Open House - Rants & Raves

User Forum Topic
Submitted by RatherOpinionated on December 18, 2007 - 2:18pm

I haven't seen a thread on this topic, so my apologies if it was already done. Not sure if there are actually any potential buyers on this forum, or if everyone is a bearish perma-renter. If you're the latter, then you should skip this post.

Those actually in the market for homes and who have been house hunting, perhaps this would be an interesting place to post your comments on a particular property so others who are in the market (in that same area) can benefit from it.

Useful details of course include:
- Address/Zip/MLS Number
- Date of Open House you attended
- Comments on house, price, location, schools, circumstances of sale, etc (anything useful)

If this is a pointless thread it will die quick, if people think it's worth it, well, post away.

Submitted by NotCranky on December 18, 2007 - 3:30pm.

R.O.
I have actually thought about a pitch thread. Another realtor on the board and I have discussed it via e-mail. Our consensus was that I should run it by the blogmaster.I decided not to. It is not that I am saying you should, just pointing out that this idea has been considered.Yours truly thinks there will be good deals long before the bottom and therefore long before that sentiment shifts.

I actually can see your idea having a good purpose here. Sentiment is going to be tough still and for the most part, rightfully so IMO. I believe that most people here don't want to watch the "knife catching olympics"(credit TG). I wonder if this idea of pitching properties won't be more commonly accepted when people start to get off the fence.
Who knows? Maybe you have picked the right time and place?

BTW, I have a can't miss, property to sell you R.O.

Submitted by RatherOpinionated on December 18, 2007 - 3:36pm.

I'm just thinking that not ALL people who visit this board care about "timing the bottom" - and might just be in the market for a home. Some might already own and look to upgrade, or downgrade, so their properties may be fluctuating in tandem - so property price declines may not be as big of an issue.

Anyhow, houses are going pending, so people are buying. So, if there are any of those people on this site that have been visiting open houses, I just thought this may be an interesting place to comment on what they've seen.

Of course, it is likely only negative things will come from this thread, since a real buyer who really likes a place is highly unlikely to pump it up in this thread for fear that another buyer may recognize the value and pose a threat to their potential offer.

I guess this is the perfect thread for this board/readership, since it inherently will be negative.

Oh well.

Submitted by NotCranky on December 18, 2007 - 5:53pm.

R.O.
I forgot to ask,why specifically open houses? The vast majority do not identify houses they think are good deals or that they buy, via open houses.

I get the impression that you are not seeing some of the good stuff that happens here(on the blog), both towards coaching people who are buying or selling, including helping people decide not to do either.
I like your idea or some version of it. i just want to point out that there is already plenty of good information sharing here, once an area merits it or when someone specifically brings it up. Take the active Murrieta thread for instance and threads by Raptorduck and others who admit they are shopping.

Submitted by barnaby33 on December 18, 2007 - 6:14pm.

Hey RO, if you find something you think is a good deal, let the community know. Others regularly do, or at least ask about properties. The response they get is that almost universally bearish because its too early in the cycle for any real deals to occur. Most of the real price declines are in the future and the readership here knows it. So in order to qualify as a good deal, it would probably need to satisfy basic good deal metrics, like 8xGRM. Know any deals like that?

If however you find something, unless you are going to bid, you should share. Same goes for you Rustico.

Josh

Submitted by RatherOpinionated on December 18, 2007 - 6:29pm.

Yeah, good points everyone. I guess I listed Open Houses only as one method. There are all the other posts that are good, but I just figured this was an area that was not covered in the other posts - physically seeing properties and commenting on them (not just finding them online and commenting on them that way).

Maybe it just wasn't a great idea as a thread. Oh well.

Submitted by FormerSanDiegan on December 18, 2007 - 6:40pm.

Good idea.
But, I haven't been to an open house in a couple years.
I'm thinking about maybe hitting some in 2008 ... but not until the numbers on my spreadsheet get a little more attractive.

Submitted by SD Realtor on December 18, 2007 - 7:07pm.

I think there is some merit in the idea. As Rus posted earlier in the thread, he has run the idea by me before. The crux of the decision lies with "the creator" right? His site, his rules, his ultimate decision.

I would not want this site to turn into an SDCIA sort of deal. Sometimes it is hard to figure out where to draw the line right? I mean besides having a posting board or area where good deals can be advertised there are other opportunities. Certainly the board is frequented by experts in other fields, not just real estate, financing, contracting so perhaps an area to post contacts there could be beneficial.

Anyways I am on the fence about it all. I do see value in it but it would be for selfish reasons of making money. I think the very best deals I find I would keep for myself or pass on to investors who are clients or potential clients. Sorry just being honest.

Like I said, I like the idea.

SD Realtor

Submitted by barnaby33 on December 18, 2007 - 8:37pm.

I goto open houses all the time. Mostly in my neck of the woods. Northpark/Hillcrest/Mission Hills/University heights. I don't post about them because as I said before its way too early for any truly good deals.

I went to an open house on sunday. They wanted 760 for a 2/2 no garage on a canyon with lots of stairs. True they had renovated it some, but it was 300% the cost of renting.

Open houses these days tend to be Albatross' that look nice but won't be sold. So the agent sits it, hoping to pick up buying clients. I'd say that almost all of the open houses I have seen recently have been egregiously overpriced. Not just overpriced, egregiously.

Josh

Submitted by Jumby on December 18, 2007 - 9:07pm.

"8xGRM"....you are kidding right? That is very hard to find anywhere in the US, unless it's a piece of crap or in a bad hood. I'm just as bearish as anybody on this board, but GRM of 8 ain't gonna happen in Diego....I really wish it would though because I would be investing like crazy and selling it like crazy.

Submitted by Coronita on December 18, 2007 - 9:37pm.

Fine.

 

Deal or No Deal? MLS#071093658

http://sandiego.houserebate.com/search/h...

Sorry, was looking at this for some time now. Three relistings, and still no sales.

SD R, you might be familiar with this one. Particularly the fishtank :) 

 

Check City records. 12524 El Camino Real #C closed escrow @ $510K 09/07. This home is a must see, close to cul-de-sac, light & bright, high ceilings, open & bright kitchen w/Corian counter tops.Balcony off nook for fresh air. Two master suites(one w/panoramic views)with own walk-in closets & baths.See hot air balloons go by!

BEAUTIFUL 150G SALT WATER FISH TANK IN DINING ROOM ( Standard in complex is an undesirable railing). Extra storage closet, special to this house on the second floor. Color therapy used in coloring the rooms. All colors with high sheen professionally painted. Washer and dryer are conveniently located upstairs. Higher end Berber carpet. Gas log fireplace in living room. Great location away from traffic. Close to schools, library, community parks, stores, theaters, police station, etc. Two car garage. Complex features pool & spa. Look no further.

 

 

 

Submitted by SD Realtor on December 18, 2007 - 10:53pm.

FLU why do you torture me so? I am still on this sellers most hated list because of my price recommendation last year to her.

heheheheh....

SD Realtor

Submitted by FormerSanDiegan on December 19, 2007 - 9:03am.

SD R - But you don;t understand. This house is special. They used Color therapy used in coloring the rooms.

COLOR ... THERAPY

That's gotta be worth 100K.

Submitted by barnaby33 on December 19, 2007 - 3:59pm.

"8xGRM"....you are kidding right? Hardly, there are plenty of places where you can buy things in a decent area for this, especially once house prices deflate to a more realistic level. It all depends on your view of history. If you see as I do that we have lived our entire lives in an inflationary bubble, then 8xGRM is an artifact from a bygone era. If you see deflation in our future, even that might be a bit expensive.

At this point houses are merely highly leveraged gambling devices. If inflation keeps up and you keep your job, you win. If deflation takes hold and you bought in the last 5 years, you're screwed.

Either way overall housing returns to the same formulas time and again. Maybe Sd won't return to those types of numbers, I could be totally wrong there, but I certainly don't think its crazy.

Josh

Submitted by surveyor on December 19, 2007 - 4:12pm.

8xGRM

The 4 unit I am purchasing now in Huntsville Alabama is running at a 6.4xGRM...

http://piggington.com/re_sale_in_huntsvi...

The property is not in a La Jolla class neighborhood for sure, but it is a decent area with lots of tenants across from a military base. The purchase price is $115k and annual rents total $18000 (the post shows $117k sales price, but he is paying closing costs so it's now down to $115k).

If I had more money, I'd buy ten of these... As such, I will be content to buy two more...

Submitted by HereWeGo on December 19, 2007 - 4:49pm.

surveyor -
Why was the seller willing to part with the property? Is he retiring or somesuch? Also, is the seller a Huntsville resident?

Submitted by surveyor on December 19, 2007 - 5:04pm.

I do not know specifically why he was selling the property. I asked my realtor to ask him a few times, but he never got an answer. He originally bought the property for $95k about three years ago, but he put a lot of work into it. He may have been tired of the property or may just have finished re-habbing the property. With all the bad news on real estate, he may not have been able to get as many buyers, or he was probably spooked by all the negative news. He also was keen on closing before the end of the year (and so the closing date is on December 28). Why he wanted that, I do not know...

In any case, he was asking for way too much ($139.9k) and we worked him down. My original offer was $110k and we prodded him down using comparables in the neighborhood. Also, we were in no rush and we were looking at 15 other properties with similar numbers. Finally he came back to us, asked if we would go up a little and we did.

I have to look at what I posted in the other topic post, but I think I calc'd out $300 per month cash flow, a return on equity of 43%, and a cash on cash of 18%. The total closing costs are estimated at around $12k (which reminds me, I have to put together that money...).

Submitted by Jumby on December 19, 2007 - 5:07pm.

I hear ya Josh, I just don't think Diego will ever get back to that point...

Surv, let me know if I'm wrong, but it didn't seem that you factored in the interest deduction in your tax savings (in that equation). Seemed like you only factored in straight line depreciation.

Submitted by surveyor on December 19, 2007 - 5:17pm.

Tax savings is such a difficult thing to calculate because it changes from person to person. Every person's situation is different and so I just used a generalized tax savings calculation.

But yes, I did just use straight line depreciation.

Also, note that I used the entire property cost ($117k) to calculate the depreciation. Only about 80% of that $117k will be actual depreciation (because you can't depreciate the cost of the land itself, only the building). The rest of the 20% will comprise of the interest deduction, the expenses, chattel depreciation.

Submitted by Jumby on December 19, 2007 - 5:19pm.

Care to share some pics? I'm on loopnet right now and all the 4 plexes i see are in the 200s...

Submitted by surveyor on December 19, 2007 - 5:25pm.

I can share some pictures as soon as I get home. It's all on my home computer. Most of the fourplexes I saw were not listed on loopnet, though.

The fourplexes I saw ranged from $80k (non-brick construction) to $180k (all brick construction).

Submitted by Jumby on December 19, 2007 - 5:26pm.

that would be cool...what county is huntsville in?

Submitted by surveyor on December 19, 2007 - 5:30pm.

Madison County.

Submitted by Jumby on December 19, 2007 - 5:40pm.

too bad that county doesn't qualify for the GO Zone...

Submitted by SD Realtor on December 19, 2007 - 5:40pm.

Surveyor -

Yours is an example of diligence and hard work to achieve (what looks like) a potentially sound investment in rental property. Your methods appear to be based on alot of legwork, study, and working with local realtors/property managers. Also the most important point seems to be that a substantial amount of time studying the demographics/employment/economic (growth potential) of the areas you invest in is performed.

It is a very sound approach and has produced, and will continue to produce great returns for you. What is clearly evident, (at least to me) is that there is more work involved then people think. Congrats on your finds and I am sure there will be more in the future.

SD Realtor

Submitted by surveyor on December 19, 2007 - 5:56pm.

Thanks SD R...

I've actually been looking at Huntsville for the past year, but the credit crunch made it difficult to search for loans. I only entered the serious acquisition phase for Huntsville about three months ago. For Huntsville, it wasn't nearly as much work because my realtor was an investor himself and he was extremely aggressive. We basically polled five properties and see who would deal.

Like I said, I wish I could get more money so that I could buy more, but oh well. I only have enough for two more. Still, that should be enough.

My next area for research is Nashville. I did take a look at New Orleans and the other GO Zone areas, but there is a lot of investor activity there bidding up projects so I'm reluctant to take part in that. I'm still a little small potatoes so I'd rather have a realtor give me at least most of their attention. So hopefully in 2008 I will be looking at some four plex in Nashville and making an offer on it.

I told my wife, it's going to be difficult justifying buying a car when you can purchase a property for $15k...

Submitted by FormerSanDiegan on December 19, 2007 - 6:01pm.

Surv, let me know if I'm wrong, but it didn't seem that you factored in the interest deduction in your tax savings (in that equation). Seemed like you only factored in straight line depreciation.

????

The mortgage interest is simply an expense (as are property taxes, insurance, depreciation, maintenance, property management, advertising costs etc). These are deducted from the gross rent received, you only pay taxes on the amounts that exceed real (most of them) and phantom (depreciation) costs.

The accounting in the other link took into account mortgage expenses by subtracting them from gross rents. There is no other interest deduction to factor in.

Submitted by Jumby on December 19, 2007 - 6:10pm.

You CAN deduct interest for tax purposes on investment property.

Submitted by FormerSanDiegan on December 19, 2007 - 7:00pm.

You CAN deduct interest for tax purposes on investment property.

As I stated above the mortgage interest is deducted from the gross rent received. (As are the other expenses mentioned). surveyor accounted for these in his calculation.

There is no additional "tax savings" for which to account by taking a mortgage interest deduction. He already accounted for that by subtracting it as an expense from gross rents.

Submitted by Jumby on December 19, 2007 - 7:39pm.

I was referring to data he posted in a different thread. He posted his numbers for Return on Equity (ROE).

Return on Equity = (the way he calculated it) Cash Flow + Appreciation + Loan Reduction + Tax Savings divided by down payment.

*************
What I originally said (and you first commented on) is he didn't factor in the interest deduction when figuring his tax savings. He confirmed that by saying he purposely overcompensated by adding in too much depreciation (he didn't subtract the land from the basis).

Make sense now? I got a feeling we are saying the same thing.

Submitted by surveyor on December 19, 2007 - 7:46pm.

Huntsville Property

No, FSD is right, I thought you were referring to another interest deduction, not mortgage interest deduction. The mortgage interest deduction is taken away from the cash flow.

Some pictures...

 

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.