<p>Whoops, I do know the the dif between there and their but sometimes when typing a bunch…
It would be hard to do a similar deal in Seattle just because the numbers are so much larger. It would take $400k to buy a similar well located 3br/2ba and it might rent for $1800-$2000 at most. Taxes and insurance would be around $4000. I’d have to borrow as there is no way to save that kind of money in a few years as we did for the other houses. That means more risk and a huge nut every month even if it might appreciate more in the long run we’d be cash poor and stressed in the short run. So maybe we do not maximize the potential return but we are satisfied and sleep well knowing there are no payments to make if it goes vacant a few months or needs some unexpected repairs.</p>
<p>wow. can’t get over the low taxes. 1000 for the whole year! sheesh.</p>
<p>I guess you’re not in the NY metro area? Can we come too?</p>
<p>Only 6 hours away. My family lives in NJ so we are close enough for a weekend visit. It’s a different world/economy. Average pay is low too which is why we work in Seattle and buy cheap out there. We feel the area has excellent longterm potential</p>
<p>I think barrons’ discussion of Seattle vs. Lynchburg illustrates many of the points I have wanted to make just fine. (And, barrons, sorry for thinking you were a “she”.) (Assuming, that is, which is no longer universally the case, that having a “wife” makes you male.)</p>
<p>I also note w/re barrons’ great Lynchburg deal: (a) He is making an after-tax return on assets, before capital appreciation, of about 5.3%, which is clearly fine, but does not include much risk/illiquidity/pain-inna-butt premium. Without significant capital appreciation, it’s not a good deal, which means that it’s an intelligent speculation, not a road map out of poverty. (b) There are plenty of good properties around here that you couldn’t sell today for 80% of their 2005 price. (I know because as a fiduciary I’m in the process of selling a number of residential properties for less than 80% of comparable 2005 prices.) So 30% capital appreciation over two years is no sure thing.</p>
<p>Well, in the example where taxes are $1000 a month, that needs to be added into the cost of ownership, obviously.</p>
<p>That’s really, really steep. My taxes run around $1500 per year on properties with market values near $500,000.</p>
<p>Tarhunt, where are taxes $1500 a year for a $500,000 house? That’s lower than Calif with prop 13. I like those taxes.</p>
<p>JHS, where are the residential properties that have dropped more than 20% since 2005?
Do the people in the real estate business admit prices have dropped that much?</p>
<p>d:</p>
<p>Political pressure on the appraisals has meant that appraised value is quite a bit less than market value. This was necessary to keep people of modest means from having to pay taxes they couldn’t afford during the 400% runup in the 90s.</p>
<p>I like the risk better than stock market risk where all the cards are marked and I don’t have the code. There are also some good tax benefits after depreciation and my mgt. expenses. We project bumping the rent $50/mo a year so in 5 years the return will be closer to 10% on assets invested. Add in projected appreciation in the 3-5% range and it’s a nice deal. We could throw some debt on it and increase the calculated returns but that can wait until we need the money for something else and this keeps our risk pretty low. We find it fun and not a PITA really.</p>
<p>Barrons, it looks like a low risk investment to me. And you enjoy it. And you can sleep at night. Looks good to me.</p>
<p>Tarhunt, are property taxes increases capped every year or can they be increased astronomically depending on the politicians?</p>
<p>dstark:</p>
<p>Theoretically, they could be increased by politicians. There is no cap. The reality, however, is that this is already a very expensive place to live and property tax revenues are more than adequate.</p>
<p>Let’s put it this way. If property taxes were suddenly jacked up, it would take about two days to get a cap in place.</p>
<p>dstark: </p>
<p>Two properties – </p>
<p>(1) Condo in fashionable neighborhood just outside the Center City Philadelphia area. Identical unit 7 floors below sold for $850K in 2005, selling for $675K this week. Combination of weaker market and a lot of competition from new rehab in “hotter” neighborhoods.</p>
<p>(2) Beachfront condo, small building, Jersey Shore, quiet, high-prestige town. Realtor recommended asking price of $925,000 in spring 2006. Last sale in the building was $825,000 in 2005 for a much less desirable unit. To date, no one has offered more than $725,000. In November, Realtor recommended taking that if we wanted to sell within a year of listing.</p>
<p>No one admits that the prices have dropped that much, and “average” prices haven’t. In the city, that’s in part due to new rehab. At the Shore, there is a horrific inventory. The only transactions that actually get done involve either a really motivated buyer or a really motivated seller. Otherwise the bid-ask gap is too wide. So the average transaction price has only dropped about 10%, but there are a lot fewer transactions. No liquidity.</p>
<p>Those are big drops. So how much did they go up? How much were these condos in 2001?</p>
<p>Do you think the prices will go lower? Flatten out and stay flat for a period of time?</p>
<p>There is very little inventory for sale where I live. I think prices have dropped 5% at the most from the highs.</p>
<p>The average increase in real estate prices is inflated. People are remodeling their homes. Making them nicer and bigger. Plus home sizes in general have increased over the years.</p>
<p>That’s why I always go for mid-sized SF homes in good neighborhoods. Last to lose and first to come back. Condos–blecccch</p>
<p>StickerShock - re lottery tickets, you are correct that I have never purchased one, and never will. Buying a lottery ticket just has to be the worst possible use of one’s money. But I used to play a game with myself - I used to pick my numbers, NOT buy any tickets, and then every Sunday morning check the winning numbers, and congratulate myself for not having wasted my money on lottery tickets. I got some satisfaction of out this for a while, several months actually. </p>
<p>But one day I realized, wow, how horrible would it be if by some freakish accident I actually did manage to pick six winning numbers, but, had no actual lottery ticket to present to claim the winnings. Can you imagine how awful that would be? That’s when I stopped playing the game with myself. </p>
<p>Incidentally the Florida Lottery funds Florida Bright Futures. When my daughter received the final semester of her award, I sent Jeb Bush a thank you letter for the $15,000-ish/$3K-ish per year she received in scholarship money from the fund. I wanted him to know that I really, sincerely appreciated it. How cool is that - $15,000 back in my budget over four years of college, just because she earned As and Bs. 
It’s somewhat satisfying to know that if people truly are foolish enough to buy lottery tickets, at least some of the money finds its way into some productive use.</p>
<p>Strangely enough, condos are the one sector of the market that are still selling like hotcakes in our market. But over the long haul I think homes make a decent investment.</p>
<p>Ny, SF are exeptions but the prices are way way too high for average investors.</p>
<p>Marite - re immigrants - I am curious to know your opinion of the difference in immigrants everywhere else compared to the ones I have met, grown to know, and even employed in Miami. Several of these people made more than one attempt to get here from Cuba. A few I know personally made multiple attempts, and kept getting caught, then jailed, and they just kept trying until they finally got here under the wet foot/dry foot rule. Just think of the raw courage THAT takes. </p>
<p>Anyway, they get here with the clothes on their backs, they learn english, then they get very, very aggressively entrepreneurial. They start businesses, they (GASP!!! - shhhh, don’t tell the “can’t” people, or Frank) buy homes, they take excellent care of their children, etc. They’re ridiculously happy, too, and I am quite certain that the word “can’t” isn’t in their native language and they certainly do not have any understanding of that word or any word like it in english. </p>
<p>But what’s really incredibly interesting is watching how immigrants react during serious disasters, such as after a hurricane hits. The general climate after a hurricane is not pleasant - it’s very, very humid, hot, no electicity often for days if not weeks, dangerous debris is everywhere, and there’s lots of damage to cars, homes, etc. There are usually no stores, gas stations, etc. open and it’s difficult to get ice or clean water (although people are getting a lot better at preparation). </p>
<p>The immigrants have a party. Actually, they don’t need much of an excuse to break out in spontaneous parties - they’ll celebrate over anything, or nothing. The last hurricane, the immigrants next store to D’s apartment had a massive tree smashed through their roof. They didn’t whine, or cry, or wait for FEMA. They also didn’t complain about the heat and humidity or fret about when the power might come back on. What they did instead was grab every hand tool they could find, and every male relative and friend they could find, and they chain-sawed and chopped the tree down in bits and pieces, and repaired the roof. It took them three days. And those whole three days, they hooked their radios up to their car batteries and danced while they worked. Never did I hear so many people laughing so hard for so long and having so much fun. (The power came back on two weeks later.)</p>
<p>While all this work was going on, the rest of their families - the wives and children - cooked tons of food on grills, and went around and fed all of the non-immigrants who were all still sitting at home whining for their insurance companies, FEMA, the governor, the power company, etc. - waiting for government rescue and complaining about how terrible everything was, never for a minute considering that just perhaps they could get up and get moving and DO something, vs. just complaining and waiting for someone else to come along and solve their problems. </p>
<p>When you think about it, I had a head start - I didn’t have to flee a dictator, and risk my life over 90 miles of ocean in a boat and evade coast guard patrols to get here, and I didn’t have to learn a new language. If these immigrants can accomplish all that they have, surely any American who makes a choice to be successful and financially viable vs. a choice to be poor can accomplish these things too.</p>
<p>I could be wrong but i’d bet given 10 years in this country and some sort of legal status their home ownership rates are much higher than other poor who have been around much longer.</p>
<p>Some of the immigrants I’ve met do own homes. They’ve been in this country for nigh on 20 years now, some more. Their command of English remains limited, they are packed like sardines in their homes with lodgers, relatives, etc… I’m pretty sure that if the authorities were aware of their living arrangements, some would have to move.</p>
<p>I know of one family, for example, who wanted to rent a two bedroom apartment but were prevented from doing so by the local authorities because it would have meant their son and daughter sharing a bedroom. But that’s because they were getting help from the housing authorities after their previous apartment caught fire.</p>
<p>If you’ve read Harvard Works Because We Do, you’ll see a portrait of the janitors and dining hall staff that shows people barely eking out a living. The book is actually about the huge gap between affluent students and the largely immigrant service staff who work in various menial capacities at Harvard.</p>
<p>EDIT: I agree with Barrons that many immigrants are full of entrepreneurial zest, which is why they up and went in the first place. But many are hampered by their lack of English language skill and sometimes their lower level of education coming into this country. After a long day sanding floors or painting houses, they do not have the energy to study English.</p>
<p>No, but they can buy a small fixer in LA or San Antonio or Houston or Chicago or Atlanta and with so many friends in the construction world they can fix up a place for cheap and pack the family into 3 brs. The kids learn English.</p>