Ethics of Real Estate Investment, NIMYism and the Housing Crisis

yupididit said:

In reply to z31maniac :

That's probably why I like living here in SATX. Homes aren't "cheap" but my current situation I'm able to save $2600 a month without sacrificing my way of life. But that's because of a dual income household where bills are split right down the middle. If I get sent to the DC area then we can forget about that lol. Location is everything and unfortunately everyone can't pack up and move. 

Oh, if we included my girlfriend's income and lived in a downtown place with no animals......Could save well north of $3k per month I suspect. 

But that's no fun. I like being able to spend. I just bought a nice used guitar for no other reason than I wanted it, not that I can play worth a damn! I barely touch the 3 I have now. lol

We are hoping to get her on here at Oracle at some point and hopefully we can both go full remote and move to a smaller city.

In reply to z31maniac :

I honestly don't know how much money my lady is putting away but she makes a few hundred a month less than me with similar expenses. But she doesn't have a car hobby and 7 cars, nor does she spend money like me. 

I have a good friend who works for Oracle doing OPA. He's living very comfortably here in SATX Lol

yupididit said:

In reply to z31maniac :

I honestly don't know how much money my lady is putting away but she makes a few hundred a month less than me with similar expenses. But she doesn't have a car hobby and 7 cars, nor does she spend money like me. 

I have a good friend who works for Oracle doing OPA. He's living very comfortably here in SATX Lol

Yeah, she makes about 55% of what I do. If she made what I did, same apartment scenario, could probably approach $5k/month in savings. 

In reply to z31maniac :

What state did you move from? 

In reply to pheller : You sound like you're jealous you don't have a vacation home and want to penalize someone that does, why? If I own a home and only use it a few times a year, why do you care? It's my place and if I don't want to rent it out, how does that harm you?

I don't give a E36 M3 if my neighborhood is owned by out of state (or foreign) investors as long as they're paying the property taxes and maintaining the place.

I do mind somewhat if a house is being used as a hotel room and causing a disturbance of my peace and quiet - but my city has zoning regs for stuff like that. And when somebody has a "sneaky" rental arrangement but the tenant does not cause a disturbance - there seems to be a willingness to look the other way. I'm good with that as well. 

yupididit said:

In reply to z31maniac :

What state did you move from? 

I've always lived in Oklahoma. Just moved from Tulsa to OKC 4 years ago next month for work. 

My income + the cost of housing here is what makes it difficult for me to want to move somewhere else where I would have to spend a much larger % of my income on housing.

Our company only has two pay scales, Bay Area......rest of the US. 

So I could move to a more expensive area, but they wouldn't pay me more. So I would have to change jobs to a different company for a commensurate raise. But it still would not likely cover the increased cost of housing. 

In reply to Orael :

Canoes aren't great investments. 

yupididit said:

I'm 31 and been renting since I was like 20. I know I can afford a mortgage easily. 

But, I havent lived in the same state for more than 3.5 years. I really just don't feel like buying then selling whenever I have to leave. I know we have VA home loans etc to make buying easier. Even renting out my home whenever I move seems like a hassle, especially since the rent won't be much more than mortgage/ taxes/insurance in the areas I've lived in (south east VA, S.Cal, SATX). I do know some military folks who just buy a house at each assignment and rent them upon leaving. But they usually just break even or make a little money. I guess I could've been buying each time instead of renting but I don't feel like I've been wasting my money either. I do know if I wouldn't bought something in California, then I would've made a decent amount of money but I wasn't educated on California real estate back in 2014.

That said, I do plan on buying some land in this area around 2022 and building a home on it in the near future (5 years from purchase maybe). 

 

Do some paper what if's.  What if inflation goes up?  How long before the land value appreciation will exceed your ability to pay? With higher inflation will also come higher interest costs. Again how high can interest go before you can no longer afford to buy? 
     Most raw land appreciates at about the rate of inflation. Pretty much the same with real estate. The building is a depreciating asset but the land appreciates. The net will still reflect inflation. 
 The two real exceptions are highly desirable land such as water front or really great schools etc.  The Alternative, land next to a waste site, high crime area,  industrial zone,etc. 

Do the calculations and then factor in income tax savings. The first few years of a mortgage nearly all of the payments are deductible on your income tax.  The reduction occurs as you build equity. 
  
Now all of that assumes inflation.  Inflation is forced by national debt. How much debt does America currently have? 
  
   Moving every 3.5 years will eat up any potential gains.  So that was valid for that time of your life. If you are more stable now do you can see a 5 year+ future in reasonable commuting area. Then I respectfully suggest now is the time to act. Before the pandemic is over!  

gearheadmb said:

Duke said:

Basically, as I read it, he wants to use excessive taxation to force people to use their private land as he / society / the government sees fit. 
 

Or to put it another way, he can't afford to buy a place where he wants to live, so we should punish people until he can. For fairness. 

I mean.....this is what I'm reading too but it's pretty convoluted.

I'll add these little tidbits though: in this area prices have skyrocketed and wages are low. Rents of $1500 are fairly common and Idaho's minimum wage is $7.25. A lot of people have multiple roommates and barely skate by. People are selling and unable to get anything in the area because of booming prices.

You pay a mortgage whether you rent or not, its just a question whose mortgage you are paying.

Owning comes with a lot upsides and a lot of work. My mortgage is $280 a month now and the second home I owned in the city ( yes I was at one point a dastardly 2 hone owner) was $590.  Both together are still less than renting something even vaguely comparable than either.

I get the anger about being priced out of an area but if you are genuinely angry about the wealthy doing this........renting or paying money into the area is counterproductive. Move somewhere where you can thrive.

Maybe I'm alone here but comfort to me is having low bills/money going out rather than having to go 100 percent and scrape by.

Comment on "NIMY"...

It's in the title, but I think it has been ignored this whole thread. 
 

I'm assuming you meant "NIMBY" which stands for "Not in my Back Yard".  It's a phrase used to describe people's altruistic attitudes about low cost housing, as long as it doesn't happen close to them, or affect their property values.  Years of working with Habitat for Humanity... I am very familiar with it.

While it may express an elitist mentality (or even at times a racist one), I see absolutely nothing unethical about having a "NIMBY" attitude.  People should be able to voice their concerns about their property values, shifting demographics, etc.  
 

Though frustrating for a person like me who has spent a huge part of my life advocating low cost housing solutions, it's not unethical. It's just normal communication for normal people who are concerned about their neighborhoods. Don't use it as an ethical litmus test- that just creates divisiveness. 

In reply to SVreX (Forum Supporter) :

Well said.  But I question the bit about pricing owners out of the market.  I fail to understand how someone can be priced out of their home unless he owners treat their home like an ATM.  In that case "As yea sow, so shall yea reap"  

    However for those who don't, you qualified for a loan when you bought it. So that means you could afford it.  In the normal course of life inflation makes your fixed payment easier and easier.  After a while the property taxes go up but about that time the payments begin to end. 

In reply to frenchyd :

I didn't say anything about pricing owners out of a market.

When low cost housing is introduced to a neighborhood, it often drives neighborhood prices down. Owners hate that, so they fight it.

frenchyd said:

yupididit said:

I'm 31 and been renting since I was like 20. I know I can afford a mortgage easily. 

But, I havent lived in the same state for more than 3.5 years. I really just don't feel like buying then selling whenever I have to leave. I know we have VA home loans etc to make buying easier. Even renting out my home whenever I move seems like a hassle, especially since the rent won't be much more than mortgage/ taxes/insurance in the areas I've lived in (south east VA, S.Cal, SATX). I do know some military folks who just buy a house at each assignment and rent them upon leaving. But they usually just break even or make a little money. I guess I could've been buying each time instead of renting but I don't feel like I've been wasting my money either. I do know if I wouldn't bought something in California, then I would've made a decent amount of money but I wasn't educated on California real estate back in 2014.

That said, I do plan on buying some land in this area around 2022 and building a home on it in the near future (5 years from purchase maybe). 

 

Do some paper what if's.  What if inflation goes up?  How long before the land value appreciation will exceed your ability to pay? With higher inflation will also come higher interest costs. Again how high can interest go before you can no longer afford to buy? 
     Most raw land appreciates at about the rate of inflation. Pretty much the same with real estate. The building is a depreciating asset but the land appreciates. The net will still reflect inflation. 
 The two real exceptions are highly desirable land such as water front or really great schools etc.  The Alternative, land next to a waste site, high crime area,  industrial zone,etc. 

Do the calculations and then factor in income tax savings. The first few years of a mortgage nearly all of the payments are deductible on your income tax.  The reduction occurs as you build equity. 
  
Now all of that assumes inflation.  Inflation is forced by national debt. How much debt does America currently have? 
  
   Moving every 3.5 years will eat up any potential gains.  So that was valid for that time of your life. If you are more stable now do you can see a 5 year+ future in reasonable commuting area. Then I respectfully suggest now is the time to act. Before the pandemic is over!  

Can you explain this to me again? But,  pretend I'm a child and in 10 sentences or less.

SVreX (Forum Supporter) said:

In reply to frenchyd :

I didn't say anything about pricing owners out of a market.

When low cost housing is introduced to a neighborhood, it often drives neighborhood prices down. Owners hate that, so they fight it.

I understand owners who resent multi unit homes in their neighborhood. But I don't understand how cheap housing can otherwise occur in high priced neighborhoods.  Assume $500,000 plus homes. At least 1/2 of that price is land.  Plus the cost of building a house. Assuming donated land, Even if much of the labor is donated as are a significant portion of materials. That's still a expensive property.   With property taxes and insurance can a low income ( under $20K yr ) person afford such a place?  I understand the mortgage is interest free, but if we go by the 1/4 income for house payment that's still only a little over $400 a month?  

In reply to yupididit :

I'm sorry, Not without insulting you. Which I'd rather not do. 
I'm just saying things will change. Perhaps now is the best time to build the place you want sometime in the future. 

yupididit said:

frenchyd said:

yupididit said:

I'm 31 and been renting since I was like 20. I know I can afford a mortgage easily. 

But, I havent lived in the same state for more than 3.5 years. I really just don't feel like buying then selling whenever I have to leave. I know we have VA home loans etc to make buying easier. Even renting out my home whenever I move seems like a hassle, especially since the rent won't be much more than mortgage/ taxes/insurance in the areas I've lived in (south east VA, S.Cal, SATX). I do know some military folks who just buy a house at each assignment and rent them upon leaving. But they usually just break even or make a little money. I guess I could've been buying each time instead of renting but I don't feel like I've been wasting my money either. I do know if I wouldn't bought something in California, then I would've made a decent amount of money but I wasn't educated on California real estate back in 2014.

That said, I do plan on buying some land in this area around 2022 and building a home on it in the near future (5 years from purchase maybe). 

 

Do some paper what if's.  What if inflation goes up?  How long before the land value appreciation will exceed your ability to pay? With higher inflation will also come higher interest costs. Again how high can interest go before you can no longer afford to buy? 
     Most raw land appreciates at about the rate of inflation. Pretty much the same with real estate. The building is a depreciating asset but the land appreciates. The net will still reflect inflation. 
 The two real exceptions are highly desirable land such as water front or really great schools etc.  The Alternative, land next to a waste site, high crime area,  industrial zone,etc. 

Do the calculations and then factor in income tax savings. The first few years of a mortgage nearly all of the payments are deductible on your income tax.  The reduction occurs as you build equity. 
  
Now all of that assumes inflation.  Inflation is forced by national debt. How much debt does America currently have? 
  
   Moving every 3.5 years will eat up any potential gains.  So that was valid for that time of your life. If you are more stable now do you can see a 5 year+ future in reasonable commuting area. Then I respectfully suggest now is the time to act. Before the pandemic is over!  

 

Can you explain this to me again? But,  pretend I'm a child and in 10 sentences or less.

He's basically saying that (assuming you'll be in the current location for several years) now may be a good time to buy. Interest rates are historically low. A low interest mortgage can be a good hedge against rising inflation (which frenchy seems concerned about). And he seems to be assuming that housing will appreciate in value during that time, so even if you sell in the next 10 years, you'll probably be alright. It's all speculation of course. Your plan to buy in 2022 may turn out to be a better time than now, if COVID foreclosure/eviction moratoriums are lifted and prices drop over the next year. Nothing is certain. YMMV. Do the math for yourself considering your situation/down payment availability/credit rating, etc.

Also, you should probably ignore the part about taxes. The increased Standard Deduction that started in 2018 has made the mortgage interest deduction pretty much pointless for millions of people.

frenchyd said:

In reply to yupididit :

I'm sorry, Not without insulting you. Which I'd rather not do. 
I'm just saying things will change. Perhaps now is the best time to build the place you want sometime in the future. 

LoL I'm messing with you

In reply to STM317 :

I have less than 2 years left here, I'll move between this summer and next I'm sure. And it'll be to DC area most likely, which I'll buy a home. I won't be there for more than 4 years, though. After that I'm moving back to Texas to "retire" and afford life lmao

Joining the party late, but here's what is happening in my city.

Example #1: Little old lady has five acres, grew up in the house. Time to retire (can't live alone anymore). Has to sell the land and split it among her siblings (one alive, one an estate). She contacts a realtor, who suggest marketing the land for development because otherwise her cut (1/3 of the sale) won't be enough for her to continue living on her own. So she does exactly that, sells the land for $1.1m and moves away. Keep in mind, she was a beloved member of the community. The neighbors lose their collective E36 M3 at the developer and the city for allowing the lot to be developed. Zero anger at the old lady, it isn't her fault because (like most of the neighbors) she's old and needed the money. Apparently the neighbors all agree she was supposed to sell the land to the city for the tax assessed value as a *gift* to grow the size of the existing park next door. Any other plan of action was unacceptable. New $300k houses are going up on the land as we speak.

Example #2: Old folks who owned the house for 30 years die, pass it on to the estate. Kids immediately put it on the market for what would have been considered an insane amount just a few years ago. Sold for asking price in days.

Example #3: Huge REITs are swapping apartment complexes like baseball cards. Each one fixes it up just a little more, ups the rent, shows a profit, throws it back on the market as a successful investment ripe for snatching up for ones portfolio. Rinse, repeat.

I live in what was once a crappy area that hasn't seen any real development since the 1960s. Our downtown looks like a history book photo. Our zoning code is so old it doesn't even address townhouses. And E36 M3 is about to get real. Half million dollar houses are being built on the edge of our city limits, $350k townhouses across from an active railroad crossing are going up and selling instantly. We're located minutes from downtown Atlanta, property is cheap, and the money is flowing.

I've been warning people for the last two years that some of our sprawling apartment complexes built in the 1960s are ripe for demolition and rebuilding as $400k townhouses. No rezoning required, no presenting plans to city council for approval, no way to stop it. It will happen, I've already seen it happen in Brookhaven.

I still find it interesting how this thread took lots of twists and turns. 

People made a lot of assumptions about the reasoning for my topic. 

People chimed in about topics not related to my topic. 

The new administration is going to try to various methods to make it easier for homebuyers, but I highly doubt any of them will really increase the supply of housing in areas with high demand. I don't think we're going to see a reduction in rental prices and an increase in housing affordability. We'll likely see more of our tax dollars go towards housing programs. There is talk of a $15,000 First Time Home Buyers credit, but that's likely to just drive prices up.

It would be interesting if the new administration, or the post-COVID economy had more people working from home, but I'm not sure that'll keep people from slowly moving towards metro areas with more amenities and better social lives. It certainly won't slow the growth of the west. 

It'll be interesting to see if changes to lending rates have any impacts, or if increased taxes on capitol gains makes land and property speculation less lucrative. I suppose the Feds could develop some sort of "Tiered Rate" that would incentivize lending on primary, lower-cost housing and deter lending on 2nd homes, land investments, rentals etc, but that already kind of exists and doesn't do much to keep people from leveraging. 

I think the only way housing is going to be anymore affordable in areas of high demand will be to somehow tax folks with vacant land or 2nd homes at a higher rate, and that's largely left to the state and local governments.

pheller said:

The new administration is going to try to various methods to make it easier for homebuyers, but I highly doubt any of them will really increase the supply of housing in areas with high demand.

Correct me if I'm wrong, but do you want more 2007?  Because that's how you get more 2007.

I think the only way housing is going to be anymore affordable in areas of high demand will be to somehow tax folks with vacant land or 2nd homes at a higher rate, and that's largely left to the state and local governments.

Two words:

Supply

Demand

News at 10:  people pay a lot of money for things a lot of people want.

Duke said:

....people pay a lot of money for things a lot of people want.

Just to reinforce your point:

If you make money (financing) easier to get for a item in demand, it will only get more expensive.  You would "think" economists / financial experts would know this.

In reply to Duke :

Duke said:

pheller said:

The new administration is going to try to various methods to make it easier for homebuyers, but I highly doubt any of them will really increase the supply of housing in areas with high demand.

Correct me if I'm wrong, but do you want more 2007?  Because that's how you get more 2007.

 

I think you're wrong. I think we're lining ourselves up for something that is potentially even worse than 2007. Demand has either stayed the same or gone up, but there is just no inventory right now. There aren't foreclosures happening. We're not letting the market work, for better or worse, but that means that houses that are available are going to be priced much higher than they should be. What happens when they are available again? I'm predicting a flood of inventory, and that will drive prices down; meanwhile the Fed will do what it does, or doesn't, money is too cheap... I think we're going to see massive see-sawing, and it has the potential to be bad. I'm nervous about it.