Thread: The Real Employment Picture?

MarketTimer wrote:

......darn we will not even be the superpower of sin anymore...

draughts we were good at something....tear in eye...

hahaha LOL...good one



MarketTimer wrote:

Do you want fries with that, Sir?

That will be your childrens future....

Is there ever a time when someone is not saying that?



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My tid bit on homebuying: Still not everyone can afford a house. Yes, rates are low, but prices are higher and you have to look at supply. Here, supply is very low and for a while it was very low nationwide, which also drives up prices (and leaves only the more expensive houses available).

Additionally, most early-twenty-year-olds are not in a financial position to buy a home and there are plenty of those.

I've been wondering about a real-estate bubble for a while now. Until now, I've always heard "Oh noooOOOoooo". I dunno. We'll see. In the meantime, I gotsta buy a lotta furniture and things for this new house.

cowboy wrote:

Basicially Pyriel, as far as your response I feel the top paragraph is for MT to answer. Yes, you could go to Wyoming and buy land but you better have cash in your pocket. One is I know moreabout lending then you think. You also make several points that I have been trying to pointout too. One is interest is tax deductable so why not fix it and collect it. Two is if you feel you have property that is good enough that Joe Blow will keep renting as you keep raising his rent your fine. But if MT is right and were going to a service type countrymore Americans will be on lessincome. Your strategy will not work will it. It all comes down to what the little man can afford and if your little man can't afford it he wont rent. He will go accross the street and rent from someone that has his building paid for as he won't be passing on the interest fees because he is his own banker. Basically if you have a product, you have to keep your customer happy.Most people have the same thinking as you do Pyriel that you can just pass it on and smile,I think that time has passed and if you want to keep your customer in 2 -5 years you need to kiss major butt. Right now, a lot of people are buying houses why?The interest rate is down and they can own for whattheir rent is costing them. This is why houses have went up in price.

Cowboy, Have you ever had coffee with redbull? That is what I am having now and they both seem to be doing their job since it's only 0500 hours here in Hawaii. You got one part right but you didn't get the other part. When you remortgage a rental property (after it appreciated in value which your tenant had paid for) you need to take that money and buy more property. Eventually, you have to raise rent if the market calls for it. I'm attaching a worksheet on how we look at properties before we buy and before we remortgage. I'm sure you'll see what I am talking about. Also, your way of thinking that your competitor will lower his rent is just not happening. If the market calls for it, everyone raises rent (even those who has no mortgage) I have a friend who bought three fourplexes with cash (total of about more than$500k)within the last two years and he is regretting it because it is killing him with the tax (no mortgage brought him to the highest tax bracket). So what is he doing now? He is remortgaging and taking the nontaxable money to buy a day care business. You see, and I am sure that you've heard this before, you have to use OPM to make money. As for the comment about people buying their houses, I think that its great. However, if I knew then what I know now, I would have bought a 4 plex which is considered a residential home loan. I would have lived on one and rent the others. Tenant pays my mortgage andI have a free place to stay and still get tax deductible on it. I will then use my money (saved) to increase my net worth. So that I can buy that house free and clear.

We do this projection (attached) on every single property that weplan tobuying. I also would like to apologize if I had misled you to believe that we remortgage for 100% value of the property. We never ever do that because we end up not having any room for leverage. 80-90% isa good number for remortgaging. Everytime you remortgage, your holding pattern before you can remortgage again increases. So if your first remortgage is on the 5th year, the second one will be on the 15th year. Now, of course, if you haveenough passive income you candefer your remortgaging factor till later. Which iswhat is ending up happening. The longer you defer, themore leverage youwill have from your property.

BTW, we ended up not buying this property eventhough it would have given us more than a 100%cash on cash return for our money within 6 years without remortgaging.

Hi Pyriel! First I would like to commend you for putting something like this out to download for others to view. In an appreciating market this works fine. I also figure that you may be somewhat more savy then other investors I have worked with. One thing I would like to say is it takes all types of people to make the world go around and one thing I have learned is we all have different jobs and different interests.

I down loaded your worksheet last night and it took me the time to read the first page to decide if I would invest in this or not and I decided like you did that I would not. Your initial investment is $32000, your passively yearly income is $1970.76. This is a .0651% return for the money invested.

The rest is just an assumption that the property is going to appreciate and your going to make money on the sale in the future. The money to be made is not in the operation of the property but in the resale of the property itself. If I was invested in this property I would put it on the market immediatly and sell it as soon as possible. Why? The annual profit deteriates annually in every year of ownership. In other words every year you hold the property it makes you less profit. I could beat this with a stick all day but Im not going to.

I did notice something else and thats depreciation and captial gains. I notice you straight lined the depreciation. THis possibly is a good thing. If you did what this is showing and sold this real estate at the shown value, the depreciation would, or a portion of it could become considered ordinary income and the $15,000 made on the sale would immediatly become capital gains and have a 10% minimum tax in the year sold or higher depending on where you set in the tax bracket. This possibly explains why you would be wanting to repurchase other property and also remortgage. This all works fine until you decide that you don't want to buy anymore.

This is only a perspective of my view and others may be looking at it differently. Lets look at it from other perspectives. I am the lender and Pyriel comes in and submits this plan would I do it? You bet I would, investment $88,000. money made in 5 years $31972.80 a return = 36%. Plus I have the mortgage on the property.

Lets look at another prospective, the real estate agent, this is a good one, buyer meets seller in my office and $110,000. sale at 7% for being a middle man = $7700.00. No investment. Sweet! Right off the top!

I am an investor I have $32,000 and throw it in my TSP and take a chance, it averages 8.5% for 5 years, no worries and not much effort annual return = $2720 per year end of 5 years $45,600. Interest rates rise price of house deteriates to $100,000. Suddenly the property looks inticing.

I could keep going here but I do want to point out another thing about your spread sheet. The annual 36, 48, & 60 month profits are all wrong in my opinion as you forgot to subtract the initial investment of $32,000 to purchase the property.

Oh by the way! Coffee and Redbull in the morning wow! Just a thought but maybe you need to read Tekno's little ditty about the class and the jar, it makes a lot of sense.

Pyriel, please do not take offense to this. I am just trying to give you my prospective of what Isee. Don't get me wrong here that I am totally against people doing what they enjoy. The Real Estate business is a dog eat dogenvironment and some people love it.

Have a good day in the markets everyone!