Don't buy high and sell low

Alex Stenback has a GREAT post over at Behind the Mortgage, which anyone interested in real estate should -I think- go and read immediately.

Alex hits on something that has perplexed me for a long time, and that is the sort of herd mentality that many people have about real estate.

As far back as eight years ago, it seemed like everyone around me was into buying real estate. At parties and social gatherings, new homes and home projects were a constant topic. If a renter was uncovered in the room it was highly likely that s/he would be overwhelmed with bossy proclamations about how s/he was missing out THE GREATEST OPPORTUNITY EVERRRRRR... because homeownership and real estate was totally where it was at.

I had a friend who bought a small condo off of Excelsior at 38th in St. Louis Park. He got seriously lucky over the whole Excelsior/Grand development, and sold for a tidy profit. I was pleased for him. But then he took the money and invested it into no fewer than ELEVEN different rental properties, all of which he paid top dollar for.

I remember discussing the shift with him and expressing concern that the rents may not be sufficient to cover his loan payments, given the high prices of the properties he was purchasing. He told me that he'd make it work with fat Section-8 rents, and that he wasn't worried, because even if that didn't work out, he'd still realize appreciation on the values and could sell the properties if need be.

Well, a couple of years later, he was in bankruptcy. And, the worst part in my view was that he didn't even have a homestead. After selling his condo, he plowed all the gain into investment property down-payments and then rented an apartment for himself. (Interestingly, it seemed that he didn't care to live in the neighborhoods where he invested, which is why he didn't occupy one of his own units. That set off a red flag of an entirely different nature, which I'll save for a future post.)

At any rate, this friend's situation was particularly dramatic, but there were others who got in over their heads even with their primary residences. You probably know a person or two like that - it seems these days that we all do.

So why did everybody believe they needed to buy? Why were buyers engaging in bidding wars, pushing home prices skyward in their desperation to experience ownership?

I really have no idea, to tell you the truth.

Just like I have no idea why today, when home prices are in the tank and half the houses in my neighborhood could be owned for ONE HALF of the monthly expense of renting around here, many people are still terribly hesitant to buy.

Alex called it a "fear bubble."

And I get that. Some people are scared that prices will continue to fall. But consider this: Unlike with price increases, which theoretically could continue on into oblivion, price decreases do actually have a lower bound. A forty thousand dollar house can only decrease to zero/FREE. (Do you think sellers will start giving homes away for free? I suppose it's technically possible.)

But let's say you find a forty thousand dollar house and its value plummets to zero in the course of four years. That's about $834 in value lost per month.

Which is cheaper than the average rent for a three bedroom unit.

So do you really win by renting?

(And we haven't even gotten into things like mortgage interest deduction, potential rental income in the case of duplexes, etc.)

It's time to pop the "fear bubble."

Anonymous threats and stalking - why Northsiders don't want to talk

As Sheila Regan and Ed Kohler both illustrated lately in the Twin Cities Daily Planet and The Deets, there's a bit of drama swirling around the Northside blogosphere these days.

What's unfortunate is that the most nefarious aspects are being perpetuated under a cloak of anonymity.

There's been plenty of speculation as to the identity or identities of the "Jordan Hawkman Group*" but of course, unless someone sues them (or Blogger/Google) it seems unclear as to whether or how these theories can be proven. (But in case you haven't been following the story, word on the street is that it's at least partially Don Allen. Hence the above-linked stories causing a backlash on JHG.)

In the meantime, the angry personality(ies?) hiding behind this moniker are having a grand old time spreading misinformation and -in some cases- outright lies about a variety of Northsiders.

Is it any wonder that nobody wants to talk?

Here's an email I received from "Jane Doe" just today:

from Jane Doe
to Minneapolis Girl
date Tue, Feb 8, 2011 at 9:59 AM
subject Constance E. Nompelis
signed-by rocketmail.com
hide details 9:59 AM (2 hours ago)
Don't feel left out as of late, we have not been forgetting about you.

JHG has a few questions for you:

1. How is the completion of the TISH orders coming along for your North Minneapolis House?

2. Were you involved in any way with the Jeff Skrenes accident? In any case, was there alcohol involved in his accident?

3. Have you ever been investigated for Real Estate transactions? Which ones?

As you well know, we keep our word as to what is on the record and off the record. If we dig up the answers on our own we have moved forward with stories. As stated before, we are willing to put up your side of the story....your call.

Your friends at JHG

For the record, this is not the first time I've been contacted by JHG, and while the questions in this particular message are mostly related to me, in the past they've attempted to blackmail me for info about others. Take this message, for example:

from Jane Doe
to Minneapolis Girl
date Sat, Aug 28, 2010 at 8:17 AM
subject Time
signed-by rocketmail.com
hide details 8/28/10
What's it going to be?

We know you represented the buyer side of Goodmundson's house among other things. We have known this all along, yet have not brought it up when there were logical times to publish it. That should prove that JHG can be Connie friendly.

Now would be the appropriate time to slide us information that focuses our attention towards Hoff and Goodmundson. There are others working with us already. Don't be late to the party, because it will not count if you are.

The dumbest part about it all though, is that threats of exposure *should* only work if the threatened party has actually done something wrong. The JHG have implied OVER and OVER again that I had some unethical or illegal role in Megan Goodmundson's home transaction, but the reality is that I did not. The JHG have also implied OVER and OVER again that I have romantic relations with any number of Northside characters, but the reality is that I do not.

So why should I (or anyone else) be afraid?

Well, because they lie. And lies really suck.

And I know a dozen other people over here who won't dare say one word about any of the local issues because they're afraid of some anonymous-lying-COWARD-blogger posting lies about THEM TOO.

Which really is a terrible shame.

I spent a few months trying to ignore this whole mess, hoping that it would just die down, and feeling like the best response was none at all. However, things have not in fact died down.

So, I decided to respond.

******

Oh, and for the record, I'm happy to answer the questions posed in the initial email. Here goes:

1) All the corrections have been made. (PS - Did you notice the beautiful new paint job on my home? I know you drive by it a lot as part of your intimidation efforts.)

2) Nope. Jeff's car accident took place in Northeast Minneapolis and I was nowhere near him at the time. (But how nice of you to take the friendly act of picking him up and driving him to the hospital and try to twist that into something seedy.)

3) Not unless it's been so super-secret that I wasn't informed about it. (And not unless your obsessive googling and defamatory insinuations count... which I don't believe they do.)






*Which I REFUSE to link to. If you want to read that garbage and you don't already know where it is, please consult with Google.

Reflections while scrubbing woodwork

When I first bought the house I now live in, I basically hated it. And not only did I basically hate it, but in uncharacteristic fashion, I had little hope that my sentiments would ever change. Part of it was due to the extreme nature of its hose-up-ness, but also, I now realize, in part due to the particularly grumpy stage of life I was passing through at the time.

In any event, two years later, much has evolved for the positive, both for the house and for my general disposition.

As I ponder the various options this new year has brought to me, I cannot help but also reflect upon the amazing transformation of this house, and my attitude toward it.

There are still things to be done, for sure. But Now I look at them with (mostly) good humor, and I know that they can be accomplished. I also know that this house has finally become a home. And I like it.

Remembering the Petro Stop

Here are some not-so-great photos of some REALLY GREAT photos:

Using your IRA to invest in real estate

Did you know that it's possible to invest in real estate with funds from a self-directed IRA?

Yeah, I didn't either until several months ago, when I learned about it from a savvy new client from another state, who I helped purchase in just this fashion, here in Minnesota. I was a little uncertain about how the whole thing worked, so I consulted an estate planning attorney, several custodian firms, and -of course- the internet.

What I found was that it's a surprisingly simple process!

There are some restrictions of course, and it's always wise to consult tax and estate-planning professionals when considering purchasing real estate for any purpose, whether investment or homeownership.

Nevertheless, it's always exciting to learn and share information about new ways to invest in real estate!

Creative houses from reclaimed stuff

This is amazing and inspiring.

The Hounds of Hell

I love dogs.  Really I do.

I have had dogs since I was a kid - mostly large breeds, and some (well, one) with socialization issues.  I understand that dogs are a lot of work, and that sometimes they have genetic or puppyhood-related personality issues which can be challenging.  I am totally sympathetic to this.

Nevertheless, it ultimately an owner's responsibility to keep their animals under control, and - if they have socialization issues - away from other people/dogs/etc to which they might do harm.

Unfortunately, not everybody seems to get that.  And what is even MORE unfortunate, is that it seems often the folks who are most irresponsible with their animals happen to own breeds which ALREADY face challenges due to perceptions of genetic propensities toward violence.

I am speaking, of course, of Pitbulls, Rottweilers and similar.

Take, for example, my neighbors.  Not only do they have three huge Rottweilers that live 24/7 outside, are un-fixed, bark and snarl their brains out ALL FREAKING DAY, but, on TOP OF THAT, their fence is so broken-down that the animals regularly escape and terrorize the neighborhood.  I myself have called animal control no less than three times over the last two years when these animals escaped.

I feel sorry for them, really.  The dogs, I mean.  They have a terrible life.  They are stuck in the hot sun in a dirt yard all day and night, with nothing to do - they don't get walked EVER... but seriously people.  This is not cool: