Guest Post: Is Housing An Attractive Investment?
Submitted by Chris Martenson contributor Charles Hugh Smith
Is Housing an Attractive Investment?
In a previous report, Headwinds for Housing, I examined structural reasons why the much-anticipated recovery in housing valuations and sales has failed to materialize. In Searching for the Bottom in Home Prices, I addressed the Washington and Federal Reserve policies that have attempted to boost the housing market.
In this third series, let’s explore this question: is housing now an attractive investment?
At least some people think so, as investors are accounting for around 25% of recent home sales.
Superficially, housing looks potentially attractive as an investment. Mortgage rates are at historic lows, prices have declined about one-third from the bubble top (and even more in some markets), and alternative investments, such as Treasury bonds, are paying such low returns that when inflation is factored in, they're essentially negative.
On the “not so fast” side of the ledger, there is a bulge of distressed inventory still working its way through the “hose” of the marketplace, as owners are withholding foreclosed and underwater homes from the market in hopes of higher prices ahead. The uncertainties of the MERS/robosigning Foreclosuregate mortgage issues offer a very real impediment to the market discovering price and risk. And massive Federal intervention to prop up demand with cheap mortgages and low down payments has introduced another uncertainty: What happens to prices if this unprecedented intervention ever declines?
Last, the obvious correlation between housing and the economy remains an open question: Is the economy recovering robustly enough to boost demand for housing, or is it still wallowing in a low-growth environment that isn’t particularly positive for housing?
Factors Affecting Housing Demand
The demand from investors can be roughly bifurcated into two distinct camps: those buying distressed homes to “flip” them for a profit as market conditions improve, and those buying homes and multi-unit buildings for rental income and future appreciation.
The “flippers” are counting on continued demand by non-investor buyers, such as first-time buyers. The rental housing investors are counting on continued strong demand for rentals from those who lose their homes to foreclosure and must now rent, as well as from household formation resulting from population growth.
Both lines of reasoning are implicitly based on continuing Federal and Federal Reserve support of the housing market via first-time buyers’ incentives, such as low-down payment FHA and VA-backed mortgages, and the Fed’s continuing support of mortgages via low interest rates and the roughly $1 trillion in mortgages that the Fed purchased in 2009-10.
The assumption behind any forecast of improving demand and higher prices is that private demand for housing and mortgages will slowly replace government-stimulated demand.
If either of these conditions deteriorates -- that is, if government support of the housing/mortgage markets declines due to the rising pressure to trim fiscal deficits, and private demand does not appear to replace it -- then the forecast of steadily improving markets weakens.
While direct government support of the housing market via ultra-low rates and guaranteed FHA/VA mortgages is well-known, the rental housing market is also implicitly supported by government transfers; i.e., cash distributed by the federal government in Section 8 rent subsidies, extended unemployment benefits, etc.
These transfers now make up an unprecedented share of household income, as this chart shows:
(Source)
Common sense suggests that the pressure to trim unprecedented (in peacetime) Federal deficits -- roughly 8%-10% of the nation’s gross domestic product (GDP) for four years running -- will eventually impact all government spending, including transfers and housing/mortgage subsidies.
Combine the prospect of declining government transfers with the deterioration in household disposable income since 2007, and the household income picture darkens considerably.
Why these factors matter to investors is self-evident: If households receive less income, then they will be less able to afford either a mortgage or high rent.
The fact that inflation has outpaced disposable income should also give real estate investors pause. If rents have by and large kept pace with inflation (rental markets are local, so any national figures are generalizations that may not apply), then this divergence between income that has flat-lined and rents that have risen with inflation suggests a future convergence: Either incomes rise to align with higher rents, or rents decline to align with flat-lined income.
Though most believe the Fed has the power to counter deflationary forces, it is worth recalling that in the early 1930s, rents declined by roughly 40% as demand and incomes fell. Prudent investors should ponder the possibility that incomes won’t rise to align with higher rents but that rents will decline to align with flat-lined income.
(Source)
The general expectation in the real estate market is that whatever declines in home and rental prices could happen, have happened. This is reflected in this composite chart of the home price futures market:
(Source)
Clearly, the futures market is anticipating a bottom in home prices in mid-2012 and a gradual improvement in home valuations from then on.
On the “not so fast” side of the ledger is the possibility that both home valuations and rents have been artificially inflated or propped up by government intervention and stimulus, and that the positive effects of those gargantuan transfers of cash and risk have run their course.
Though the Fed has publicly stated its goal of keeping interest rates near-zero until 2014, investors should ask what might happen when that prop under the housing market is removed; i.e., what possible consequences might flow from higher mortgage rates?
Some believe that housing demand will surge as rates start to rise, driven by potential buyers who were waiting for the bottom in prices and rates to re-enter the housing market. Once the bottom is clearly in for mortgage rates, as this line of thinking goes, these buyers will flood back into the market.
Others worry that rising rates could crimp affordability, especially if housing prices resume their climb, as anticipated by the futures market.
Though the general assumption is that the Fed can engineer super-low rates essentially forever, investors should be wary of assuming that an omnipotent Fed can control the mortgage market. The Fed only sets the Fed Funds rate; it does not directly set mortgage rates. Its only other lever over mortgages is direct purchases of mortgages and mortgage-backed securities in order to prop up the market, and many observers believe there are now political limits on what the Fed can do. In other words, the Fed could theoretically buy another $1 trillion of mortgages on top of the $1 trillion it already owns, but the unprecedented expansion of the Fed’s balance sheet is already drawing criticism.
Thus the future trend of mortgage rates is an unknown. If housing values take another dive, then the availability of mortgages may decline even if rates stay low. Buyers of mortgages will have to factor in the risk of default and/or declining rental income, and that calculation is especially sensitive when the rate of return is already paltry.
The thesis for higher demand for housing and rentals is based on these assumptions:
- The economy is on a sustainable uptrend of growth
- Employment is also on a sustainable uptrend
- Inflation will remain low
- Household income will soon resume an uptrend
- The Federal government will continue issuing unprecedented amounts of cash transfers to households
- The Federal government will continue to fund housing subsidies and mortgage guarantees
- The Federal Reserve’s plan to keep interest rates low for the foreseeable future will also apply to mortgage rates
- The MERS/robosigning Foreclosuregate issues will all be settled without disrupting the housing market
- The bulge in inventory will be liquidated as new supply (i.e., newly built homes) stays well below demand (sales)
- New household formation will drive demand for rentals and homes
While it is widely assumed that new household formation parallels population growth (which is remarkably consistent), the following chart reveals that household formation is more correlated to recessions and periods of prosperity.
(Source)
We can see that peaks in household formation correspond rather well with peaks in economic growth, while the valleys correlate with recessions or periods of slow, uneven expansion.
While household formation has returned to the trendline, the long-term trend is clearly down. Other than the euphoric outlier of the housing bubble, the series displays the classic signs of a downtrend — lower highs and lower lows.
If the US economy turns out not to be decoupled from the sagging global economy, then this chart suggests another bout of recession could cause household formation to fall below its 2008 nadir. That would not be supportive of demand for housing, either home purchases or rentals.
Conclusion
The picture for housing is decidedly uncertain, and confirmation of the ten trends listed above will be needed to establish a clearer forecast.
In Part II: Key Insights for Those Buying Real Estate as an Income-Generating Investment, we inspect the specific factors that most frequently determine whether a real estate investment is successful or not.
Too often, when buying real estate for its income-generating potential, small investors make costly underestimatations or miscalculations that materially handicap the returns on their invested capital. In this type of sector, being forewarned is forearmed.
Click here to access Part II of this report (free executive summary; enrollment required for full access).
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Real estate taxes keep going up even though housing prices are falling. Property owners are paying for all those bloated and underfunded public pensions. The local governments see the peoperty owner as an unlimited ATM for funds.
Municipal Finance in the Face of Falling Property Values - http://www.clevelandfed.org/research/commentary/2011/2011-25.cfm
As long as my coworkers keep on "buying" (in quotes) homes, and spending about $10K per year on upgrades to "their" homes, I can not see myself selling my silver to trade for a "home".
I don't live in a cardboard box because I choose to rent because I can walk away from this "home" with no strings attached at any time of my choosing.
My property taxes on silver are.... get this.... OMG.... drumroll..... my property taxes on my silver is precisely.... ZERO!
That's nice, but unless your landlord is an idiot you're paying his property taxes. It seems to me that the real strategy here is to live in much less house than you can afford, whether you own it or rent it. Oh, and buy silver!
Thank You Kind Sir!Not the case in CA--at least not yet.
It is true that in CA, Proposition 13 "officially" limits the ability to extract revenue via ever-increasing property tax. But the legislators aren't stupid. They just invent new "fees" to charge to cover the shortfall. The classic end-run around Prop 13 is Mello-Roos.
No matter the "rules" or the "law," it is undeniable that governments exist to collect taxes. All else is justification for the gullible.
invest in house vaporizing, cull the herd
Yogi, YES! Its happening in Broward county Florida. They act like the pension payments are somebody else's problem, not their's! Sheriff's office too, not their problem that employees work 70+ hours their last year to game the system into paying BIG Pensions, the taxpayers be damned. My NYC Bus Driver neighbor did the same thing before moving to Florida.
The big thing going foward is the collapse in decent paying jobs for young people.
They can't form new households and have to move back with their parents. This is happening right when the Baby Boomers want to sell their homes to fund their retirements.
The big thing going foward is the collapse in decent paying jobs for young people...They can't form new households..
From your post to GOD's ears, or not.
Easy Money made its way too soon (2003-2006) into the hands of home buyers, I suspect. Retirees able to cash in on some equity, downsize and finally enable their entrepreneurial talents (some of them at least) is exactly what is missing now in the US Economy. There are lots of boomers ready to start a new small business incorporating their experiences and passions, but NOOO, they instead get to look begrudgingly across the dinner table at junior thinking of this: http://www.youtube.com/watch?v=-io-kZKl_BI.
NOT the same as it ever was...
Because retirees enabling thier passions is what is missing? You have got to be fucking kidding me.
None of them have passions and talent, huh.
Or do you automatically think retiree means feeble and TOOOOOO old to do anything?
Thanks for the early morning comedy.
I almost never bump posts (just not my thing) but I bumped yours. I think most people do not relate to the incredibly horrible fundamentals young workers are stuck with. I commented about this to my dad last night ... I specifically said ...
I also think the boomers are going to retire and try to cash out in a huge wave. I mean, its basic medical physics; at a certain age you can't live by yourself or independently.
I think housing fundamentals, as a generalization, are piss poor.
Lastly, I think there is one exception to all of this; quality homes close to major work centers. So many people live in the suburbs. The price of oil is going up and staying up. In fact the State of Alaska forecast 100+/bbl average oil price for the next X years (start here and see the 2011 Fall Forecast PDF - page 10).
I think this translates into a shift in home valuations where property in the inner city areas is going to go up, reflecting the savings in transportation costs, which will be a transfer of value from homes in suburbs where commutes are longer. If a family is commuting 30 miles to work and fuel costs double, it doesn't take a genius to figure out they will want to move closer to work.
But what the hell do I know, I am just a redneck ...
Regards,
Cooter
In the city I live North of, there are all kinds of new communities being built. We are apparently on an economic island. What most people do not realize is that island will sink once federal funding in the area dries up. The developers don't give a damn though. They will build and build anyway, for a crash a couple years from now does not matter. They just have to sell their drastically discounted new homes to the locals, who mostly have no idea what's coming. From the radio to TV, they think we are in a "recovery."
The site I work at though has three buildings. One of them is losing 50% of the people, with most of that being contractors. Our building was built for 1100, is currently around 700, and it is expected to drop to 600. The third building is similar I'm sure, but I have not heard the details on it (I rarely go over there). Government contract money is drying up quickly, and it is only going to get worse in the future. Plus, a ton of officers are being "released" (fired) from their contracts. Even though my job is at risk too, I welcome the cut backs!
Not only that, but the continued tax deductibility of mortgage interest is questionable.
It's worse than that. I haven't seen a single commentator discuss the connection between AMT and real estate prices, but having done the math on my own recent purchase over and over, it seems like a material consideration.
I live in Long Island, so taxes are punitive. Make a decent salary here and AMT kicks in, and all of a sudden you are not able to deduct your property/state/local taxes and potentially even some of your mortgage interest. Throw that consideration into the buy/rent calculator, and renting looks a lot more attractive.
I live in one unit of a tri-plex; the other two units provide enough cash flow to pay my mortgage, taxes, and utilities. Simple logic indicates your property had better generate a cash-flow benefit - either providing you with wood for heat, head for hydro-power generation, rental income, food that you eat and can, gas rights or some such benifit to offset your property taxes - either you work for your property or it works for you.
I have a real genuine laugh at the dullards who live on 1/8 of an acre, who can spit out their bathroom window and hit 3 other houses, who pay 12K per year in property taxes IN ADDITION to an HOA fee...makes me feel no matter how fucked up my life might be, I'm not a complete tool like those clowns.
Only Americans are stupid enough to pay for their own propaganda (TV/Cable) and Fin dumb enough to pay for their own proto-commie/fascist living arrangements (HOA).
Their hamster cage is so much nicer though! I lived under an HoA once in my life, and I'll never do it again.
By state constitutional amendment, Florida homestead taxes can only go up by a maximum of 3%/year based on the property value.
Thank God for the second tsunami wave of foreclosures. I'll pay less that $1000/year on my almost new 2,750sf home that's paid off for a long time to come.
What does "based on the property value" mean? Would be nice if tax increases were capped at 3% increases per year in nominal dollars. Bwahahahah
Owning arable land is attractive. Owning rental property if you have the time to manage it is attractive. Owning a home you could turn into a duplex is attractive. Owning a single family home, despite what Buffet says, is not attractive.
Given all of the new houses that have been turned into rentals, I don't see anything attractive about having to compete against them.
I have a couple rentals that are doing quite well, actually.
Me too, the competition for decent housing in some areas is fierce.
The pool of renters is much higher now due to all the homeowners who have defaulted on mortgages and will not be eligible for another anytime soon.
Had a rental open in Feb - had no real hopes of renting it soon; not a big moveing time in the winter. I had over 80 calls on this property where the normal peak of early summer would have been maybe 20; interestingly, I had quite a few people say they were moving since they got their tax refund. Raised rent from 480 to 545 for a two bedroom.
The women I rented had stellar refs; BTW, to potential renters - don't have your ringback tone some screaming rap song...any sane landlord just hangs up and crosses your number off the list.
Well said mr lh. The wild card in this is the property taxes. You can count on the parasites to continue that trend in the positive direction. I have explained to my 3 preteen boys that we are by definition not free because we are required to pay property taxes. That, in my opinion, is the basic indicator of true freedom. They are young but they completely understand this. Most adults I know do not.
I own commercial real estate (class A office space) and recently had my property tax reduced 19%. I had to file an appeal and appear in front of the "committee" to state my case. It was an easy sell. The Auditor's office was very helpful and friendly. Why? Because the Auditor wants to get re-elected and isn't so much concerned about balancing the budget; not their job.
TC
Dont forget about property insurance if you have a mortgage. In some cases mortage insurance as well. In some areas if you can't keep the property the HOA's have the right to lien you and take your property too. There are all sorts of ways to get screwed here.
"and alternative investments, such as Treasury bonds, are paying such low returns that when inflation is factored in, they're essentially negative."
Long US Treasury funds have returned 37% over the past 12 months and averaged 10%/yr over the past 3 yrs. See it on Morningstar.
I didn't bother to read further.
I lol'd
dude - you got it right. so then buy some more right now. boatloads, wave it in. who could have imagined the extent of the printing? you did - great - good for you. load up. i'm bitter because they are sucking down my savings. you got it right. buy more. it's going to go big time negative rates in US
I bought 20YR TIPS at auction a few years back, held for 18 months and sold for 12% gain. Thought I was real smart, but the same treasury is now selling at $137. However, not planning to buy more UST anytime soon.
TC
Rates may go negative.
Fear will do that.
If that happens, there will be another 10%/yr for the next 3 yrs.
Rural Western homesteads only. Anything else will be a big fat target for starving bureaucrats, cops/local warlords, DHS thugs, gangs, and zombies. And it's probably best to keep everything mobile during the chaos. You would hate to have your land end up on the wrong side of the DMZ. Renters also may have no scruples about strip-mining your copper and suing you when they trip on the way out. Destruction of morality is part of the plan.
"Destruction of morality is part of the plan."
You might like this - http://agendadocumentary.com/
Looks like a modernized take on the Red Menace. Most of it is probably true but it is still deceptive. The agenda is not run by the Communists, it is run by Luciferian cultists who are trying to summon the Beast of world government. And the right has plenty of dupes, thugs, profiteers and evil manipulators to match those on the left.
I didn't junk you.
Search Youtube for G.Edward Griffin from 1985 interview a former KGB agent.
Paraphrase quote for KGB " over the last 40 yrs communism has slowly demoralized the USA"
Important advantages to renting:
Important advantages to owning:
do you have a blog / newsletter please
Not now, but since you are the second person to request this I will get off my ass with a half-assed newsletter that will consist of police state alerts, conspiracy theories and occaisonal topic-sorted links to my assorted ZH rants and bizarre ramblings. Send an email to valis [delete this] rising at gmail.
Thanks!
*Ding ding* on the first two comments.
housing has at least another 30 percent to fall and may fall to cash value.........government will soon give them away like they used to do with land in the wild west.
But but but Shangai has houses 70 times the average salary! We can get there! USA NUMBER ONE!!! USA USA USA!!!
unrelated to the topic at hand but...
shanghai fucking sucks. been there several times on business and it is literally a city of filth filled with dirty air - not helped by their very liberal smoking non-laws (you can smoke just about everywhere - and shysters looking to rip you off at every turn. beijing is infinitely worse but shanghai is still horrible.
ah! the smell of freedom and capitalism.
shanghai fucking sucks.
http://www.wimp.com/throughoutalberta/
nothing left to say
What happens if population declines? Number of house units do not.
but population is NOT declining. It might move.
US fertility rate is currently at 2.06, but has to compensate for early deaths and emigration to keep population growing.
A house, free or otherwise, does you no good if you're starving to death. What happened in the Great Depression? I tend to believe what's coming will be FAR worse. We will have plenty of vacant houses in the near future.
Answer: No, not when the government becomes the largest landlord
Is it really an investment when you don't have the hard cash to buy it in the first place?
You don't own it, the banks do. And even if you buy it 100%, them or the government still might fucking own it.
Do you really EVER own it? HOA can put a lien on it, county can put a lien on it, even an assistant to the assistant of a contractor you hired to fix the roof can put a lien on it and eventually force a sell. I understand that all these can be justified. However, if somebody for whatever reason can take your property from you, do you REALLY own it?
Imminent domain bitches
Investors will not buy into homes even if they plan on renting them if they feel like the value/price of the home will go down.
If I told you, buy this house and fix it up/rent it out, and then I told you that next year the house would be worth 10% less than today.... would you still buy it? or wait for the price to drop?
No one is in a rush to invest, its not like the situation is "if i don't invest right now im gona die".... the media pushes people to invest in the "asset" classes they want as quickly as possible.
If the media says housing is a good investment, GET THE FUCK OUT OF HOUSING.
If the media says bonds are bad, GET THE HELL INTO BONDS.
If the media says Gold is bad, GET THE HELL INTO GOLD, lets take this week for example, all month they have been portraying gold/silver as HORRIBLE investments.... the price of silver is up almost 7$ from a month ago, and gold is doing extremely well.
Why? because all this counterfeit money/credit/derivative GARBAGE is just floating around inflating the value of assets (the stock market/dow is GARBAGE) theres no money left in equities, Consumer purchases are going to fall as gasoline prices SKY ROCKET, so ???? how are these corporations going to be profitable? IT DOESNT MAKE ANY SENSE why the market is going up right now , which leads me to believe that what we see there is INSTITUTIONAL INVESTMENTS / banks PUMPING the market up for the BIG DUMP (pump and dump).
They will entice un-informed investors to throw away their savings into equities and then pull the rug out and let the market tank all the while betting against it on the other side.
What goes up, must come down all other laws are laws of men which hold no ground.
dre4wolf - but why would some insane attention idiot on cnbc lie to me? i thought they were so pretty and loving? (sarcasm). i think you wrote now every response i ever hope to articulate.
i thought years ago - the more somebody has to advertise on t.v. - the less you need the product. did anybody forget to 'eat' because they missed the advert on t.v. for two whoppers for $3?
Ha, anyone who buys a house these days is a sucker. The entire industry is subsidized by a bankrupt government. No one knows how much a given house is worth because the people left with houses won't sell them at a loss. There are still a lot of people living in houses that should have been foreclosed on long ago. Investors own huge swaths of houses in my neighborhood. One guy owns 48 houses. With that many houses concentrated in a few hands, investors can control the prices of houses in your part of the city while the city happily looks the other way. Nearly every sale of a house here is from one LLC to another. Are the LLC's owned by different people or the same person driving up prices? Another huge problem is that when gas eventually costs $10 a gallon the idea of what seems like a good location will change dramatically. Why would anyone in their right mind plunk down money on something they cannot determine the value of? Owning real estate as a bet on increasing equity is so last decade.
Low mortgage rates won't help investors who are largely cash buyers. If interest rates go up, their property values will decline.
In Canada, it certainly is not...
When my bank call me to tell me they want to meet to talk about me buying a house... you know they are desperate to keep the BS going... especially when I am $9k in debt with no job. LOL
Because the new debtors finance the old debtors. If there are no new debtors money supply collapses, currency deflates and old debtors get in trouble or government has to borrow like crazy to compensate for that ... actually the macro-economic reason behind the huge deficit spending in the US.
Housing can be a good investment depending on where.
I live in Boston, say I put 100k down on a 400k rental property with a 30 year mortgage. The mortgage, taxes and insurance will be ~1800/month and the rent is ~2300.
So you clear 500 in cash flow, another 400 is principle on the mortgage and you deduct everything, which will save you 300/month on taxes.
500+400+300=1200 or 14400/year. More than 10% ROE, I challenge you to get that return in the stock market.
Of couse being able to take the deductions requires you have a job, which could be easier or more difficult depending on your situation.
Maintenance? Vacancy factor? Credit losses?
Douchebag renters.
Douchebag renters.
yup- i should be working is a troll- one mis step and those figures are a loss... one pissed guy who losses his job and trashes the place and hocks the appliances and it is a BIG loss.
Another proof that housing is a bad investment, at least for the people who know how to do business.
The only way it pays is if you cash out the property then you need to be able lower rents as this economy drops into the cellar.
Careful, that $300 a month savings in taxes reflects a much larger deductible SPENDING (presumably on interest). You need to account for the SPENDING also to get a clear picture. Plus, you are counting your $400/mo principle, which is an illusion if the price is falling.
buy aapl. or ibm. it's NEVER going down. just more and more up.
I have had rentals too. You cannot analyze a rental as an investment. It is NOT. It is a business and you should factor in your work. 10% is shit when you factor in the work YOU will have to put into it. I have changed so many toilets in my life already that I don't even like to sit on them for fear of breaking them. I was ALWAYS the ahole landlord because I wanted the rent on time or I had to take money from deposit to fix the holes in the wall the angry teenage punch in or so many of the other reasons. And don't get me started on dealing with the bank and their bullshit games not to mention getting the property tax bill required some liquor.
You are better off buying a reit if You want to get into that or the ETF VNQ.
lets see my mortgage interest is 4.8%
my taxes are 2.2% (up .03yoy
my insurance cost another 1% (up 30%yoy)
my maintenance cost including the central air unit that went out last summer cost another 5%
____________________________________________________________________________________
Total costs 13% of the homes supposed value
+ Last years 10% price depreciation in my area = -23%
Yep homeownership still sucks. Im listening to that Three Little Pigs story next time ANd Im building my next home out of GolD BriCKs.
What about the millions of foreclosed people? They won't come back into the housing market too quickly, will they?
The ones still living in the McMansion and not paying are digging it...for now.
And there credit score allows them to come back when?
Yup, the lt trend of housing is still down and homeownership is a nightmare for anyone but the elites.
http://confoundedinterest.wordpress.com/2012/02/28/case-shiller-20-city-...
"Is Housing An Attractive Investment?"...You Betcha!
Not Many Better!...Got Pleanty of Money & Savvy??
I'd like to have both right now.
I just bought five acres and a trailer in ruby arkansas for 26,000 total. It is a shirty place to live, but full of mexican farmworkers. I will never rent to section 8 again. I get a little bit less for renting to latinos but they always pay. One of the family always has a job, and I trade rent for work on the house.
I actually think i do better than with section 8. My experience was that i was always repainting and recarpwting when they moved out.
If you are gonna buy cheap property advertise for latinos in the local latino circular or put up an index card in a latino grocery store.
First generation immigrants, legal or otherwise, are a joy as renters, and they wont destroy your stove cooking meth like section 8 will.
yes
A buddy of mine leased his two bedroom condo out for a while. Each rental ended with a period of non-payment followed by playing the eviction game. Back-rent was hard to collect. Ex-tenents would quit working for an employer if he got the courts to order payroll withholding for the debt. Each rental caused him the need to repaint and recarpet after 18 months to three years occupation. We nick-named carpeting "an apartment diaper". Actually, use diapers look and smell better than used apartment carpet at the two-year mark.
These were people one notch above section 8. When he went to rent the last time, the county came in to insist his property was avaiable to section 8. He took the rental off-market and left it vacant until the 2005 market cycle got him out of the property.
I vowed never to repeat his mistake.
Recarpeting and repainting every 2-3 yrs is normal. Divide the cost by 2.5 and that's in your annual maintenance budget.
There are also now insurance policies for appliance damage, paid by the tenant.
It's not too bad, provided you don't walk into it with minimum down and a big mortgage. You can't get homeowner mortgage rates for rentals. Better you just pay cash, and pay upscale, not section 8. And from day one start making noises to the tenant about them buying it some day.
Rent month-to-month, 2 weeks advance...
You can boot em out immed. as the lease has expired....
Don't even try to get the back rent...
At least according to a slumlord I know in Cohoes NY...
they wont destroy your stove cooking meth like section 8 will.
=========================
Section 8. The only time you remodel with crapier stuff. You got to love that linoleum floor and there is nothing like carrying a gun to fix something in the property.
Marc Faber considers US housing cheap.
Because he lives in Thailand and not in the US.
The piece didn't mention anything like; "If property laws are followed there will only be a recovery when the people get their homes back and the economy can recover after the perpetrators are indicted and a recovery of some 500 billion is returned to the homeowners and investors.
The thesis is reliant on ongoing and retroactive crime as a business model.
Housing is set to fall 70%-80% considering hyperinflation will remove the easy credit because the printing press will be rendered worthless. Also, hyperinflation is completely economically devastitatin which will cause Americans to become much poorer, further driving down housing. In order to save on housing maintenance and utility costs, more people will live together in each household. In addition, many will altogether leave the country, which will further expose the overbuilding of housing that cheap money and government backing of mortgages has created.
Now is the time to take the equity out of your home if you would like to keep that equity. The best way to save is with silver. Gold is a great option too. If you’re looking to save in USD, nickels now have a melt value of more than $.05.
TheSilverJournal.com
What history do you have to support this?