During the bubble rally, it was common for people to buy multiple properties. When these people’s financial empires crumble, a number of properties can be dumped on the market at the same time. Today’s profile is about one such failed enterprise.
There are multiple properties today. This owner has 3 in Irvine and 1 in Mission Viejo that I found. All three Irvine properties were put on the MLS yesterday and some are listed as short sales.
Asking Price: $699,999
Address: 12 Gold Bluff, Irvine, CA 92604
Love Shack — B-52s
How do you build a real estate empire? There are plenty of hucksters who will sell you their books, tapes and seminars to tell you. Of course, they make money on the products rather than on investing in real estate. If there was a secret to making huge wealth in anything, you can be sure it will remain a secret because the moment everyone starts doing it, the profits disappear. Ask a successful quant trader to share their algorithms and see how far that gets you.
The “secret” to building a real estate empire is simple. Buy properties with 20% down that have a positive cashflow yielding a cash-on-cash return of at least 10%. When you have saved enough or built enough equity in a property, you buy another one, as long as you maintain 20% equity in the first. You keep pyramiding up your gains until you have a number of properties each producing positive cashflow providing you a steady cash return on your investment. Appreciation is a pleasant bonus if and when you decide to sell (you never need to sell because it has positive cashflow). This “secret” has been known for decades among professional real estate investors.
The problem with the traditional method of making money in real estate is that it is slow. It takes time to save money, and it requires sacrifice. There is no instant gratification. You can’t buy a property and start spending $100,000 a year from it. You may only acquire 1 property every 5 years. It takes decades to create an empire that way. Who has time for that?
Then there is the way to build a house of cards. Buy properties with no money down that have negative cashflow. Rely on loose financing to obtain as many properties as you can as quickly as you can. Pray that some greater fool comes along to allow you to capture some appreciation before the negative cashflow eats you alive. This is the amateur method of building a real estate empire. It is only a matter of time before this method blows up. The people giving seminars make good money though.
The Love Shack is a little old place
where we can get together
Today’s profile is a crumbling financial empire. The owner is a woman who bought 4 properties in 2004 through 2006 (at least in Orange County). In 2006, she had the bright idea to quit claim all of her properties to an LLC. In 2007, she had the LLC deed the properties over to a corporation. I won’t give the full name, but the title is ?????????? Love, Inc. Who puts “Love, Inc.” in their corporate name? When I first saw this, I was wondering if some porn company from San Bernardino bought some Irvine houses to film on location. Crazy.
For this post, lets call the owner Love Shacks, Inc. I am not sure what she was hoping to accomplish by all these transfers. The purchase money mortgages were non-recourse by law, so she had no liability beyond the loan amount. It is possible she wanted to refinance and maintain the non-recourse status by obtaining the financing through a corporate entity. However, it doesn’t seem likely that a lender would loan this much money to an upstart corporate entity without having the owner personally guarantee the loan. There is no tax advantage to doing this that I can see. Perhaps she just liked the idea of incorporating Love Shacks Inc. because it sounded cool.
No matter her reasons, this owner went out an built her financial empire. Unfortunately, the property records do not show any of the loans she acquired through the corporation. I don’t know why, but none of the properties have this data (perhaps that is why she did it). Some of these are listed as short sales on Redfin, so we will have to take their word for it.
Asking Price: $699,999
Income Requirement: $175,000
Downpayment Needed: $140,000
Monthly Equity Burn: $5,833
Purchase Price: $675,000
Purchase Date: 4/26/2005
Address: 12 Gold Bluff, Irvine, CA 92604
| Beds: | 3 |
| Baths: | 2 |
| Sq. Ft.: | 1,686 |
| $/Sq. Ft.: | $415 |
| Lot Size: | 4,385
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Other |
| Year Built: | 1975 |
| Stories: | 1 |
| Area: | El Camino Real |
| County: | Orange |
| MLS#: | S562179 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 2 days |
Highly upgraded with hardwood floors and remodeled kitchenn that
features stainless steel sinl and stone countertops. It is walking
distance to to the award winning Irvine Unified School District
Schools. NO Mello Roos Tax and very low association dues. Newer roof,
large backyard, seperate atrium area and two car roll up garage.
She forgot the $0.99 and 9/10 on the asking price.
sinl? kitchenn? seperate? to to?
The original loan on this property was an Option ARM with a 1% teaser rate for $540,000. There was also a second for $72,101. If there were no refinances granted through the corporation, the total property debt would only be $612,101 plus accumulated negative amortization. This would not be a short sale if that is accurate.
Asking Price: $729,999
Income Requirement: $182,500
Downpayment Needed: $146,000
Monthly Equity Burn: $6,083
Purchase Price: $700,000
Purchase Date: 8/30/2006
Address: 3 Monte Carlo, Irvine, CA 92614
| Beds: | 3 |
| Baths: | 3 |
| Sq. Ft.: | 1,600 |
| $/Sq. Ft.: | $456 |
| Lot Size: | 3,874
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Spanish |
| Year Built: | 1988 |
| Stories: | 2 |
| Area: | Westpark |
| County: | Orange |
| MLS#: | S562186 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 2 days |
BACKYARD WITH UNOBSTRUCTED VIEW. CLOSE TO POOLS, TENNIS COURTS, PARKS,
AND SHOPPING. FORMAL LIVING ROOM WITH VAULTED CEILINGS, PLUS DINING
ROOM. 2 CAR ATTACHED GARAGE WITH FULL SIZE DRIVEWAY. BUILT IN CABINETS
IN THE GARAGE. LOW HOA DUES
She forgot the $0.99 and 9/10 on the asking price, again…
ALL CAPS.
{book3}
This property shows a $560,000 first mortgage, and a $140,000 downpayment. It isn’t listed as a short sale, but it certainly has a WTF asking price. She bought this property right at the peak in the summer of 2006, and she is asking more than she paid for it. Good luck with that. My guess is that she thinks she can short sale the other properties and keep the profits from this one. Keep dreaming.
Asking Price: $729,999
Income Requirement: $182,500
Downpayment Needed: $146,000
Monthly Equity Burn: $6,083
Purchase Price: $685,000
Purchase Date: 4/29/2005
Address: 17 Monte Carlo, Irvine, CA 92614
| Beds: | 3 |
| Baths: | 3 |
| Sq. Ft.: | 1,560 |
| $/Sq. Ft.: | $468 |
| Lot Size: | 3,800
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Spanish |
| Year Built: | 1988 |
| Stories: | 2 |
| Area: | Westpark |
| County: | Orange |
| MLS#: | S562191 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 2 days |
ROOM AREAS. FIREPLACE IN THE DINING ROOM. LIGHT AND BRIGHT WITH LOTS OF
WINDOWS. DOUBLE DOOR ENTRY FEATURED ON HOME. HAS A LARGE PRIVATE YARD.
GREAT IRVINE SCHOOL DISTRICT. GREAT NEIGHBORHOOD.
Does this look like a copy of the last property? They are both in Westpark which is noted for its all-too-similar architecture and the prices are identical. It is also a WTF fantasy asking price.
Plus, the realtor kept the ALL CAPS and the extra 9s in the asking price.
If you want to check out her other property, it is listed too: 19 Brindisi Mission Viejo,
CA 92692
This is how a financial empire built on a dumb business plan and loose financing crumbles. If there were no additional refinances, this woman stands to lose a lot of her own money. Each of these properties had significant downpayments. You can see the denial in her asking prices. The only property near today’s pricing is the one in Mission Viejo. The Irvine properties have little or no chance for selling anywhere near these asking prices. After a couple of months on the market, the reality will start to settle in that she has lost every penny of her downpayment money, and if she is lucky, she can still sell in time for all 4 of these not to be short sales. In all likelihood, each of these properties will end up in foreclosure.
One owner, four properties: how many implosions like this one will we see?
{book7}
If you see a faded sign by the side of the road that says
15 miles to the… Love Shack! Love Shack yeah
I’m headin’ down the Atlanta highway,
lookin’ for the love getaway
Heading for the love getaway, love getaway,
I got me a car, it’s as big as a whale
and we’re headin’ on down
To the Love Shack
I got me a Chrysler, it seats about 20
So hurry up and bring your jukebox money
The Love Shack is a little old place
where we can get together
Love Shack baby, Love Shack bay-bee.
Love baby, that’s where it’s at,
Ooo love baby, that’s where it’s at
Sign says.. Woo… stay away fools,
’cause love rules at the Lo-o-ove Shack!
Well it’s set way back in the middle of a field,
Just a funky old shack and I gotta get back
Glitter on the mattress
Glitter on the highway
Glitter on the front porch
Glitter on the hallway
Love Shack — B-52s
Maybe she put these into an LLC and then sold a share of the LLC to get some cash?
Remember that in the bubble lenders did stupid things. Maybe they believed there was enough equity to make only the LLC liable for the loans.
She probably received “legal advice” from a real estate agent or broker about how to “protect her assets.”
testing.
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[url=https://www.youtube.com/watch?v=h9mioHO4hoM]Something About Mary[/url]
Good Grief.
I may have mentioned it on a previous thread, but this reminds me of a woman I saw on one of those court shows on tv. She was there b/c she was refusing to give back a cleaning deposit on a very high end beach property. Turns out, that she wanted to give back the deposit as soon as the thing sold – essentially putting the renters on hold until she unloaded the property. The judge seemed a bit sympathic in the very beginning… this lady had a cashflow problem, etc… However as the story continued, the woman actually owned at least 3 other high end properties and many were being rented below what the mortgages were, as she waited for real estate to recover. She even had a personal assistant type person working for her and her “company”.
At first she seemed fairly normal, but in the course of her 15 minutes of fame, it was very apparent that she had no idea what was going on and she was in denial of her little empire collapsing. That she had an “employee” to help her manage the mess she was in was also astounding to me. I wondered at the time, just how many more people like her are out there.
A friend back east had been telling me of this cousin down in SD who was busy accumulating properties about 5 years ago. It sounds like the cousin is also in this kind of situation lately, as her husband is out of work, they have health issues and many of the properties are underwater as they are trying to unload them…
They also considered themselves “real estate investors” in “the real estate business”.
I have often wondered how much impact the real estate gurus have had on people like this. There is never any shortage of the con men who sell their books and tapes on how to get rich in real estate. Usually, the behaviors they advocate are not enabled by lenders; however, during the bubble, anyone could do what these idiots proposed, and for a while, many people made money doing it. As you pointed out, many people were “investors” or in the “business”. The reality is they were fools who were enabled by another group of fools with a lot of money. The result is a massive real estate bubble.
I also think we will see more of these multiple property implosions as the high end crumbles. I doubt there were as many subprime borrowers building these empires as there were Alt-A and Prime borrowers. When these people implode, it is more like a supernova spewing multiple properties on the market.
I can forsee another round of real estate “investors” entering the picture here over the next year or so. There are still a lot of people making statements about how it is a “great time to buy” because “prices are so low,” and I’m sure many of these Donald Trump wannabees are starting to think about accumulating properties “at the bottom” thinking that thngs will rebound very quickly. Now of course they won’t have easy access to crazy financing like they have the last few years, so this may hold them back…..
“You can see the denial in her asking prices.” Yeah but “this is Irvine”.
Three of my wife’s coworkers decided to invest in multiple houses. They are all now working overtime because they are underwater. How many “real estate empires” are in Irvine?
That “huckster” link is a real eye opener.
I really like John T. Reed (from the link). He is a no-BS kind of guy. I bought one of his books in the 90s, and I just bought another one recently. I would like to think he and I are similar in that we both tell the truth whether or not anyone wants to hear it. Fortunately for both of us, it seems that people do.
At least they have the option to work overtime; a lot of people are unemployed and waiting for a bailout.
BTW, these properties when they become unoccupied are attractive nusiances to teens who need a place to party.
I know a couple of kids who got charged on trespass charges a couple of years ago at an abandoned home in the Ranch. Windows were broken out and the place was generally trashed. The total damages were roughly $10k. Property search turned up the owners had numerous other properties that they had also bought in Woodbury and QH and other newly developed areas. Several of those properties were bought within the same year. This type of mulitiple house real estate “business” is going to be a lot more prevalent than anyone would ever care to admit, is my prediction.
That is a pretty amazing find. I have been waiting for the media to start going after these delicious kinds of stories, but so far it looks like political tax evaders and greedy corporate executives are good enough to keep the Viagra and Cialis advertising money flowing in to the coffers.
You know that this person was all about pontificating real-estate investing to all of her friends/family – I wonder how many minds she infected among her inner circle and steered into financial ruin; the collateral damage.
What percenage of those down payments could have come from friends and family that decided to invest in the scheme with someone they trusted and assumed knew what they were talking about?
Hopefully she isn’t taking the parents 401Ks down with her. All those down payments came from somewhere.
Add another empire tale from the fantasy land of victims who are beginning to wake up and live in the real world and making false sacrifices and enduring pain in order to now live like the rest of us. Someone fetch the tissue box.
http://www.crackthecode.us/images/couple_sells_home.jpg
(CNN) — Vanessa Cooreman Smith dreamed of running her own boutique since college, and she’s not letting anything — not even the dismal economy — stop her.
Vanessa Cooreman Smith and her husband, Steve Smith, are selling their home to help make ends meet.
Cooreman Smith, 27, and her husband are selling their spacious, two-story, lakefront home in South Bend, Indiana, to keep her business alive.
“We’ve learned to live on less,” she says. “It’s my calling and I feel best when I’m doing what I love.”
The couple, along with their 3-year-old son, plan to move to a smaller home, one of many cuts they have made to make ends meet. The family will cut their mortgage in half.
“It’s worth every sacrifice we’ve had to make,” says her husband, Steve Smith, 26, a self-employed Realtor.
Cooreman Smith’s shop, Flourish Boutique, which sells women’s designer clothing, accessories and artwork, is no exception. While she says her store is still gaining market share in her town, she has noticed sluggish sales since October.
“There was a point when the phones stopped ringing,” she says.
A troubled economy wasn’t on Cooreman Smith’s mind when she opened her boutique in early 2008. She says she didn’t expect things to head south so drastically, and she had already been saving and planning for her store for nearly four years.
Cooreman Smith says she had to embrace the one concept that would help her business weather the economy: change. The troubled market forced her to react quickly, she says, describing her business skills as “chameleon-like.” She abandoned some of the store’s couture clothing that was selling for around $500 a dress and stocked more affordable luxury items priced around $200. This gave customers the value they wanted and they returned, she says.
She also began cutting print and radio advertising expenses. She opted to hold trunk shows in women’s homes and at parties. iReport.com: Scrambling to make a profit
“It was a great way to expose our store without the high cost,” she says. “That also meant I was working longer hours and practically moving my store into other people’s homes for a day.”
Flourish Boutique is a small business that employs two other people. To avoid layoffs at her store, Cooreman Smith is saving in small ways, like taking the store’s trash home to avoid paying for garbage service. She attends fashion shows in nearby Chicago, Illinois, a two-hour drive away. A year ago, she spent hundreds of dollars on flights and hotel rooms for business trips to New York and California. She also has expanded her shop’s Web site to get more sales.
Experts tracking small businesses say stores like Cooreman Smith’s can survive if the owners make the right operational cuts and can figure out what their penny-pinching customers want.
Meanwhile, Steven Smith, once named a top five Realtor in his county, no longer closes on homes weekly. He works solely off commission in a tanking real estate market.
Smith says that in 2005, when he helped sell townhomes near the University of Notre Dame in South Bend, his business was profitable. “They were selling like crazy,” he says.
Because he is his own boss, Smith says he has to work twice as hard to make up for the shortfall.
“It’s almost like being unemployed, but you still work every day,” says Smith, whose inventory has shrunk from an average of 25 new spec homes to three. Interested buyers are rare. “You work just as hard.”
He made cuts in advertising and laid off his part-time employee.
As the market continued to look sour, the Smiths knew they had to make personal cuts, too. In addition to selling their home, they laid off their son’s nanny and enrolled him in day care. Last Christmas, they drove to visit family members in Savannah, Georgia, instead of flying. Vacation trips this year are unlikely, they say.
The couple no longer eats at the chic restaurants downtown or hires a baby sitter for their son on weekends so they can go out with friends.
Despite the hardships, the couple has found a silver lining in the way they manage their money.
“You get to the point where you think ‘Why wouldn’t you save the $2?’ ” Cooreman Smith says. “I wish this wasn’t happening, but I think a part of me will be changed forever.“
“The couple no longer eats at the chic restaurants downtown or hires a baby sitter for their son on weekends so they can go out with friends.”
Now I know that article’s a fake. Anybody who’s been to South Bend knows there aren’t any chic restaurants.
Gee, I feel really bad for their ‘hardship.’ It must be tough to give up that nanny and take the kid to day care, not go to gourmet restaurants, and live in a small house instead of a castle on the lake. Oh wait, that’s my life and the life of everyone I know. And CNN calls that news?
What are you talking about, they have a Cracker Barrel a short drive away. Yummy, and you can buy stuff in their General Store.
Cracker Barrel is an odd place but they have insane pecan pancakes (something I have never tried). Try them once. They’re amazing. Good enough to actually make me ponder a return.
Cry me a river. These poor saps are now living like most other people in this country. Eating at fancy retaurants, vacationing and enjoying the finer things in life is something you earn…they are not a right. I almost thought these people were living in their car from the tone of the story. A large percentage of Americans are lazy and have a nasty sense of entitlement, this needs to change asap.
They are conveniently leaving out the specifics. How big is the house? Smells McMansionish to me. When did they buy it? For how much? How did they finance it? With a liar loan? How much is it worth now? How far underwater are they? Are they going to pay it or are they going to mail back the keys and let the tax payers cover the difference?
Entitlement is exactly right. The wife feels better doing what she loves so by god they have to do whatever it takes to keep her from having to work a real job like most normal people. These stupid little businesses that depend on customers with bubble wealth are going to be demolished in this recession. She thinks that if she tells herself “I just have to accept change” three times and clicks her heels then all will be OK.
The bubble created all sorts of B.S jobs and faux-business owners that are going away and not coming back.
Is anyone else starting to develop schaudenfraud for schaudenfraud? Someone in the 5th grade could figure out that there is no REAL hardship here.
Can you imagine why people in the rest of the world would form the impression that Americans are weak, spoiled, and do not understand true hardship?
Some people think of hardship as not eating for the day while others equate it with making dinner at home for the evening and maybe only selling a 200.00 dress instead of a 500.00 dress.
Schaudenfraud. I like that one.
Exactly, what “hardship” are we talking about. It is not classified as a “hardship” to live within your means? What are we coming to? Has the entire culture embraced a collective sense of entitlement?
IR, I’m glad you like it. Spend 5 minutes in a third world country and see what real hardship looks like first hand. The american economy is one big circle jerk.
Totally right. This isn’t the United States I grew up in.
I would love to go back to the United States we grew up in, but I don’t think it will happen.
It’s time to start facing the reality of the next 10 years. Moral Hazard is the new black.
Mav,
I remember in 2004, I went to Tijuana to visit with a Mexican homebuilder who was creating a large master plan across the mountain range into the next valley. I toured a number of this developers properties in Tijuana. The focus of my trip was on the living conditions of your typical Mexican worker. We drove by shanty towns and I toured houses that measured less than 300 SF. This is much of the Tijuana middle class that lives like this. The shanty towns in particular struck me emotionally. I was not the same for almost a week after the trip. At some level, I am still not the same.
Reminds me of a Zulu Indian from South Africa who came here to teach for a year. He went with out with our church group to distribute turkeys and food to the “needy” around Thanksgiving time and his jaw kept hitting the floor. Our “poor people” had trucks in their driveways and TV sets. He just stood in the back of the group at each home and muttered to himself the whole time “These people aren’t poor!”
He later went to Tiajuana and came back and said “Now those people are poor!”
I hear you. Do you know what they do with our wooden garage doors that we toss aside when we buy our fancy, new roll-up garage doors? They cart them down to Tijuana and build houses out of them! THAT is poor.
Hi All,
I’ve been reading the blog for over a year now and greatly appreciate all the insight this website has provided me with. During the bubble years I knew that things were not right but you guys helped me put everything in perspective.
I just wanted to address the conversation taking place above about how the people we refer to as poor in this country are not poor by global standards. I am sure you guys have heard of the movie “Slumdog Millionaire”, probably even seen it, now that’s what poor is. I am from India and grew up in the city the movie is shot in. Though I was far away form the poverty I still couldn’t escape from it (hard to ignore it when it’s everywhere) and I can tell you for a fact that the story of the guy in the movie, his life on the streets is a reality that is all too real for millions of people in that city. A reality that I still can’t escape from and it still haunts me in my dreams. Don’t get me wrong, India probably has more millionaires that the entire USA and Europe, it also has the poverty most of us can’t even imagine.
We here in the USA are worried about people who have to settle for selling a $200 dress while a major portion of the world population might never even earn $200 in their entire lifetimes … just sad.
Keep up the great insight coming.
Regards.
He was right. Those people aren’t poor.
We all know why there is such a disparity between the haves and the havenots. fittest that is driving many of us today.
Because we have all forgotten that we came from the era of personal responsibility, accountability, and the ability of separating the rights from the wrongs.
If we could just recite the Ten Commandments and live by them, not from a religious sense but from a common sense perspective, things could be and will be much better than how they are today.
Sadly, this is so remote, and so detached from the reality we are in today.
Many of us are out there for just our own selves. It’s the mentality of “dog-eat-dog”, survival of the
Say anything, do anything to win.
The buck just does not stop here.
Mass consumer credit has been the great equalizer for average Americans. Take it away and half of America would live in third world squalor.
The day joe six pack shows up at walmart and can’t use his plastic to buy food for his family… is the day the revolution begins.
Both of their “careers” were directly tied to bubble wealth. As AZDavid mentioned, they will get demolished in this economy.
I knew several RE agents and mortgage brokers who were literally printing their own money during the boom. These RE agents would sit at open houses for a few hours and collect multiple offers and then get a nice 25K check for their hard work. Fortunately, the world is returning back to normal. Most of these idiots are now going back to jobs in the real world and making a fraction of what they made trading houses.
My schadenfreude meter spikes up when hearing stories like this.
I have a friend who’s an attorney who opened a mortgage brokerage in 2003 and made a ton of money with 5 or so brokers working for him. He used to golf 3-5 days per week.
Now? Well, money isn’t so easy or big, so he’s back to the billing grindstone.
“Sometimes building ivory towers
Sometimes knocking castles down
Sometimes building you a stairway —
Lock you underground”
And they’re raising a child! Poor kid doesn’t stand a chance.
How do you calculate the monthly equity burn?
The monthly equity burn is 10% of the sales price divided by 12. It is based on the assumption that prices will drop at least 10% a year for the next 2 years. Converting this to a monthly number focuses the attention of those who buy based on payment to the real cost of owning property right now.
IR:
I was recently treated to an “official” equity burn calculation. As part of an interest reduction re-fi (no cash out) my credit union of course had an appraisal. The gentleman was knowledgable, diligent and thorough. I even learned that GRM is one of the accepted methods for estimating value. After he was done, he called me to ask if I would be surprised that my area was deflating to the tune of 25% over the prior year. Being a daily IHB reader, I was not.
Included in the appraisal was a regression analysis, mapping price per square foot over several years. The verdict; 15 cents per square foot, per day! I can hardly walk through the neighborhood without hearing the audible hiss. This is in an “immune” area, of course.
SB
I don’t understand why you think the 999 thing is greedy. Would it be less greedy if she asked for $730,000 instead of $729,999? Plus studies have shown that it actually works. When you see gas for $2.39 9/10 do you think it’s $2.39 or $2.40? Most people see $2.39. It’s an effective sales tool, though perhaps not as much when we’re talking single dollars in a half-million dollar transaction.
I have a rant on this kind of pricing in tomorrow’s post. I will save my explanation for then…
I used to listen in on an oldies AM radio station in SE Virginia. In 2007 there was an advertiser that ran a testimonial stating the she had “2 S Corporations, an LLC, and an incorporated business.” Leaving aside the redundancy, I wondered why a small proprietress would own so many different types of businesses if her testimonial was to support a purveyor of a be-your-own-boss type of business.
I figured this must be some kind of real-estate venture and her businesses probably amounted to nothing more than being a landlord. However, the way it was put in the testimonial sounded much more glamorous than a business that consisted of collecting monthly rent checks.
I never understood what the incorporation aspects added to such an enterprise. The best I could come up with was that the individual must have attended some ballroom seminars and bought a tutorial CD.
I remember in the 80’s in New York, some scammers promoted incorporation for these naive landlords. This was because State law permitted charging a higher rate of interest to a business than an individual. It wasn’t too much of a stretch to believe they were incorporating simply because that was the only type of loan they could qualify for. Of course, this was back in the time when sub-prime was a niche business.
When I was on my own as a real estate consultant, I had a corporation to handle my taxes. At the time, it was the only way you could deduct your health insurance premiums. When Congress changed the laws on that one, the corporation became of no value, and I closed it down.
I never got into the ego thing about being a corporation or anything like that. I suppose I should have had business cards printed that said I was the CEO of my corporation and passed them out at dinner parties. Some gullible fool might have been impressed.
Isn’t there more of a liability reason to incorporate? For example, if a tenant slips and falls and sues the owner, isn’t the corporation the one who gets sued?
Granted, I don’t think many of these Trump-wannabees thought that far out. However, it is something to consider.
I don’t think the corporate protections mean much. It is pretty easy these days to pierce the corporate veil, particularly when the corporation is owned 100% by an individual. General liability insurance is a far better way to go.
I think it comes down to a single person or if you have a partner.
I was thinking of going down this investor road with my sister. We would have incorporated if we did. (Luckily, we decided to wait – this was 2006.)
If its just you, the corporate entity is not really necessary.
IMHO, the housing market will experience 2nd wave crash in one year. We just need a little more patient and can save another 20% compares to now.
Here is my theory, last year I was trading C, WB, BAC stock and making around 180% profit. Thanks to info from this site, with crash in my mind, I did not short stocks but just did some swing trade. I stop trading BAC, after 100% return in a few days, because I am confusing why BAC willing to buy MER with unreasonable prices (which in my mind is worthless). I am just an ordinary person, and you must keep this in mind every second, Wall St. has smartest people in the world, why they do this stupid thing?
I figured this out a little while, the reason is because BAC will crash no matter what, they know they will crash at 2nd crisis because bad commercial restate loan. And entirely Wall St. insider knows how bad the thing will go at that time already. And the rest is just playing game with us.
Regarding Obama and his bad bank plan along with bash Wall St the big bonus from tax payers, I hope this is not just made for show-time. Form the current path, at the end of game, the Wall St will still benefit the most and the future big bonus still will be in their pocket. IMHO, if my observation is right, why we don’t elect Wills Smith as president, at least he is much handsome and younger and taller than Obama.
Obama was a lousy choice for president and most voted for him for the wrong reasons, but he was still better than what most voters considered to be the only alternative. McCain would have surely been worse and at this point anything is better than the 8 years of stupidity that we are finally putting behind us.
That being said, plenty of other candidates were against bailouts and pork stimulus and wanted to do the right thing, but were not given the time of day by the voters who selfishly fear “not counting” unless they pick Democrat or Republican.
Unfortunately, as long as the average Joe Six Pack considers his vote “not counted” for voting independent, we are going to continue swapping power from one group of corrupt politicians to the other – the only difference being the group of elites that each side works for. We will continue to take the Pepsi Taste Test Challenge every 4 years and we will continue to get the government that we collectively deserve.
Obama is limiting the power of lobbyists in his administrations. Although I didn’t vote for him, that alone is one reason I would have.
This letter to the editor showed up in our small, east King County weekly paper. The author is a local real estate agent who has clearly gone round the bend. I had to share:
Be patriotic
Will Bruce, Woodinville
Let’s do something patriotic for our country. Let’s do something right here in Woodinville to bolster the economy. We have it within our means to make a positive difference for America. Let’s buy or sell a home.
The name of the game is jobs. Every time a home sells a bevy of people keep their jobs. It isn’t lost on anyone from the President on down that the housing industry lynchpins the U.S. economy.
Consider the people who get work with every real estate transaction. Consider these local folks who, thanks to a real estate closing, can buy groceries at our local markets. When you buy or sell your home, these people directly participate and benefit: the home inspector from Mack’s Corner; the lender and five employees working on 175th Street; the appraiser from Cottage Lake; the title company representative living in Wellington; the escrow officer from English Hill; the moving company employee living at Pioneer Hill; the local hardware store employees who sell the touch up paint; the baristas at the coffee shop downtown where we sign the deal.
And yes the guy who owns the real estate office on Main Street who has been in business in this area for 35 years. He lives in Bridal Trails, pays taxes and employs six staff (two from Duvall) and supports 50 agents living and working in this community. Our jobs are on the line, too.
Doing the patriotic thing and purchasing a home isn’t much of a sacrifice. Interest rates near all time lows; home prices are more affordable than ever. If you will live in this home, have no plans to move for a couple of years, and have good job … it’s an auspicious time to buy.
You folks who should be purchasing a home in this buyer-friendly market. Don’t let the sum of all your fears measure your patriotism. Do something for your country and your neighbors. Kick up our real estate market.
I completely agree with this author. Let’s drop the prices on all homes 50% so we can all go and buy one.
As ridiculous as it that is, it’s not the first time I’ve seen this type of argument.
I remember someone in the RE biz try to blame people who aren’t buying or selling homes for the economy – like it’s our fault because we don’t want to spend $.
Hence, another demographic of people who feel “entitled” to whatever: a good economy, other people spending $$, a prosperous biz, etc…
I especially like the statement (that I also seem to see in the real estate section of the LA Times every Saturday) that “home prices are more affordable than ever.” Ever? Does that include the lower prices we saw in the pre-bubble early part of the decade, or in the post-crash period of the ealry 90s?
I saw an ad in the OC Register placed by a local homebuilder that stated “procrastinate at your own risk”. :snake:
The level of denial that I hear is unbelievable. Just today I engaged in conversation with three V.P. level executives (two from two separate big defense contractors and one from a local government agency, all of them big wage earners at well over $150K base). They were all calling bottom, saying now is the time to buy something because things are going to quickly rebound. They were all talking about how Florida condos are more affordable than ever and how they’re such a good investment.
A funny thing I heard was how the brother of one of these guys bought a condo, and the monthly cash burn was the same as what he was paying for a self-storage unit. He moved all of the goods in storage into this condo, hoping to sell at a later date for a profit.
I hardly hear anyone considering the realistic possibility that things just might be different this time – what if prices stop dropping and simply don’t increase any more for the next 20 years? (while possible, I personally feel that too many people will be unemployed and unable to service their massive debt, causing prices to continue their fall for a long time)
I had a reader of the IHB tell me that they were at a dinner engagement where a variety of professionals were in attendance and the IHB came up. There was a realtor at the table who characterized us as “economic terrorists.”
Economic terrorists…that is too funny. No, we are just a small segment of the population who aren’t afraid to call it as they see it. Not to mention, the analysis and collective intelligence on this blog would put many well known industry pundits to shame.
If anybody should be labeled as economic terrorists, it should be all the fly by night RE agents, shady mortgage brokers, fraudulent banks, NAR, Wall St. powerbrokers who enabled this whole mess to happen. We have seen greed taken to a whole new level…and everybody will pay dearly for this!
I sometimes ask myself if perhaps I’m a bit too bearish, that just maybe things won’t get as bad as I think.
The build up of the housing bubble was unlike anything in history – sure there have been bubbles before, but NOTHING is comparable to the magnitude of what we’ve experienced. When you consider the effect of housing on the economy as a whole (especially the influence of HELOC/ReFi money on consumer spending) it’s hard not to see just how bad things can get.
Regardless of where things are headed, I refuse to buy any house that I cannot afford. I am not letting “fear of declining prices” keep me from buying a home right now; it’s simply current pricing that’s keeping me from buying a home.
Wallstreet is trying their best to force you to buy. Your cash is making very little so the push to get you to do something with it is evident in CNBC calling the bottom every day. We have hit a bottom in housing, hit a bottom in stocks. WE are going to give the economy another shot in the arm. Meanwhile new job losses, more houses go up for sale–I have never listened to these folks back in 05′ and I refuse to do so now. The unwinding of the bubble takes a long time and with mortgage rates going up today this prolongs it again. Anyone that tells you RE is the time to buy has something to gain—YOUR MONEY
When the builders cut their prices to affordable levels along with taxes to DTI ratios that is when I will believe it’s time to buy.
From “Chicken Little” to “Economic Terrorist”.
I must admit that I did have a feeling that the subprime crisis originated with all of those borrowers mailing in keys after reading the IHB.
Osama Bin Renter?
Will Bruce from Woodinville, be patriotic; kill yourself.
The part that is amusing is that prices are well understood to be just a ballpark starting price where the negotiations begin. So pricing it to the nth 9 is irrelevant and pointless unless you are not willing to take 1 penny less than your asking price.
When you buy a bag of cheese doodles at the store for a 1.99 the store isn’t planning on accepting 1.50 otherwise they would just price it at 2.00.
Predicting 60% Decline for Manhattan Property; TARP for Trump?
http://seekingalpha.com/article/118333-predicting-60-decline-for-manhattan-property-tarp-for-trump
Relative to Manhattan, where does Irvine stand if Manhattan were to correct 60% from peak?
Please help. I’m looking at houses and would like to take advantage of the proposed government $15K tax credit. I understand it’s for 1st time buyers.
I’ve never owned a house but my wife owned a condo with her ex-husband more than a decade ago. Is it true that ther prior ownership would disqualify ME from getting the $15k?
Should we get divorced for a year?
It’s a trick, be careful – the government is trying to fool people into throwing their money away on depreciating assets in order to help their failed partners in crime.
Wait a year and then look at the house prices. The 15K will be a drop in the bucket.
Any subsidy is ultimately funded by you anyway as your taxes will be used to pay for other buyers who decide to invest in the scheme.
Your call though.
The proposed law is for all home buyers not just first time. However it is not even signed into law yet. Don’t act until all of the details are known. Of course it’s almost certainly best to not act at all as you will probably save much more than 15k waiting until prices are back in line with fundamentals.
Dude, is your marriage worth less than $15K? Don’t let your wife know you seriously considered this option.
AZDavid’s on target, of course. Getting a 15K credit on an asset that’s going to lose more than 15K in value is a bad deal.
I’m not so sure that this is necessarily a bad deal in all circumstances. A credit like this is going to have the biggest impact at the low end of the property scale, so low-end and first-time buyers are going to be the ones most motivated by this initiative.
Add to that the fact that even IR has said that since the low end of the market led the crash, they are likely the first to reach fundamental values and may have already reached them in some areas. In cases like that, a credit like this could wind up spurring some healthy reinvestment in the real estate market at the bottom where it is most needed. Just a thought.
The government knows full well how the game works and what their masters need – knife catchers and lots of them.
Be very skeptical whenever government claims that they are helping you.
They need those savers whom they hate so much to step up and take one for the team by investing in a depreciating asset and catch the falling knife.
The government does not care about you – they do not work for you. Their job is to manipulate you into doing their master’s bidding which is going into debt and being an obedient slave who pays interest.
They are going to dangle a 15K carrot in front of you and hope that your greed gets the better of you and then they gotcha. Your down payment money will go to the bank and be gone as your equity evaporates as the value declines. If you stop paying your mortgage then even better, they will keep all your money and re-sell it to another patzy with money to burn.
My house is in my name and paid for. Why shouldn’t I sell it to my wife for $150K and we take the full deduction? Why shouldn’t I sell it to the both of us as a married couple? D*mned republicans & their stupid ‘tax cuts’, far better the [shudder] ‘tax ‘n spend’ versus the wrongwing approved ‘borrow & spend’.
http://www.cnbc.com/id/28979328
Does anyone know the cap the Federal government puts on business losses for real estate? I am wondering what kind of hit people will take when they unload several properties at a huge discount all at once and how much of that will the federal government forgive…. I am sure it not 100%.