All Forum Posts by: Account Closed

I don’t think anyone can predict what interest rate conditions will be like in five years. It's easy to predict short term rates are going to rise, and directionally we know where long term rates are headed, but the magnitude of those changes is unknown. I once did a back of the envelope calculation on long term rates using empirical research and data on the relationship between the fed funds rate and the 10 year treasury. The 10 year Treasury has always been anchored by the fed funds rates and spreads have consistently been 200-300 basis points over a 20 year period of time. The 10 year treasury tracks the 30 year fixed rate nicely. I think my calculations showed that even with really aggressive interest rates hikes by the Fed it would only result in a maximum 30 year fixed rate of about 6 percent in 3-5 years (using the 10 year Treasury as a proxy).

I would tend to think about this option you raise in terms of return on equity. How much equity do you have generating $5k/month? If you deploy this equity in another investment vehicle what type of returns do you hope to achieve? If you set these two scenarios up with ROE being your comparison metric you can then run a sensitivity analysis on rates to see how it affects your decision.

In hot markets with a lot of investment happening in new construction how do non-cash buyers confront appraisal issues where the land value exceeds a price per square foot value using a sales comparable approach? I am already starting to look for another lot to buy and hold for a few years as a rental with a future ambition to build another personal residence. The challenges I faced financing my current tear down competing with builders paying a premium with cash were daunting. Anyone see appraisers defer to a replacement cost approach for these types of tear-downs to more accurately reflect fair value? I realize this is unique in that most people building will probably finance the land (which could include a tear down) and improvements in a single step rather than a two step process.

You wondered about your asking price in relation to your investment and purchase; as much as we would all hope comparable properties drive FMV and decision making, I have observed realtors, buyers, and even appraisers use purchase history to frame negotiations. I even had an appraiser once note in a report the sellers purchase price two years prior and the excessive profit sought in the asking price.

The comment about fair housing laws is the most salient point and should guide your actions. If you do object I would consult with an attorney first as familial status (number of children) is a protected class.

I hate to make generalizations without more information on intended uses, but I found 50x100 lots to be less than desirable when it comes to a traditional home with a 2 car detached garage with and normal access points; not a side entrance on a corner lot for example.The depth doesn't provide for a detached garage set in the back of the lot with easy access to both spaces. What are the front and rear set backs? What are the coverage limits? You should be able to find zoning rules with your municipality on the web. If you share some more details I could provide various rough site plans for a similar sized lots so you could modify and visualize how a home would be situated.

If you encounter difficulty in finding comparable land sales you can always review comparable sales for new construction and back into the cost of the land that makes economic sense.

GM just got a subpoena from the Justice Department related to their securitization practices and subprime lending. Tough road ahead for them.

http://dealbook.nytimes.com/2014/08/04/focusing-on-g-m-unit-u-s-starts-civil-inquiry-of-subprime-car-lending/?_php=true&_type=blogs&_r=0

The quote function didnt work properly. I meant to quote @Dion DePaoli and his comments about not ABS being created equal, and the level of due diligence on MBS.

Valid points. I should have qualified my observations in experience indicating the asset class; specifically, auto ABS (retail, wholesale, and lease). My only knowledge of MBS has been academic as I recently complete coursework in an exec MBA program on RE finance taught by an expert on MBS and former HBS instructor. The securitization process seemed very similar but we didn’t spend a lot of time on due diligence. I will concede not all ABS is alike..

Several posters have commented on this issue within the framework of securitization and the secondary market. I can tell you having worked on a half dozen ABS deals for an issuer nobody is looking at contract level data in a pool balance. The investor is looking at a prospectus, the trust is just receiving the electronic chattel paper, and the issuer is not going to be reviewing chain of title as they create pools. There are certain provisions of Dodd Frank that now require an issuer to review contract level data on a small sample of underlying contracts in a pool. The possibility that chain of title issues would be revealed in a securitization transaction seem rather remote in my opinion.