Author Topic: INFLATION IS OUR FRIEND  (Read 56596 times)

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Offline zubs

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Re: INFLATION IS OUR FRIEND
« Reply #720 on: June 15, 2022, 02:02:07 PM »
I've had some good and bad and ok renters.
You should keep at it and rent out your Elsinore house.
You can have a property management company do it for you and pay the fee.

Once you get the house sold, where you gonna put the cash?
the stock market?


I guess cash is a good play right now.

Offline CalBears96

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Re: INFLATION IS OUR FRIEND
« Reply #721 on: June 15, 2022, 02:31:39 PM »
I've had some good and bad and ok renters.
You should keep at it and rent out your Elsinore house.
You can have a property management company do it for you and pay the fee.

Once you get the house sold, where you gonna put the cash?
the stock market?


I guess cash is a good play right now.

I had been using property management company and the fee is only $99 a month.

Another con with the Lake Elsinore home is HoA, which is a real pain in the ass. They keep sending me violation letters. I don't even know why there's HoA since there's absolutely no amenities at all.

There's no way in hell I'm keeping the Lake Elsinore home. It's been under water for the past 16 years and it's finally above water so we can't get rid of it fast enough.

Offline USCTrojanCPA

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Re: INFLATION IS OUR FRIEND
« Reply #722 on: June 15, 2022, 02:37:49 PM »
I've had some good and bad and ok renters.
You should keep at it and rent out your Elsinore house.
You can have a property management company do it for you and pay the fee.

Once you get the house sold, where you gonna put the cash?
the stock market?


I guess cash is a good play right now.

I think it's a good thing he's selling it.  Properties in the IE will get hammered in the downturn and these high gas prices plus the tenant pool is not as strong as what you'll find in Orange County.
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Offline CalBears96

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Re: INFLATION IS OUR FRIEND
« Reply #723 on: June 15, 2022, 02:52:19 PM »
I've had some good and bad and ok renters.
You should keep at it and rent out your Elsinore house.
You can have a property management company do it for you and pay the fee.

Once you get the house sold, where you gonna put the cash?
the stock market?


I guess cash is a good play right now.

I think it's a good thing he's selling it.  Properties in the IE will get hammered in the downturn and these high gas prices plus the tenant pool is not as strong as what you'll find in Orange County.

Exactly.

Offline ChiKid24

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Re: INFLATION IS OUR FRIEND
« Reply #724 on: June 15, 2022, 03:51:11 PM »



I have a 2.375% 30-fixed rate on my Tustin Ranch home and I'll be about $1,500 cash flow positive when I rent it out so that home is not hitting the market anytime soon.  There are a lot of owners out there who have fixed rates in the 2% to 3% range and those people are not going to be selling until they absolutely have to.  That's going to keep a lot of inventory off the market.  And where are all those people who have gotten priced out due to the high prices and high rates going to live?  That's right, rental properties and that's why the rental market is still hot.

I'm probably in the minority here, but offering up a counter point as this is something I contemplated before ultimately deciding to sell our place. We're looking to upsize and move about 10 miles SW from current location. Our oldest kid started at a K-8 charter school (free) that is a great fit and so we're committed to that school for 10+ years (for her and our younger son when he's older). Currently wife and I have been doing a 30-minute morning drive for drop-off before heading to office. That worked in the covid / hybrid work world, but wife is going to have to start going back to office. So here's what I debated.

1) Buy new house (was pre-approved without sale contingency) in area we have been eyeing close to school, then sell/rent current home
2) Sell/rent current home, then rent while we look for new house.

I went with option 2 as I was very worried about buying high and selling after housing market softened. We closed on our sale a few weeks ago. Agent said we couldn't have timed it better as activity has drastically sold.

Now why did I sell vs rent it out, especially with a 2.375% 30-year and a pre-approval to buy without a sale contingency? A few things.

1) Cap gains avoidance. We were well over the $500k capital gain exclusion on the sale. So pocketing $500k worth of gains tax-free felt like a big win.

2) Fear of tenants trashing the house. We sold for a bit under $2M. We treated the place well because it was our home. While I know there are great tenants out there, many don't have the same pride of ownership I do. Too big a risk at that property value.

3) Return on equity. This was probably the biggest driver as I'm a numbers guy. The equity in the place was over $1M. My overall cost of ownership (PITIA) was about $4,500/month. My guess is we could have rented it for $5,500-$6,500/month, so cleared $1-2K a month. But that assumes no vacancy, repairs, management fee/my time, etc., which we all know will happen from time to time. So clearing $12-$24k per year (excluding those extra costs) on $1M in equity is a paltry 1.2% to 2.4% return. Yes there is mortgage paydown happening which increases the equity, but there is also risk of housing price decline. 

In the end, selling and pocketing the cash, while avoiding $500k in cap gains won out. Plan is to much of it as a down payment on the bigger house, maybe even get lucky and it's after prices have come down a bit. With the way mortgage rates are trending, lowering a 4.5% mortgage when we buy makes more sense than the 1.2% return on a rental. My bank also has more attractive jumbo pricing if you put 40% down. Currently that cash is getting 3% at HM Bradley (capped at $100k), 1.35% at GS Marcus (includes referral bonus), and 1.4% in 8-week treasuries (state tax free). I also put some in the market this week as we had excess on top of what we need for a down payment.

Just thought I would share the counter point to sell vs rent decision and how I looked at it.


Offline The California Court Company

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Re: INFLATION IS OUR FRIEND
« Reply #725 on: June 15, 2022, 05:31:11 PM »
Quote
1) Buy new house (was pre-approved without sale contingency) in area we have been eyeing close to school, then sell/rent current home
We did option 1 last year and all I can say absolutely there are no regrets. Our current house checks all the boxes and I really like this neighborhood which only has like 20-30 houses total and the houses with the lot/location and floor plan that we would consider is less than half of that so on average a house will be available every couple of years....it really made no sense to rent and wait out the market if the buying opportunity presented itself...
"Should any Person come into contact with such fruit, soil or groundwater, such Person is advised to wash thoroughly with soap and water and seek immediate medical attention"-Augusta Disclosure, Tustin Legacy

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Offline irvinehomeowner

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Re: INFLATION IS OUR FRIEND
« Reply #726 on: June 15, 2022, 06:12:41 PM »
Quote
1) Buy new house (was pre-approved without sale contingency) in area we have been eyeing close to school, then sell/rent current home
We did option 1 last year and all I can say absolutely there are no regrets. Our current house checks all the boxes and I really like this neighborhood which only has like 20-30 houses total and the houses with the lot/location and floor plan that we would consider is less than half of that so on average a house will be available every couple of years....it really made no sense to rent and wait out the market if the buying opportunity presented itself...


I think #1 is harder to do today with higher rates (for those that finance).

And with prices slowing down.... #2 may be a better option as someone's dream that prices will finally drop significantly might come true.
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Offline The California Court Company

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Re: INFLATION IS OUR FRIEND
« Reply #727 on: June 15, 2022, 06:47:36 PM »
the problem is it all happened so quickly the rate doubled in less than half year...how can people time it?

Quote
1) Buy new house (was pre-approved without sale contingency) in area we have been eyeing close to school, then sell/rent current home
We did option 1 last year and all I can say absolutely there are no regrets. Our current house checks all the boxes and I really like this neighborhood which only has like 20-30 houses total and the houses with the lot/location and floor plan that we would consider is less than half of that so on average a house will be available every couple of years....it really made no sense to rent and wait out the market if the buying opportunity presented itself...


I think #1 is harder to do today with higher rates (for those that finance).

And with prices slowing down.... #2 may be a better option as someone's dream that prices will finally drop significantly might come true.
« Last Edit: June 15, 2022, 09:38:51 PM by The California Court Company »
"Should any Person come into contact with such fruit, soil or groundwater, such Person is advised to wash thoroughly with soap and water and seek immediate medical attention"-Augusta Disclosure, Tustin Legacy

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Offline zubs

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Re: INFLATION IS OUR FRIEND
« Reply #728 on: June 15, 2022, 08:56:55 PM »

Quote
2) Sell/rent current home, then rent while we look for new house.

My tenant who did option #2 back in 2018 just took a rental price increase from me.
Good tenant good guy.
He sold his house in Mission Viejo in 2018 and was gonna buy something when real estate dropped, so he is renting from me while he is waiting.
He was suppose to be out of my house by 2020.


It's probably a good time to sell now...shrug.
It doesn't matter to me.  I'm gonna keep my rentals forever.
They just keep laying golden eggs and I ain't fuckin' with it.


My smooth monkey brain wouldn't know what to do with all that scratch....
I'd end up spending all of it on hookers and blow.
« Last Edit: June 15, 2022, 09:31:30 PM by zubs »

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Offline irvinehomeowner

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Re: INFLATION IS OUR FRIEND
« Reply #729 on: June 15, 2022, 10:33:27 PM »
He sold his house in Mission Viejo in 2018 and was gonna buy something when real estate dropped, so he is renting from me while he is waiting.
He was suppose to be out of my house by 2020.

He must have listened to the slowdowners... and unlike LL, didn't buy in 2020 with perfect timing.

It's okay... maybe next year... or next year... or next year.
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Offline ChiKid24

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Re: INFLATION IS OUR FRIEND
« Reply #730 on: June 15, 2022, 10:37:33 PM »
To be clear, we are actively looking and have made offers on 5 homes in the past three months. My real fear was buying high and then selling after a drop. My intention is not to wait for a drop to buy as I tend to think things will flatten and unicorns will still get multiple bids. We're active in the market and not expecting to get something at a big discount.

Curious though if others would have rented out their place instead of sold. It's something I really debated and it probably eneded up being a 55/45 call.

Offline irvinehomeowner

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Re: INFLATION IS OUR FRIEND
« Reply #731 on: June 15, 2022, 10:47:57 PM »
@ChiKid24:

I don't think there is a cut and dried right/wrong call... everyone needs to make the decision based on their own situation and finances.

One thing I didn't see is how is rent on your bottom line? Is it equitable to whatever your mortgage was? You don't have to share the exact numbers or even the area, but that was one of the issues when we rented for short period of time... comparing that cost to if we would have just re-bought instead.
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Offline CalBears96

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Re: INFLATION IS OUR FRIEND
« Reply #732 on: June 15, 2022, 11:10:56 PM »
@ChiKid24:

I don't think there is a cut and dried right/wrong call... everyone needs to make the decision based on their own situation and finances.

One thing I didn't see is how is rent on your bottom line? Is it equitable to whatever your mortgage was? You don't have to share the exact numbers or even the area, but that was one of the issues when we rented for short period of time... comparing that cost to if we would have just re-bought instead.

I just think that it depends on whether or not you're cut out to be a landlord. For my Lake Elsinore home, the rent pretty much pays for all the costs related to the house, and some. But I'm just not cut out to be a landlord. I can't deal with the stupid ass HOA and I don't to stress out over missed payments. We were fortunate enough that our tenants never missed a payment, even during the pandemic, but we were stressed out about it.

Offline OCtoSV

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Re: INFLATION IS OUR FRIEND
« Reply #733 on: June 16, 2022, 08:35:43 AM »
Did anyone else catch Art Laffer on Kudlow yesterday? His recipe for the Fed was monthly 100 bps increases in the Fed Funds rate all the way to 10% . I seem to recall some mockery from USC over my “Volcker moment” thesis on Powell. I think we’ll see it as  the only inflation the Fed can impact is housing market inflation, which will be reversed through huge rate increases and unfortunately widespread job losses.

Offline zubs

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Re: INFLATION IS OUR FRIEND
« Reply #734 on: June 16, 2022, 12:26:28 PM »
To be clear, we are actively looking and have made offers on 5 homes in the past three months. My real fear was buying high and then selling after a drop. My intention is not to wait for a drop to buy as I tend to think things will flatten and unicorns will still get multiple bids. We're active in the market and not expecting to get something at a big discount.

Curious though if others would have rented out their place instead of sold. It's something I really debated and it probably eneded up being a 55/45 call.

The $500,000 tax free gain is really tempting and would put me close to selling. 
However, the "What the hell do I do with $500,000+++" would have just made me hold the asset...cause you know...momoney moproblems.

 

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