards. Last week I went to Auction.com and found a couple houses that are in my area and appeared to be good deals so I registered to bid, just as I have done for the last three years on the Auction.com web site.
I intended to look at the properties and do more research before the auction ended on Sunday but the weather forecast for Saturday convinced me that a day sailing on the Potomac river would be much more appealing than crawling under houses inspecting for mold and rot. When I came home Saturday evening, I had an email and voicemail from Auction.com. They wanted to talk to me about MY qualifications before allowing me to bid on a property on their auction site. The voicemail acknowledged that I had purchased properties from Auction.com but they still needed to talk with me.
The lady I spoke with at Auction.com was able to pull up my history and see my purchases but still needed to ask me a series of questions before allowing me to bid. She wanted to know if I had inspected the properties, verified occupancy, done a title search, and done my due diligence regarding other aspects of the property (see the "Home Inspection Checklist" below). I explained the sailing trip and that I would not be buying anything since I had not inspected the houses but I started asking her a series of questions. First - Are you calling everyone that is registered to bid, even previous customers? Yes they are. Second - Why are you doing this? Well, we've had an increased number of buyers back out after winning because of issues that surface after auctions have ended. Third - How long have you been doing this (my last bid on Auction.com was over a year ago)? About six months.
I went on to query her about the owner occupied and quit claim deed properties that began showing up on Auction.com almost a year ago (see November 8, 2012 update below cautioning readers NEVER to buy such properties). She admitted that may have contributed to the problem somewhat. I then asked her essentially what idiot in the company thought it would be a good idea to sell a house with absolutely no title, particularly from an auction company? She carefully explained that Auction.com is just the middle man in the transaction and while they are sensitive to buyers' needs, their sellers (banks, HUD, real estate workout specialists) are the main customers and drive the decisions. She said that people buying the owner occupied, quit claim deed houses generally know how to work the system and evict the previous owners. She speculated that large banks simply didn't have the resources to give individual attention to each property that an investor would, with much more skin in the game. I thanked her for her time. She was obviously just trying to do her job and call the thousands of people trying to bid on these houses and get their own American Dream at a bargain price.
I didn't mention the fact that Auction.com charges 5 percent of the purchase price ($2,500 minimum) as a buyer's premium, meaning Auction.com makes a significant amount of money from the very customers buying the properties - both good and bad. It would seem to me that Auction.com would be well served to rethink its decision to sell these worthless occupied quit claim properties. To be fair, Auction.com is not the only auction company selling occupied homes. It appears to be driven by big banks overwhelmed by the number of sour foreclosures in their system.
July 21, 2013 Update: Interest Rate Bottom Confirmed
Interest rates continue to bounce off historic lows and have pushed up in the last month. House prices continue to rise and an unexpected pop in oil prices will push the inflation rate up in the next few months.
Bargain houses can still be found in the Atlanta, Charlotte, and Myrtle Beach areas. They are giving away houses in Detroit, which asked for Chapter 9 protection from creditors this week. A free house in Detroit is still no bargain!
It is a good month to buy a house!
June 5 Update: House Prices Keep Going Up, and so do Interest Rates
In a report released today home prices jumped 12.6 percent in April from April 2012. This is the largest increase in seven years. Fewer foreclosures and more new homes account for some of the increase but overall demand appears strong as consumers are increasingly coming back into the market. Low interest rates and a better employment picture add to the demand.
Just as the party is getting started, Interest rates in the first week of June are heading higher. At this point we can't determine if the Fed is taking its foot off the gas or higher demand is causing a natural rise in interest rates. Either way, rates remain close to historically low levels and home prices are still low.
Bottom line: It is STILL a good time to buy a house to live in or as an investment!
May 4 (Kentucky Derby Day) Update: Sticker Shock!
I buy all my cars at federal government auctions - not state, not repo. The federal government takes better care of their fleet cars because taxpayers foot the bill. When the cars reach a certain age (7 years) or mileage (around 70K), the cars go to auction. The public can buy the cars around the country. Here's the site: www.autoauctions.gsa.gov. This week I went to an auction in VA Beach. 2006 SUVs with 50K or so miles were selling for $15 - $20 thousand! I bought my 2000 Expedition in 2007 with 50K for only $7,500! Have car prices doubled since the great recession ended?? Oh, never buy a car the FBI had. They trash them. My guess is that Homeland Security trashes theirs too. My big green Expedition came from DC and was assigned to the Department of Energy. Ironic?
Real Estate report: Home sales continue to recover and construction has improved. Realtors are reporting actual shortages of homes in some areas. Prices have recovered from 2012 lows but are nowhere near the bubble prices of 2006. If car prices are a guide for what is yet to come, I anticipate much higher prices this summer and fall! South Carolina and Georgia remain depressed with many bargains. Short sails are booming as banks are now ready to write off more bad loans! While fewer homes are currently underwater (mortgage more than value of home) the total number remains disturbingly high.
It is STILL a great time to buy investment real estate!
March 21 Update: Housing Sales and Prices Jump!
The National Association of Realtors reported today that sales of existing homes were up ten percent in February from a year earlier. Existing
homes are selling at a five million annual rate, which is the best showing in three years!
The report indicated that 25 percent of the sales were “distressed” homes such as foreclosures and short sales. Distressed sales
accounted for 34 percent of total sales this time last year.
The median sales price is up a whopping 12 percent from last year!
This month’s report confirms the housing market has turned and is on the upswing. However, because a quarter of all sales are foreclosures or short sales, the market continues to be filled with bargains! HUD and some large banks continue to have huge inventories. Ally bank is desperate to clear its
inventory.
Don’t be late to the party! Get your copy of Where’s MY Bailout? on Amazon (link above) and jump into the market this spring!
March 8 Update: Blowout Jobs Report! Homes are being Built again.
The Labor Department reported today that the economy added 240,000 jobs in February - much higher than expected. This number is subject to revision and very well could be wrong, considering Washington DC was shut down this week because of some snow flurries! The report included the addition of 48,000 construction jobs, confirming what we have already suspected - housing has bottomed and is starting to recover!
Home prices are on the rise and new homes are being built but it's not too late to get bargains at auction or short sales. HUD still has a huge inventory and Ally Bank failed the latest stress test because of its bankrupt residental lending unit. HUD and Ally are still dumping homes. I have also noted an increased number of occupied homes up for auction either with clean title or with uninsured title. Auction.com continues to offer large numbers of these properties. Hudson and Marshall has recently begun offering quit claim deeds at some of its auctions. Unless you have money to lose, do not buy an auction home without an insurable deed!! I still don't understand why these properties are being auctioned.
There is a chapter in my book about this kind of offering: Kill the Scammers!
Spring is two weeks away. It's a good time to buy an investment house!
February 3 Update: Ravens Win! It's time to buy an investment property
It is clear the real estate market has bottomed and is starting to turn around. Even as houses are selling again, bargains abound! Banks continue to
reduce inventories at firesale prices and continue to walk away from mortgages, literally leaving properties on courthouse steps. Fannie and Freddie remain
bloated with excess houses and are more inclined to let them go at reduced prices. Auctions are still the best places to get houses at cents on the dollar.
Still, investors must exercise caution even when buying at auction. Auction.com continues to sell properties without clear title. (See Below) I received a flier from Auction.com in the mail explaining the quit claim deed properties. These are all occupied "bank owned" properties in various states of foreclosure. My take is that the banks are shifting their liability to unwary auction buyers. This is a HUGE risk for buyers! With all the problems banks had with robo signatures, I believe many of these loans will ultimately be deemed void in court and auction buyers will lose everything! Don't buy these homes!
November 8, 2012 Update: The election is over, at last it's safe to answer the phone!
Online auctions at Auction.com are in full swing! In Florida there are 120 current auctions that will end Saturday morning and another 450 scheduled. North Carolina has 50 properties selling Saturday and Virginia has a good number. There are some prime beach properties up for sale in North Carolina! It's not too late to have the
properties checked out before you bid. The book outlines the process. Essentially you contact a realtor in the area and send them the buyer's checklist. If you are lucky, the realtor has actually seen the property and can give you immediate feedback. Ask the realtor if they would like to be your buyer's agent as compensation for checking out the property. If you win the auction, the seller pays your realtor!
A note of caution:
The past two auctions on Auction.com have included several listings that do not
guarantee a clear title. These auctions indicate the buyer will receive a quit
claim deed and the property is not eligible for title insurance. AVOID THESE
PROPERTIES! When you buy a property at auction, you want clear title that is
backed by a title insurance policy. When you sell, your buyer will be assured
that if there is any problem with the title, it will be covered by insurance.
Galleria Drive, Fayetteville, NC
This was my first purchase in 2010. This condo is 2 BR, 2 BA open floorplan. It was purchased on Auction.com for $25,000. After $5,000 in repairs, it has been rented for $650 per month. All forclosures in the complex have been sold and prices have rebounded into the low $50,000's!
Eagle Lakes, Myrtle Beach, SC
This was my second purchase in May 2012, again on Auction.com. This condo was owned by HUD and sold on a previous auction. I researched the condo with methods outlined in the book. The unit checked out and I bid online. The price went much higher than I was willing to pay and I backed out. Several weeks later, I was watching an auction and the property popped up with only a few days to go in the auction. I started bidding and ended up winning at only $20,000. After expenses, my final cost was $22,500. I decided to use this as a vacation home and appointed it with high-end tile and renovated the bathrooms for about $7,000. Units are selling for $60,000 now.
HUD would not normally let a property sell at such a low price but had done all the prep work to get it out the door when the first sale fell through. My guess is they would have sold it to whoever was the highest bidder at the next auction. Now Fayetteville pays the expenses for both units!
HUD would not normally let a property sell at such a low price but had done all the prep work to get it out the door when the first sale fell through. My guess is they would have sold it to whoever was the highest bidder at the next auction. Now Fayetteville pays the expenses for both units!
Sample Chapter from the book:
Home Inspection Checklist
If you are asking your buyer’s agent or paying someone fifty
dollars from a Craigslist post to inspect an out-of-town property, don’t expect
a thorough job. You are not looking at a property that has been lovingly
maintained; it has been vacant for up to a year; it may have been vandalized,
appliances may have been stolen, or a leaking pipe could have ruined the floor.
You want to make sure the property is standing and doesn’t need extensive
repairs. A perfect property will look bad, discouraging most prospective buyers,
but be structurally sound.
Generally, because you have limited your search to houses built
after 1985, you will avoid some of the issues
related to older houses such as lead paint or collapsing roofs. If you are
considering a home built during the Chinese drywall era, verify that the
wallboard is made in America.
Outside
Roof: The ridge (peak) should be straight and level. There should be no
evidence of sagging between trusses. Any deterioration of asphalt
shingles should be noted. Flashings around the chimney should be secure and
without signs of cracking. If the roof is sagging, do not consider the property.
Chimney: Any bricks or mortar missing? Is the chimney leaning? If the
chimney is leaning, do not consider the property.
Siding/outside walls: If brick, look for missing mortar or cracked bricks; if wooden or
pressboard, look for evidence of rot by tapping on the wood, particularly
near the bottom few rows or corners. If the exterior wood is rotten, do not
consider the property. Vinyl siding can hide underlying rot. Pull up the
bottom row and make sure the wood beneath is dry and rot free. If
there is significant rot, do not consider the property.
A word about stucco. In the 1990s and early 2000s, stucco was a
popular façade for larger houses and McMansions. Stucco belongs in the desert,
not the humid east. Many stucco houses had small cracks or poorly sealed joints.
Moisture would migrate between the stucco façade and wooden house frame and
insulation, and begin the rotting process. Avoid stucco houses in the eastern
part of the country.
Foundations: Look for cracked bricks or damaged masonry. White
or chalky substances on the bricks could be a sign of water intrusion. If the
foundation is cracked, do not consider the property.
Inside
Basement: If there is any sign of water stains, mildew, mildew
odor, or standing water, do not consider the property.
Floors: Ideally the carpets will be stained from spills and
wear. Unsightly flooring can discourage prospective buyers
but is very inexpensive to replace. On the other hand, look for sagging or
sloping floors. If the floor sags, do not consider the property.
Walls: Verify the wallboard was not made in China. Look under
the sink, in the attic, furnace room, or plumbing access ports to find
unpainted wallboard. If there are any Chinese characters, do not consider
the property. Make sure doors open, close, and latch. Make sure the walls
are vertically straight.
Kitchens and Bathrooms: The water will be turned off so you
cannot test faucets. Look for water damage, mold, or
cracked tiles or calking. Make sure the toilets and sinks exist and appear
to be in good shape. List the appliances that are in the kitchen. Budget
missing appliances or fixtures accordingly. All kitchen appliances can be
replaced for about $1,500 and bathrooms redone for less than a thousand.
Electrical, Plumbing, and Utilities: Look at the house plumbing.
If the property has Qwest pipes, do not consider the property. If the plumbing
is copper, make sure it has not been stolen. Look at the electrical service. Are
the circuit breakers in place and appear to be the original installation? If the
electric panel, circuit breakers, or wiring is missing, do not consider the
property. Check the water heater for signs of rust or corrosion. A replacement
water heater can run up to $1,000 installed. Make sure the furnace is in place
and the outside unit is not missing. Thieves tend to steal outside units of heat
pumps on foreclosed houses. Replacing a heat pump system can cost $5,000.
If the property does not have deal-breaker issues, set your bid
with enough margin to make repairs and pay any transaction costs; then sell
below current market value and make a profit or rent for ongoing income!
Home Inspection Checklist
If you are asking your buyer’s agent or paying someone fifty
dollars from a Craigslist post to inspect an out-of-town property, don’t expect
a thorough job. You are not looking at a property that has been lovingly
maintained; it has been vacant for up to a year; it may have been vandalized,
appliances may have been stolen, or a leaking pipe could have ruined the floor.
You want to make sure the property is standing and doesn’t need extensive
repairs. A perfect property will look bad, discouraging most prospective buyers,
but be structurally sound.
Generally, because you have limited your search to houses built
after 1985, you will avoid some of the issues
related to older houses such as lead paint or collapsing roofs. If you are
considering a home built during the Chinese drywall era, verify that the
wallboard is made in America.
Outside
Roof: The ridge (peak) should be straight and level. There should be no
evidence of sagging between trusses. Any deterioration of asphalt
shingles should be noted. Flashings around the chimney should be secure and
without signs of cracking. If the roof is sagging, do not consider the property.
Chimney: Any bricks or mortar missing? Is the chimney leaning? If the
chimney is leaning, do not consider the property.
Siding/outside walls: If brick, look for missing mortar or cracked bricks; if wooden or
pressboard, look for evidence of rot by tapping on the wood, particularly
near the bottom few rows or corners. If the exterior wood is rotten, do not
consider the property. Vinyl siding can hide underlying rot. Pull up the
bottom row and make sure the wood beneath is dry and rot free. If
there is significant rot, do not consider the property.
A word about stucco. In the 1990s and early 2000s, stucco was a
popular façade for larger houses and McMansions. Stucco belongs in the desert,
not the humid east. Many stucco houses had small cracks or poorly sealed joints.
Moisture would migrate between the stucco façade and wooden house frame and
insulation, and begin the rotting process. Avoid stucco houses in the eastern
part of the country.
Foundations: Look for cracked bricks or damaged masonry. White
or chalky substances on the bricks could be a sign of water intrusion. If the
foundation is cracked, do not consider the property.
Inside
Basement: If there is any sign of water stains, mildew, mildew
odor, or standing water, do not consider the property.
Floors: Ideally the carpets will be stained from spills and
wear. Unsightly flooring can discourage prospective buyers
but is very inexpensive to replace. On the other hand, look for sagging or
sloping floors. If the floor sags, do not consider the property.
Walls: Verify the wallboard was not made in China. Look under
the sink, in the attic, furnace room, or plumbing access ports to find
unpainted wallboard. If there are any Chinese characters, do not consider
the property. Make sure doors open, close, and latch. Make sure the walls
are vertically straight.
Kitchens and Bathrooms: The water will be turned off so you
cannot test faucets. Look for water damage, mold, or
cracked tiles or calking. Make sure the toilets and sinks exist and appear
to be in good shape. List the appliances that are in the kitchen. Budget
missing appliances or fixtures accordingly. All kitchen appliances can be
replaced for about $1,500 and bathrooms redone for less than a thousand.
Electrical, Plumbing, and Utilities: Look at the house plumbing.
If the property has Qwest pipes, do not consider the property. If the plumbing
is copper, make sure it has not been stolen. Look at the electrical service. Are
the circuit breakers in place and appear to be the original installation? If the
electric panel, circuit breakers, or wiring is missing, do not consider the
property. Check the water heater for signs of rust or corrosion. A replacement
water heater can run up to $1,000 installed. Make sure the furnace is in place
and the outside unit is not missing. Thieves tend to steal outside units of heat
pumps on foreclosed houses. Replacing a heat pump system can cost $5,000.
If the property does not have deal-breaker issues, set your bid
with enough margin to make repairs and pay any transaction costs; then sell
below current market value and make a profit or rent for ongoing income!