All Forum Posts by: Account Closed

@Pat Martin It might be a local phenomenon you would have to observe to understand. An affluent community that has grown and expanded over the years with gradual investment--sometimes accelerated. 12+ sales within the past year over 600k; not sure where your looking at comps. A $1.34m sale four months ago in close proximity to the house I used as an example of what could go wrong. My counterpoint to the "be cautious" post was spec builders are printing money in my area. I had a dumpy 800 square foot bungalow under contract for 250k and walked away after finding a better lot. Spec builder bought, built, and sold 8 months later for 850k (you must have missed that comp too) and probably pocketed 250k. I would ask my neighbor why he choose to buy a 900k house next to a 300k bungalow but he's a pretty good red wings defensive player and a bit scrappy : )

@Steve Babiak The link may be helpful to the OP if he was curious- thanks. I assumed most could locate the listing with a search engine. 

I don't have any meaningful insight into cause for trouble with the listing. I am sorry if my post came off as all-knowing. I was merely trying to point out ..." who knows". Not me! The OP seemed confident in a protection of an exit price at a break-even point. Simply pointing out these assumptions reflect confidence that may not pan out-- and there is always risk inherent in these activities. My personal opinion; personally guaranteeing 800k worth of property for a 45k profit does not seem worth the risk. This particular property was an example of a spec build that doesn't seem to be panning out, and for no observable reason.

Take a look at this property and tell me what you think went wrong-- 1905 Shipman, Birmingham MI 48009. It was priced right initially at >1m. On the market for 120 days with 300k in price reductions and no action. It is readily apparent what went wrong? Houses are flying off the shelf in this area. It could be something as simple as the front elevation is not appealing to buyers. Who knows is my point- but their are no guarantees of a sale even at a 10-20 percent discount.

As for your fire sale exit price at the break even point-- this is an assumption that may not be true. Homeowners are fickle; a single design or construction element gone wrong could prevent a homeowner from purchasing a new construction home even at a deep discount.

The 20 percent rule may a good framework but I think it is mostly situational. There are at minimum 20 homes being constructed in the neighborhood of my build (1/3 spec I would estimate) and all of the land was purchased for 200-300k with coverage limits less than 3,000 square feet and exit prices of 700k to 1M. The spec builders are practically printing money right now-- and so are the home owners who undertake these building activities. You may have very little equity at risk but with a personal guarantee of close to 1M I would expect much bigger personal profits. You are the only one with any skin in the game as a "sponsor".

@Paul S. Back to the Colombia example: If you could get a local bank to issue debt in USD you still have a a liability denominated in USD and an asset denominated in COL (peso). The home or asset is not easily converted to USD unless you use the future prevailing exchange rate, and any cash-flows presumably are going to be denominated in local currency too. Your USD debt may remain neutral based on currency fluctuations but as the peso weakens against the US dollar, your asset is worth less in real terms (USD). Same with cash-flows. The opposite is true for a strengthening against the US dollar. In short,  you still have real currency risk despite the borrowing terms.

I work in a Latin America finance group in automotive and manage finance teams in Brazil, Argentina, and Venezuela. A tough place to do business and even tougher to manage risk (political and economic). Most multi-nationals are naturally hedged because they do business in so many countries their assets, liabilities, and cash flows are remeasured in so many currencies the net effect of some currencies moving for and against the US dollar is minimal. You don't have that benefit with a single asset and cash flows. Hedging in the forward market is also usually cost prohibitive.

Hard to hedge against currency risk especially when you expect to receive income denominated in $USD. I am thinking of specially Columbia which has a relatively strong Peso at the moment which is experiencing a weakening this year. How would plan to hedge this risk? You have to have really strong foresight into projected inflation and future central bank actions and interest rate conditions. Even the best economists have a hard time predicting inflation and currency movements in the short term (less than five years)...something to think about.

@Ann Bellamy @Dan Borecki  Dan - as I am sure you are aware the practice of public accounting is regulated by state licensing departments. Maybe good advice from Ann not to limit yourself to the Boston area, but outside of the State might not make sense unless you want to pay someone hourly and file yourself. Are you current or ex Big4? Why not find a current or former colleague? Too personal maybe to ask colleagues, but for me--when my tax scenario reaches a certain complexity, or my net worth exceeds a certain amount --I am surely going to find the best of the best. And in most major cities those accountants are former or current Big 4 -- you are going to pay 300-500/hour for a staff and probably 1k+/hour for a partner, but worth it for a high net worth individual.

Good riddance- maybe now they wont be so frequently listing their properties well above fair value in the hopes of a desperate HomePath buyer that can waive appraisal. I honestly see no benefit other than higher higher DTI limits if you needed them--up to 55 percent with strong compensating factors; otherwise, same guidelines as conventional loans except paying an interest rate premium for the Homepath product.