All Forum Posts by: Jay Hinrichs

@Jay Hinrichs this is what my mind jumps to. I wonder how the wholesalers frame it though?

Is there a reason beyond the "I don't have to actually look out for the seller's best interests" reason that wholesalers think they have?

 I do not see many pacific palisades owners being thrilled at high desert.  Maybe some of the other fire areas (such at Altadena) will like the high desert.

For those in pacific palisades, they are used to nice homes in nice locations.  I suspect a very large percentage of them will desire to stay coastal. 

Of course their options may be limited as there is not enough housing.  Some of those owners are very wealthy and can afford to pay above current market price, but the inventory is not that big.

a lot of speculation.  Time will enlighten to the realities but I see no scenario where coastal Southern CA does not have a significant housing shortage.  So anyone from OOS that considered moving to coastal Southern Ca, please hold off until things settle down.  no need to make a bad situation worse.

Best wishes to all but especially the fire victims.  

 Great questions and things to consider! I haven't lived in it long enough to be exempt from capital gains, good point on that. And yes, the home is in a good area, that will continue to appreciate (not extraordinary but still good), and it's easy to get good tenants.

Thank you for the input! Lots of things I hadn't considered.

@Nicholas L.

Unfortunately James I am not convinced you are correct. We have had many large fires before. Yet the large coastal CA cities still have a housing shortage. I typically get multiple applications at my first open house charging top of market price. The rents are crazy. A few years ago core logic indicated the average rent increase for the year in this city for a SFH was $600/month. I had some increases higher than this average and I keep my good/best tenants a bit below market rent.

if no one came to San Diego, it would still take years to have enough housing.  The Los Angeles fires are likely to make a poor situation worse.  Some will leave the state, but many will be in search of housing in state that does not exist.   If I lived in and worked in Los Angeles and lost my home, I would first look in Los Angeles, then Orange County, then San Diego, then Santa Barbara.  None of those areas have enough housing.

i was forecasting a moderate year in terms of rent increase of $100/month average.  I suspect that is unlikely with the increased need for housing.   If I had an empty unit today, I think it would rent for at least $200/month more than a month ago.  I suspect this will increase as the people who lost homes do not want to live in hotels and, as the high season approaches, the hotels will be less inclined to provide reduced rates to the fire victims.

I hope no one from out of state decides to move to San Diego until this housing situation is stabilized.

i wish all the fire victims the best and success finding replacement housing.

 Have you actually ran the numbers on how much money you as the manager would make? It is very hard running a fund and paying 9% with performing assets at such a small scale and making it worthwhile for the fund manager. 

Sidenote: if borrower is paying P&I and investors receiving interest only it gets more challenging as you are receiving dribs and drabs of principal back every month which is impossible to deploy but you are still paying investor interest on it.

 Many people cannot afford to live in the coastal Ca cities.  I have a friend that moved from San Diego CA to Michigan in the late 1990s.  He has indicated he wants to move back to San Diego but the cost would affect his quality of life.  He bought in Michigan when he moved there, but the property value is far lower than a similar purchase in San Diego would have achieved.  He probably could not buy a starter home for the value of his Michigan property that is fairly nice (on a pond and far nicer than a starter home in San Diego).

There is a reason more people choose to live in CA than any other state and it is not even that close.  However, informing others of all the reasons would be contrary to my desire to not encourage people to move to CA.

so CA $ucks.  There is no reason anyone should move to CA.

Best wishes

The Midwest is going to benefit, no doubt. Away from the coast, no hurricanes, fires, floods - we don't even have snowstorms anymore.

People can deny climate change all they want or blame it on sun cycles, and frankly, it does not even matter, the reality is that insurance cost will force the issue.

You can try to rebuild and you can put houses on stilts in flood areas, or fortify them against high winds and fires, but that makes it expensive. And it's not only the homes, you also have to fortify your grocery stores, schools and anything else. Keep your automobiles safe.. This is one of the things that sound a lot easier than they are actually done.

The crazy thing I learned about these CA fires is that the heat radiation is hot enough (1500-2000F) that it will ignite your furniture through the windows. Wood ignites at 700F, fabric a lot sooner. So yes, you can have solid concrete walls, it's still going to burn down.

I have read that worst case up to 80 million Americans will relocate in the next three decades. That seems extreme to me, but even if is only 10% of that, that's more than our States entire population, the implications are supermassive. That would mean entire metro areas would become ghost towns and entire new metro areas would have to be built. For reference, we currently build 1 million homes per year just to keep up with current demand. Now we have to build how many millions extra? And it's not only homes, it's all the infrastructure a city needs.

On the insurance issue, I think this may be the end of national carriers. I am going to see if I can switch to a local Wisconsin insurance that reflects our local risk level in their premiums.

Many of the homes in the Pacific Palisades are 3-5 million, but when you look on Google Street View, most are very modest homes from the 1960s (there are some $20m ultra luxury mansions too), so a lot is the land value, the home replacement value on a 1600sqft may be what - 500k at the most? Most people are not rich there, look at the cars. I am not sure what the means for insurance payouts, replacement value and property value are VERY different - does anyone know?

There are lots of listings currently under contract, I guess the buyers are not going to show up for closing next week.. 

And also rents! I see two high end homes for rent, 50k, 70k, 210k per month.. I guess not anymore.