wrote in message
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NOYB wrote:
wrote in message
...
On Mon, 19 Sep 2005 12:37:26 GMT, "NOYB" wrote:

Or they could do a reverse mortgage and retire off the 1000% increase
in
equity that they accumulate over the the next 25 years.

That's not how a reverse mortgage works. The mortgage company pays a
fixed amount per month (usually based on a fraction of the current
appraised worth plotted against an optimistic guess on how long the
person wil live) and hopes to pocket the appreciation.

They only hope to pocket the appreciation beginning from the initial
starting point of the reverse mortgage. Any appreciation that occurs
between now and when the reverse mortgage starts belongs to the home
owner.
The homeowner's equity in the house drops as the bank continues to make
payments. But the homeowners reaps the benefits of the appreciation that
occurred before the payments begin.


They also won't
write a reverse mortage unless the owner is pretty old.

In other words...most retirees would qualify.

It is really just a scam that the banks foist off on old folks without
anyone to look out for them.

It's not a scam. It's a process that allows the homeowner to take out
the
equity of the home without having to pay monthly payments on the equity
line.

Here's another way to look at it:

Suppose you live in a million dollar home, but have zero equity in that
home
(ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You
decide
to take out $2 million of that equity, and put it in an investment that
pays
a rate equal to what the monthly payment would be on the loan (ie--you
end
up with a net monthly outlay of cash of zero). You can then use the $2
million to live on.

You won't live very well on that $2mm if its only worth "half a house."
First thing you know, you'll need to buy a new $250,000 car or a
$500,000 ski boat. You will think twice before taking that $40,000
vacation in Europe. Surely you didn't expect housing prices to go up in
a vaccuum, right?
Heck, you'll be paying your pool boy and gardners $100 an hour (and
getting by so cheaply only because they don't speak English and work
under the table) when houses are $4mm a throw.

I wouldn't be surprised if my house doubled in value every 5-7 years. But
even if it doubles every 10 years, that means it will be worth $12+ million
in 30 years. I used the $4 million dollar figure as an example.




You want to make some money and retire off real estate?
Here ya go. This will work for you, particularly because you're in your
early 30's.

Buy up as many rentals as you can find. Yes, they will go up in value-
but although the day will come when there are "do you want to sell
XXX Main Street" letters in the mail several times a month you'll never
consider parting
with them. Money machine. You can have a couple of dozen properties
paid down to zero by your mid 40's if you work at it. Then you can
retire, or not, but you won't ever have to worry about money as long as
people need a place to live.


I'm in the process of doing that right now.

Harry Krause wrote:

Maybe NOYB will open a B&B to make ends meet.



Wonder if he'd throw in use of his boat? I wouldn't mind getting some
Florida sun in January or February.

"thunder" wrote in message
...
On Mon, 19 Sep 2005 12:44:45 +0000, NOYB wrote:


I agree. But I don't think prices will "correct". They'll plateau and
stagnate, but not fall significantly. Demand is increasing
exponentially
with the baby boom population retiring.

A real estate bust is not like a stock market crash. Any corrections will
not happen overnight, but they will occur. A very general scenario,
right now, your market is overheated, they are building like crazy,
everybody is getting fat, and the market will never go down. But watch,
you see a couple of buildings completed, usually a retail unit, with no
occupants. Same with a house, here or there, completed with no one moving
in. Six months later, it's bust. The switch has been thrown, and there
will be no new starts. The well financed builders will complete their
projects and hope for the best, the less well financed will leave theirs
incomplete. Now comes the corrections.

The prices will remain high, because no one is willing to sell for less
than they paid, but those that thought they were going to get rich,
leveraged to the max, can't make the payments, will either walk or declare
bankruptcy. Those that have to leave the area, for whatever reason, will
have to take the hit. That's the bottom. Then there are those, such as
yourself, who bought a house to live in, they'll ride it out.

Excellent synopsis. So the only thing that will drive prices down will be
those folks who *must* sell because they can't afford the payment on an
investment that they can't rent out. That is precisely why DSK's idea of
rental properties makes less sense than dumping all the money into your
primary residence. When you live in the house, you can afford to ride it
out.



I read somewhere
that speculators are a third of your market.

I've read up to 40% in some areas like Punta Gorda. It's much, much
lower
in Naples.

Nothing against speculators, but if they are in the market enough to
effect the market, it's a dangerous market. They don't really add
anything to the market, they just take from it.

They are definitely parasites on the housing and gasoline markets.

"Harry Krause" wrote in message
...
NOYB wrote:
"DSK" wrote in message
...
So, who is actually the smart one here?
PocoLoco wrote:
NOBBY!

He's the one who will be pocketing the money while the rest of you are
telling
him how foolish he is!
If he can really afford a $5000/m home payment on an interest-only
mortgage, and is *gambling* that his home equity will rise fast enough
to both pay off the home and provide a good financial return, wouldn't
he be better off living cheaper and investing that $5k/m?

How would I pocket $5k/mo if I lived in some place cheaper? Even a
cheaper place would have a mortgage, taxes, and insurance. Perhaps you
meant to say "pocket a portion of the savings"?

A similar home to mine that is *not* on the water would run about
$550-600k. But the ones that aren't on the water are appreciating at
half the rate as the ones that are on the water. I'd wager any amount of
money that I couldn't save enough money living in a house off the water
to come anywhere near the amount of appreciation that I'm seeing by
living on the water.

Here's an example:
Suppose a million dollar house on the water appreciates 10% per year
(they've been averaging more than three or four times that rate over the
last 10 years though). That's $150k. Suppose the $500k home that is
not on the water appreciates 5% (once again, an extremely conservative
figure). That's $25k. So the equity of the guy on the water is outpacing
the other guy's equity by $125k each year. If the mortgage payment on
the million dollar home is $5k/mo. and the $500k home is $2500/mo., then
the guy who is not on the water can put away about $30-40 k more (the
extra $5k is for additional taxes and insurance) each year in savings.
But that's still a lot less than the $125k net advantage in equity growth
for the waterfront homeowner.


Close your eyes, change a few words, and you sound like a degenerate
gambler.

I might be a degenerate...but I'm no gambler. I take well-calculated risks
only...and always leave a safety net.

I agree. But I don't think prices will "correct". They'll plateau and
stagnate, but not fall significantly.

That depends tremendously on location.

... Demand is increasing
exponentially
with the baby boom population retiring.

Ya think? Seems to me that more people are downsizing as they retire.


A real estate bust is not like a stock market crash. Any corrections will
not happen overnight, but they will occur. A very general scenario,
right now, your market is overheated, they are building like crazy,
everybody is getting fat, and the market will never go down. But watch,
you see a couple of buildings completed, usually a retail unit, with no
occupants. Same with a house, here or there, completed with no one moving
in. Six months later, it's bust. The switch has been thrown, and there
will be no new starts. The well financed builders will complete their
projects and hope for the best, the less well financed will leave theirs
incomplete. Now comes the corrections.

And this also *can* (not necessarily) lead to a steep drop in ask
prices. It will certainly lead to a steep drop in realized prices.




The prices will remain high, because no one is willing to sell for less
than they paid, but those that thought they were going to get rich,
leveraged to the max, can't make the payments, will either walk or declare
bankruptcy.

And those houses go on the block for whatever they will fetch, which
drags down other ask prices.

It's also quite possible for local conditions to change (perception of
schools, for example... or traffic & road conditions) such that an area
becomes much less desirable, and prices drop. Sometimes it's more of a
long term lag, sometimes it's falling off a cliff as the number of homes
for sale in the area increase and buyers aren't coming.

... Those that have to leave the area, for whatever reason, will
have to take the hit. That's the bottom. Then there are those, such as
yourself, who bought a house to live in, they'll ride it out.


NOYB wrote:
Excellent synopsis. So the only thing that will drive prices down will be
those folks who *must* sell because they can't afford the payment on an
investment that they can't rent out.

Excuse me? Was that written between the lines somewhere? In any event,
it's quite wrong.


... That is precisely why DSK's idea of
rental properties makes less sense than dumping all the money into your
primary residence.

What was my idea about rental properties?


... When you live in the house, you can afford to ride it
out.


Not necessarily. And you're overlooking a very key fact- if your
appreciation doesn't dramatically outpace your loan (which could easily
given any of the above scenarios), your home performs extremely poorly
as an investment.

DSK

"Harry Krause" wrote in message
...
Don White wrote:
Harry Krause wrote:

Maybe NOYB will open a B&B to make ends meet.



Wonder if he'd throw in use of his boat? I wouldn't mind getting some
Florida sun in January or February.


There is a place in the upper to middle keys that does that. It's an ok
older motel right on the water, with a good restaurant and the use of a
whaler skiff and outboard is included. The beauty of the place is that the
"offshore reef" is about a half-mile offshore, and that's as far as you
have to go to catch some damned nice fish. I stayed there for a few days
about five years ago. Nice beach, too.

I lived down here for 4 1/2 years before I went to the Keys. I don't know
what I was thinking. I finally "discovered" them this year, and have been
there twice already since Memorial Day...and I'm going back in 3 weeks. I
realized that if I want to head out to deep water to catch pelagics, it's
cheaper and easier to put the boat on the trailer and drive 3 hours to the
Keys with boat in tow. I can be in deep water off Islamorada in 3 1/2
hours...which is the same time it would take to run my 25' boat out 110
miles off Naples to reach the 100 fathom mark. And the fuel spent on the
Keys trip is 1/5th what I'd spend running to the deep water over here.

A better alternative yet, is running across the Alley and launching at Miami
Haulover or Port Everglades. This area is great for snook, tarpon, grouper,
jewfish, sharks, redfish, cobia, and snapper, but if you want pelagics
(dolphin, tuna, billfish) you need to run across to the East coast or Keys.

Harry Krause wrote:
Don White wrote:

Harry Krause wrote:


Maybe NOYB will open a B&B to make ends meet.



Wonder if he'd throw in use of his boat? I wouldn't mind getting some
Florida sun in January or February.



There is a place in the upper to middle keys that does that. It's an ok
older motel right on the water, with a good restaurant and the use of a
whaler skiff and outboard is included. The beauty of the place is that
the "offshore reef" is about a half-mile offshore, and that's as far as
you have to go to catch some damned nice fish. I stayed there for a few
days about five years ago. Nice beach, too.



If you can remember the community or motel name I'd appreciate it.
Never been to the Keys, but would like to see them.

"DSK" wrote in message
...
I agree. But I don't think prices will "correct". They'll plateau and
stagnate, but not fall significantly.

That depends tremendously on location.

... Demand is increasing exponentially
with the baby boom population retiring.

Ya think? Seems to me that more people are downsizing as they retire.


Houses in Florida don't have basements...and as a general rule are seldom
two stories, and are on tiny lots. Moving to Florida is considered
"downsizing"...everything but the price.



A real estate bust is not like a stock market crash. Any corrections
will
not happen overnight, but they will occur. A very general scenario,
right now, your market is overheated, they are building like crazy,
everybody is getting fat, and the market will never go down. But watch,
you see a couple of buildings completed, usually a retail unit, with no
occupants. Same with a house, here or there, completed with no one
moving
in. Six months later, it's bust. The switch has been thrown, and there
will be no new starts. The well financed builders will complete their
projects and hope for the best, the less well financed will leave theirs
incomplete. Now comes the corrections.

And this also *can* (not necessarily) lead to a steep drop in ask prices.
It will certainly lead to a steep drop in realized prices.




The prices will remain high, because no one is willing to sell for less
than they paid, but those that thought they were going to get rich,
leveraged to the max, can't make the payments, will either walk or
declare
bankruptcy.

And those houses go on the block for whatever they will fetch, which drags
down other ask prices.

It's also quite possible for local conditions to change (perception of
schools, for example... or traffic & road conditions) such that an area
becomes much less desirable, and prices drop. Sometimes it's more of a
long term lag, sometimes it's falling off a cliff as the number of homes
for sale in the area increase and buyers aren't coming.

... Those that have to leave the area, for whatever reason, will
have to take the hit. That's the bottom. Then there are those, such as
yourself, who bought a house to live in, they'll ride it out.


NOYB wrote:
Excellent synopsis. So the only thing that will drive prices down will
be those folks who *must* sell because they can't afford the payment on
an investment that they can't rent out.

Excuse me? Was that written between the lines somewhere? In any event,
it's quite wrong.


... That is precisely why DSK's idea of rental properties makes less
sense than dumping all the money into your primary residence.

What was my idea about rental properties?

Sorry. I meant Gould's idea. It was to buy a cheaper primary residence and
put the savings into rental properties.


... When you live in the house, you can afford to ride it out.


Not necessarily. And you're overlooking a very key fact- if your
appreciation doesn't dramatically outpace your loan (which could easily
given any of the above scenarios), your home performs extremely poorly as
an investment.

I only look at my home as an added bonus investment. It's not my primary
means of investment. And what price can you put on the enjoyment of living
on the water with a boat in my backyard and only 2 miles from my office?

NOYB wrote:
"Shortwave Sportfishing" wrote in message
...
On Sun, 18 Sep 2005 17:42:30 GMT, "NOYB" wrote:

When home prices hit the outer stratosphere, the number of potential
buyers
admittedly shrinks. But the Naples luxury market is still in boom mode,
local agents say, despite forecasts of a housing bubble that some predict
eventually must burst.

A slowdown?

You will get your turn and sooner than later.

It's already starting up here in NE.

I figure that once the NE slows, we'll soon follow. They'll be a slowdown,
but never a correction. There are too many baby boomers looking to retire
down here.

If the typical house in Naples becomes worth 5-7 times as much as a
typical house is worth anywhere else in the country, (and that is what
you seem to predict), those boomers will "look to retire" where it
won't take a nest egg of
$4-5mm just to buy a retirement cottage, and more importantly, where
taxes won't be taking a $30,000/year bite out of pension and social
security earnings.

It's a screw job. You live in a house that is valued at
$XXX,XXX,XXX.00, and you are free to sell it, but if you do and you
have no desire to start a new life in another portion of the country or
move into a beater you will be compelled to spend $XXX,XXX,XXX.00
*plus* to replace it. Put any value you want on the same property, $1
or a $100mm, and as long as you are *consuming*
the property every month by parking your butt in it that money isn't
really working for you. Meanwhile, the county tax collector comes along
and says, "Good news, NOYB, your house has doubled in value in the last
few years and so has the assessment. Here's your walloping bill for the
privilege of consuming a 7-figure house every month."

There's a reason that many of the more conservative (there's an
adjective you'll like) financial institutions *do not include* the
value of a personal residence when calculating net worth.

Did you check out "Extraordinary Popular Delusions and the Madness of
Crowds"?
(I particularly like the chapter on the Dutch tulip bulb boom and
bust).

"Don White" wrote in message
...
Harry Krause wrote:
Don White wrote:

Harry Krause wrote:


Maybe NOYB will open a B&B to make ends meet.



Wonder if he'd throw in use of his boat? I wouldn't mind getting some
Florida sun in January or February.



There is a place in the upper to middle keys that does that. It's an ok
older motel right on the water, with a good restaurant and the use of a
whaler skiff and outboard is included. The beauty of the place is that
the "offshore reef" is about a half-mile offshore, and that's as far as
you have to go to catch some damned nice fish. I stayed there for a few
days about five years ago. Nice beach, too.



If you can remember the community or motel name I'd appreciate it. Never
been to the Keys, but would like to see them.

One of the nicest places to stay down there is Hawk's Cay at mile marker
61...just 8-10 miles north of Marathon. Those small hotel/bed&breakfasts
look pretty neat, but I've never stayed at one. We're heading to Cheeca
Lodge in a couple of weeks. They have a 500ft. pier on the Atlantic side
that they allow you to tie a shallow draft (2 ft) boat up to.

There is a terrific thread on Florida Sportsman forum with all sorts of info
on the Keys:
http://outdoorsbest.zeroforum.com/zerothread?id=100907