All Forum Posts by: Eric Justice

I think we are talking past each other. My point was You won’t find non-leasehold properties in Kailua for 133-150k. Period. Whatever you’re seeing for that price are Leasehold properties, not fee simple. 

 >True, real estate fell 33% on average, but the average is made up of both the lows and highs meaning some major cities like in SoCal and Austin for example saw a much higher decline than 33%. Also, if BP members are going to use the best appreciating locations in their pro RE examples, then you must use those same locations when drawing the opposite conclusion.

Or you site the range of expert averages (I can find legit references that indicate as low as 20% and as high as 33%).  What I would not do it state a number outside the expert range such as a 50% decline (that you used) and attempt to pass that off as the normal decline.  I think most people understand that there will be those that experience both better and worse than the average.  

>2) According to chatgpt whether true or not, rent decreased by up to 10% and dividend payouts decreased by 20%. Insignificant enough to not sway me in any direction. But what makes this less of a great example you used, is the fact that you lost hundreds of thousands of dollars in equity/net worth and possibly forclosed on some properties like most Americans did at that time. However, no mainstream index fund like the VOO or some dividend index, got forclosed on. In fact, you just average down in the market causing a much better recovery than continuing to keep those San Diego homes you had. And I'm pretty sure you didn't keep them assuming you purchased pre 2009. You can't average down on foreclosures.

There are so many things in this one post

 When a source states up to, they are talking worse case.  Not average or usual case.  My experience in our 10 rentals (3 areas) was no decline in rental income. 

The only way you get foreclosed on RE is missing payments which usually implies leveraged purchase.  If I buy stocks levered (I.e. margin) they foreclose even if I have not missed payment.  They will sell your holdings if they fall in value below a certain value.  Is there a difference?  Yes, because if my house looses value but is still generating cash as would be the case if rents have not fallen (which was the case on our 10 units in 3 different markets) I get to keep them without needing to infuse additional capital.  Note that under same conditions as margin purchase, I would have been required to sell these cash positive units.  

If rents do not go down then the only reason for foreclosure would be if over leveraged.  We had no foreclosures and still own 7 of those 10 units.  We sold 2 in gulf shores because they got hit back to back years by hurricanes (sometimes wish we kept them) and the other because it was our lone property in that market and was not doing as well as locaL properties.

Note if I was in the s&p500 at GR (which I was), it lost 48% between aug 2008 and mar 2009.  Note this is far greater loss than the total average RE decline from the GR. 

Seeing I had no foreclosures, I did equivalent  to dollar cost average as we were coming out of the GR.  I pretty much purchased a property per year starting at the depreciated price after GR and stopping in Dec 2021 (purchased $4m that month).  I have made some offers since Dec 2021, but have not purchased as the rates do not have underwriting that shows my high expectations on return. 

>True that RE also averaged higher than 3-4% in the last decade from our artificially created boom and corrupt politicians and government, but thats where the market shines, VOO or whatever index, is the same for everyone. But the majority of people purchase "average" real estate properties and does not reflect the an increase in HOA, insurance, gas, electric, taxes, management and maintenance. So while the top 15% of investors strike the location jackpot, most are not and that appreciation has also been eaten up by the afforementioned. Not entirely, but it's not all gravy.

I am not sure why it matters the cause of the price increase or why you think the increase in RE prices derives from different economics than the rise in stock Prices. I suspect we can agree both benefitted from low rates. 

I used the average appreciation recognizing the average will have some above and below the average.  The average does not only represent the top 15%.  If your point is some markets have done much worse than others (including worse than mine), I think that is understood. 

>1031: I think there's a misconception here. First off, in some brokerage accounts, you can move money around index funds without incurring a taxable event i.e VTSAX to VTI or something or withint a 401k or Roth and completely change your funds much like a 1031 Exchange.

Are you sure you are in a taxable account?  I will need to ask my investment advisors.  Definitely you cannot do this in a taxable account purchasing individual stocks.

Certainly Roth accounts have no gains tax regardless if used to purchase stocks or RE.

> I bet most people didn't know that probably not even you. You can't take 45k/year out in real estate via a cash out or HELOC or home sale. NOT gona happen.

I am not sure what you are saying but assure you I have extracted a lot more than $45k/year from my properties (but $0 in last 2 years). I suspect near 10x that amount (likely have averaged near $450k). Why do you think you cannot do it? What is preventing one from doing it other than they need to have at least $60k equity gain (At 75% LTV)? This equity gain can be from value add, appreciation and/or equity paydown. For me to do 10x that amount I need $600k of equity gain per year which I have done for at least the last 6 years.

>everyone will need to sell their house at some point like in my case, not 1031 exchange forever.

Definitely not true that everyone has to sell.  People die all the time holding RE and when they do, the value of the RE gets re-based at current value and the gains are never taxed.  Wouldn’t that be sweet for stocks in a taxable account?  This is almost too good to be true.  So the plan is keep and/or 1031 until I die, then have all gains and depreciation magically ripped away via the current tax laws.  Good luck accomplishing that with stocks that are not in a Roth.  

Best wishes. 

1) True, real estate fell 33% on average, but the average is made up of both the lows and highs meaning some major cities like in SoCal and Austin for example saw a much higher decline than 33%. Also, if BP members are going to use the best appreciating locations in their pro RE examples, then you must use those same locations when drawing the opposite conclusion.

2) According to chatgpt whether true or not, rent decreased by up to 10% and dividend payouts decreased by 20%. Insignificant enough to not sway me in any direction. But what makes this less of a great example you used, is the fact that you lost hundreds of thousands of dollars in equity/net worth and possibly forclosed on some properties like most Americans did at that time. However, no mainstream index fund like the VOO or some dividend index, got forclosed on. In fact, you just average down in the market causing a much better recovery than continuing to keep those San Diego homes you had. And I'm pretty sure you didn't keep them assuming you purchased pre 2009. You can't average down on foreclosures.

3) True that RE also averaged higher than 3-4% in the last decade from our artificially created boom and corrupt politicians and government, but thats where the market shines, VOO or whatever index, is the same for everyone. But the majority of people purchase "average" real estate properties and does not reflect the an increase in HOA, insurance, gas, electric, taxes, management and maintenance. So while the top 15% of investors strike the location jackpot, most are not and that appreciation has also been eaten up by the afforementioned. Not entirely, but it's not all gravy.

4) 1031: I think there's a misconception here. First off, in some brokerage accounts, you can move money around index funds without incurring a taxable event i.e VTSAX to VTI or something or withint a 401k or Roth and completely change your funds much like a 1031 Exchange.

Second, 1031 exchange is just shifting money around not avoiding taxes on usable cash. I sold a house last year and needed the money to build another house so I have to take the tax hit. And the government will recapture 25% of those tax deductions I took over 18 years which is way more than if I cash out my stocks or accept dividens. In fact, I could be taxed at 0% if accepting less than 45k/year or similiar.

I bet most people didn't know that probably not even you. You can't take 45k/year out in real estate via a cash out or HELOC or home sale. NOT gona happen. In fact, if you sell like I did, you'll end up paying 65k in taxes for a 325k home sale which is I think what I came up with. This does not include the 25k rehab in order to sell at full price, the agent fees and whatever else I forgot. And everyone will need to sell their house at some point like in my case, not 1031 exchange forever. Lastly, you can get a loan using your 401k funds to purchase a house. So you can go from stock to house, but you can't go from house to stock without taking a huge tax hit.

So the market for the win here as far as liquid cash and the ability to reduce your taxes to $0 in some cases as well as some shifting of funds around and getting a home loan against your accounts without a tax hit.

 I’m not seeing any condos/townhomes for under 200k, but this townhome at just under 300k is a leasehold. https://www.redfin.com/HI/Kailua/539-Keolu-Dr-96734/unit-C/h...