All Forum Posts by: Peter W.

Contrary opinion (for this forum atleast), but the best risk adjusted returns over long time periods are found in the Tier 1 cities (NYC, Boston, Philadelphia, DC, SF).   You are going to have a hard time making it work (from a personal finance standpoint) because they don't cash flow well and they typically have high asset prices to begin with meaning you have to bring a lot of cash to the table or be able to deal with negative cash flow, but that is where you will get the best returns.  Colombus and Austin are hot and doing well until they aren't.  Where I live (Rochester, NY), we have been seeing huge appreciation with no current end in sight, but we spent 20 years with a depressed housing market when Kodak went out of business and all it would take is for L3Harris to relocate division headquarters elsewhere to depress the market again. The Tier 1 cities are always hot because they are the engines of economic growth for the country.

To me, the question is can you make a house hack work (in terms of personal finance and lifestyle).  If so, you should do that.  If you can't, I have minimal opinion on the out of state investing other than I chose not to do it for reasons others have already mentioned.

Asbestos is a minor health hazard, in line with light cleaning chemicals (e.g. acetone and rubbing alcohol), but there are tons of laws associates with it--so it is scary to lots of people.   You'll have to check your states disclosure laws for landlords, but generally, if it is sealed (e.g not actively breaking) it's a nonissue.  In NY we have significant disposal laws so removing and disposing of even a moderate amount of it typically runs a couple thousand dollars.  What we did in the home I live in, is the tile is in good shape, so I just put new floor on top of it, however we did remove some along the ducts (fraying) and the tile for the stairs because they were breaking).  I've been told the most efficient way to remove tile (this is not by the book) is to take some dry ice or liquid nitrogen use it to crack all the glue on the floor (hooray thermal gradients) so you can remove it easily.

By the book self removal typically requires sealing the area you are removing it, encapsulate it when you remove it (e.g. duct taped contractor trash bags) and clean after the fact with a HEPA vacuum and then a soap based cleaner (our contractor used tub o' towels).

You would have to run the numbers, which includes estimating the returns you will get on the money you pull out.  My gut says you are going to be end up ahead significantly by taking the deal--even if you took the cashout and invested in treasuries at ~5%.  

Note you have to reinvest the money (I believe in real estate) for the interest to be tax deductible.   

Also make sure you are good going to little to no cash flow from your real estate investment.  Although I never the cash flow from my RE, I do find it provides significant peace of mind.  Make sure you are calculating expected expenses into your cash flow.

This is a better solution than threatening to call ICE on them if they don't let you raise rents above what is legally allowed. You significantly reduce your legal liability this way.  The California courts and jury will eat you alive if it comes out that you tried to blackmail your tenants into accepting a rent increase above rent control levels by having ICE come out.  You're also opening yourself to a federal discrimination lawsuit--regardless of whether you win or not it will be expensive.  It's not about ethics it's about risk mitigation.

Either call ICE or don't.  It's not my business, nor am I in a position to judge, but engaging in a negotiation using ICE as a threat will lead you open to all sorts of issues, especially in LA.

You can also just raise rents to 1500 and see what happens (without engaging the ICE question).  While you aren't "allowed" to do so, the repercussions aren't obvious from a quick google search.  I would likely talk to someone who knows the law (code and precedents) to understand your risk here.

Given this is California, probably the only thing you can do is update the rent the maximum amount allowed by law.  

You can look into nonrenewal due to you moving in or needing to rehab.  Likely this comes with a 3 month rent penalty you would need to pay to them.

You also should also look into max occupancy laws, as you might have the ability to evict based on occupancy laws, provided your lease allows it.  Read your local code and tenants rights literature, and then if it seems you have a problem or case to evict go get help from a lawyer.

I don't think their status: illegal immigrant, immigrant, permanent resident, citizen etc has anything to do with your relationship as landlord now that they are in your house.

Disclosure, I am not a California landlord nor am I a lawyer, just a busybody. 

Quote from @Ken M.:

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Quote from @James Hamling:

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@Ken M. I can't put any credit into this report because it's GIGO on the data (garbage in, garbage out). 

Take Minneapolis MN for example, as in the Twin Cities MSA (Market Service Area). 

We have a very big MSA vs many others because it has 2 major down-town urban centers (Minneapolis & St. Paul) very similar to Dallas Ft. Worth. 

In this MSA we have rings of markets. We have Down-town city center, the "inner suburbs" which is the area inside a major highway ring we have, and the "outer suburbs", and than extended Twin Cities area, and lastly rural. 

The down-town centers are all but decimated. These are factors specific to city of Minneapolis and city of St. paul, and the assorted epic stupidity in uber activist leadership of those cities. And the only thing holding them together in any way shape or form is the "hold-out" areas because despite the league of morons running things there is some pockets of great communities, keeping there specific micro area great. 

The inner ring suburbs have taken a hell of a beating as fall-out from all this being so close to it all, are aged a bit more, and those cities in general are solidly in decline. Again, with pockets of divergence which is due solely to the specific community actions of those specific areas. 

Now, the outer suburbs, good luck getting a "good buy" there. This is where everyone is going and I do mean EVERYONE. It's on level with the suburb rush post WWII, I kid you not that is the only thing we have to compare it against that even compares because it's on that scale. 

Those of financial capacity have been in a mass migration from inner too outer urban/suburban areas. Leaving those of limited capacity/options. 

So you have an area in the MSA that is pacing 1 month supply of inventory, sales prices over asking, moving in on average 10-20 days DAYS listing. 

And you have areas in MSA that prices keep dropping, inventory sits, sits, sits, and things move slowly. 

So if you just take the entire area as a whole, you won't get any form of an accurate picture of things at all. 

Again, keep in mind the Twin Cities metro area and expanded area is dang near as big as some states! It ain't small. It's the 16th biggest in the nation, 15 counties...... 

I have to wonder how many other MSA's in this have similarly cooked data. 

So if you were looking to buy specifically in the Socialist capitol of the city of Minneapolis, because you want to be a Landlord the single hardest way possible, yeah you could get some crappy places in crappy areas and have the leverage. 

But if you want to go where Landlords are appreciated, supported, empowered, and it's a decent market and all that, no, it's far from a buyers market.  

 This is similar to what I am seeing, anecdotally, in Rochester, NY.  

This is similar to what I am seeing, anecdotally, in Rochester, NY.

What is? What the Redfin piece says or what I shared? 
Everyone should probably read the source article in it's full as the interesting gymnastics of data selection and meaning inference is much clearer to notice. 
https://www.redfin.com/news/record-dollar-value-home-listing...

I see a trend in Rochester, NY similar to what you are seeing in Minneapolis.  People want to move out of the city and there aren't anywhere close to enough homes in the nice suburbs.  So, the city has maybe 3 months of inventory and nicer suburbs have maybe a month.  Friends of mine took 6 months of making offers above listing price to get a home. 

Yeah, and people wonder why we don't trust the media anymore. 

Because it's blatantly BS a ridiculous amount of the time now. 

"Oh it's a buyers market" really..... Tell that to the persons on offer 7, 10, 14 feeling like they won't be able to buy a home. Not because they don't have the $ credit or financing but because they keep getting beat out over n over again. 

And when they go to a new-con development it isn't any better. 

That's the reality on the ground here. 

#1 reason people are not selling there homes now to make the move to a different one isn't interest rate anymore, it's the fear of being able to find and secure that next home. 

Interest rate is #2 and getting weaker every week/month because people are accepting this just is the new norm. And fact of how big there equity is, rolling into next buy, diminishes the sting from rate because the amount financed is mitigated down. 

I have no doubt there is micro markets of struggle out there, heck I detailed some. But to infer the whole is like those pieces is BS distortion, yet again. 

Hell, meteorologists seem to be right today more often then big media...... 

I can understand why you think that, but I think what you are missing is that this is a very big country and Minneapolis, for all it's greatness, is a teeny, tiny part of things. The article is about the country. Can anyone spot Minneapolis ?
The solution is for people to move away from the cities and that isn't going to happen in large numbers.

Ken, seriously, what's your deal man? 

If you actually read what I wrote you'd see how your making absolutely 0 sense. 

Your arguing to something i didn't state, nor inferred. I never spoke about 1 city vs the country, I have no idea where you invented that from. 

I gave examples using Detroit: Michigan..... 

You just ignore everything I say, make up random nonsense in response to say..... I don't even know what the hell your trying to say anymore....

Are you butt hurt that were not all freaking out offering to dump portfolios because Redfin released some propaganda piece? 

Ken, maybe remember that my discipline in prior life was as an Engineer.... Were kinda known for our expert mastery and obsession with data. I know data, and all the confirmation fallacy's and bias that can be concocted and "cooked" with data. 

Just on it's face stating a singular state of real estate at national level is BS. There is no such thing as a singular direction of real estate across the nation. 

Even in 2008/2009 there was micro markets all but completely unphased from the GFC. And the degree to which it impacted varied across this giant nation. 

I have 0 doubt there is specific micro markets that are right now going through significant decline. Others, especially those in TX, going through consolidation. FL has some interesting things going on in some micro-markets that is completely non existent in many other FL markets. 

Engineering school goes into great detail teaching on the dangers of false outputs from data set inputs. 

The article states a very big assumption using total dollar amount of listed properties to infer several other assumptions. Well guess what, say you have 50% inflation the total aggregate $ amount will go way up and it does not mean volume went up, nor anything else other than the inflation is showing. 

Assumptions based upon assumptions of assumptions. Yeah, that does not lend for accuracy buddy. 

Do you know how they came up with these numbers and assumptions? I do...... They invented the # for buyers..... yes it's NOT an actual #, they just made one up based on there assumptions of assumptions of assumptions........ 

So if Redfin was being HONEST they'd say they GUESS there is more sellers than buyers because there GUESSING that ______. 

Methodology

The number of sellers in the market is simply active listings, or the total number of homes actively for sale at any point during a given month. Active listings data come from the MLS.

Because there is not a similar metric measuring how many buyers are actively in the market, we developed one. We took active listings and pending sales from the MLS to estimate what fraction of homes on the market will sell within a given month. Analogously, we estimated what fraction of buyers on the market will find a home within a given month using Redfin data on the typical time from first tour to purchase. The ratio of these two data points approximates the ratio of buyers to sellers in the market. We then multiplied that ratio by the number of active listings to get the estimated total number of buyers in the market. Note that our estimate of buyers is not based on Redfin traffic or customer acquisition data, and the purpose of this analysis is to measure the number of buyers and sellers in the housing market as a whole. All metrics that go into our calculation of the number of buyers and sellers in the market are seasonally adjusted.

Your comment "I have no doubt there is micro markets of struggle out there, heck I detailed some. But to infer the whole is like those pieces is BS distortion, yet again."
(The struggle is countrywide, man - wake up and smell the coffee)

You have proven you are a logger who can't see the forest for the trees. 

Engineers are detail oriented, thankfully. I want bridges and cars and computers to be built by engineers. But engineers rarely make good forecasters. 

No offense meant. Just answering your wandering, lack of focus post. That's all.

 You can both be right, the market as a whole or on average may be moving to buyers markets but it may not matter if you are searching for quality.  As V.G. Jason is fond of saying, in the current environment we should be fleeing for quality and not quantity.  Ultimately nobody buys or sells the markets, they buy and sell a single house in a single neighborhood in a single city (or for investors multiple houses in a handful of neighborhoods). As we say real estate is all local.

Real estate is local until it isn't.

Almost 50% of purchases across the country use FHA or VA loans. Those categories are seeing the highest level of non performance (over 90 days late) since before the great reset of 2008.

And as you may remember, if people in distress can't sell their properties when they are getting behind, they go to foreclosure. It creates a cascading effect sometimes known as contagion. Lots of people lose their houses. Not over night, but over time.

When a house goes to foreclosure, it affects the appraisal for the next buyers in the area. Too many foreclosures and banks tend to not lend in that area. It affects stability. Will that happen everywhere? No. But, FHA and VA are National, so it gets accumulated into the data and it affects all areas. FHA and VA have some ability to determine local lending standards but they have to watch their Federal mandates. They are not using local data to lend locally.

Neither You nor I could get a loan in 2009-2012 and it was not localized. Banks simply were not taking the risk. Not lending. Regardless of credit and income. People either don't know that or have forgotten. If someone depended on borrowed money to buy properties, it wasn't happening for them.

High failure rates (which are published data) at FHA & VA scare the market. There are high failure rates now at FHA and VA because the numbers aren't working. People's budgets are strained. Prices for properties are something like 30% higher than they should be.  That exceeds the ability of reduced interest rates to offset the monthly debt to income ratio costs allowed by underwriting. 

It is said that for most people, if their payment went up $100 they couldn't afford the property. That is an unsettling thought.

It's all numbers really. Like the Genie in the animation "Aladdin" says as he falls off of the  flying carpet "Oops, gravity works".

 You have more experience than I do--and contagion is real to some degree.  I'm not saying this isn't a national trend, I just know, where I live, the cost to purchase is still significantly less than the cost to build new, the housing is still relatively affordable compared to median income (for instance in my village, average price is about 300-350k and median family income is 100k the numbers still work) and there is a severe shortage in part due to L3Harris moving as many operations from California to the Rochester, NY area as possible (to save $$$ on labor costs).  I look at the neighborhoods where my wife grew up (Tallahassee, FL) and I see something that looks closer to the picture you are painting--prices decreasing, houses going for less than asking, and houses sitting on the market for longer and longer.  That is, it isn't 2022 anymore. 

Quote from @Ken M.:

Quote from @James Hamling:

Quote from @Ken M.:

Quote from @James Hamling:

Quote from @Peter W.:

Quote from @James Hamling:

Quote from @Peter W.:

Quote from @James Hamling:

@Ken M. I can't put any credit into this report because it's GIGO on the data (garbage in, garbage out). 

Take Minneapolis MN for example, as in the Twin Cities MSA (Market Service Area). 

We have a very big MSA vs many others because it has 2 major down-town urban centers (Minneapolis & St. Paul) very similar to Dallas Ft. Worth. 

In this MSA we have rings of markets. We have Down-town city center, the "inner suburbs" which is the area inside a major highway ring we have, and the "outer suburbs", and than extended Twin Cities area, and lastly rural. 

The down-town centers are all but decimated. These are factors specific to city of Minneapolis and city of St. paul, and the assorted epic stupidity in uber activist leadership of those cities. And the only thing holding them together in any way shape or form is the "hold-out" areas because despite the league of morons running things there is some pockets of great communities, keeping there specific micro area great. 

The inner ring suburbs have taken a hell of a beating as fall-out from all this being so close to it all, are aged a bit more, and those cities in general are solidly in decline. Again, with pockets of divergence which is due solely to the specific community actions of those specific areas. 

Now, the outer suburbs, good luck getting a "good buy" there. This is where everyone is going and I do mean EVERYONE. It's on level with the suburb rush post WWII, I kid you not that is the only thing we have to compare it against that even compares because it's on that scale. 

Those of financial capacity have been in a mass migration from inner too outer urban/suburban areas. Leaving those of limited capacity/options. 

So you have an area in the MSA that is pacing 1 month supply of inventory, sales prices over asking, moving in on average 10-20 days DAYS listing. 

And you have areas in MSA that prices keep dropping, inventory sits, sits, sits, and things move slowly. 

So if you just take the entire area as a whole, you won't get any form of an accurate picture of things at all. 

Again, keep in mind the Twin Cities metro area and expanded area is dang near as big as some states! It ain't small. It's the 16th biggest in the nation, 15 counties...... 

I have to wonder how many other MSA's in this have similarly cooked data. 

So if you were looking to buy specifically in the Socialist capitol of the city of Minneapolis, because you want to be a Landlord the single hardest way possible, yeah you could get some crappy places in crappy areas and have the leverage. 

But if you want to go where Landlords are appreciated, supported, empowered, and it's a decent market and all that, no, it's far from a buyers market.  

 This is similar to what I am seeing, anecdotally, in Rochester, NY.  

This is similar to what I am seeing, anecdotally, in Rochester, NY.

What is? What the Redfin piece says or what I shared? 
Everyone should probably read the source article in it's full as the interesting gymnastics of data selection and meaning inference is much clearer to notice. 
https://www.redfin.com/news/record-dollar-value-home-listing...

I see a trend in Rochester, NY similar to what you are seeing in Minneapolis.  People want to move out of the city and there aren't anywhere close to enough homes in the nice suburbs.  So, the city has maybe 3 months of inventory and nicer suburbs have maybe a month.  Friends of mine took 6 months of making offers above listing price to get a home. 

Yeah, and people wonder why we don't trust the media anymore. 

Because it's blatantly BS a ridiculous amount of the time now. 

"Oh it's a buyers market" really..... Tell that to the persons on offer 7, 10, 14 feeling like they won't be able to buy a home. Not because they don't have the $ credit or financing but because they keep getting beat out over n over again. 

And when they go to a new-con development it isn't any better. 

That's the reality on the ground here. 

#1 reason people are not selling there homes now to make the move to a different one isn't interest rate anymore, it's the fear of being able to find and secure that next home. 

Interest rate is #2 and getting weaker every week/month because people are accepting this just is the new norm. And fact of how big there equity is, rolling into next buy, diminishes the sting from rate because the amount financed is mitigated down. 

I have no doubt there is micro markets of struggle out there, heck I detailed some. But to infer the whole is like those pieces is BS distortion, yet again. 

Hell, meteorologists seem to be right today more often then big media...... 

I can understand why you think that, but I think what you are missing is that this is a very big country and Minneapolis, for all it's greatness, is a teeny, tiny part of things. The article is about the country. Can anyone spot Minneapolis ?
The solution is for people to move away from the cities and that isn't going to happen in large numbers.

Ken, seriously, what's your deal man? 

If you actually read what I wrote you'd see how your making absolutely 0 sense. 

Your arguing to something i didn't state, nor inferred. I never spoke about 1 city vs the country, I have no idea where you invented that from. 

I gave examples using Detroit: Michigan..... 

You just ignore everything I say, make up random nonsense in response to say..... I don't even know what the hell your trying to say anymore....

Are you butt hurt that were not all freaking out offering to dump portfolios because Redfin released some propaganda piece? 

Ken, maybe remember that my discipline in prior life was as an Engineer.... Were kinda known for our expert mastery and obsession with data. I know data, and all the confirmation fallacy's and bias that can be concocted and "cooked" with data. 

Just on it's face stating a singular state of real estate at national level is BS. There is no such thing as a singular direction of real estate across the nation. 

Even in 2008/2009 there was micro markets all but completely unphased from the GFC. And the degree to which it impacted varied across this giant nation. 

I have 0 doubt there is specific micro markets that are right now going through significant decline. Others, especially those in TX, going through consolidation. FL has some interesting things going on in some micro-markets that is completely non existent in many other FL markets. 

Engineering school goes into great detail teaching on the dangers of false outputs from data set inputs. 

The article states a very big assumption using total dollar amount of listed properties to infer several other assumptions. Well guess what, say you have 50% inflation the total aggregate $ amount will go way up and it does not mean volume went up, nor anything else other than the inflation is showing. 

Assumptions based upon assumptions of assumptions. Yeah, that does not lend for accuracy buddy. 

Do you know how they came up with these numbers and assumptions? I do...... They invented the # for buyers..... yes it's NOT an actual #, they just made one up based on there assumptions of assumptions of assumptions........ 

So if Redfin was being HONEST they'd say they GUESS there is more sellers than buyers because there GUESSING that ______. 

Methodology

The number of sellers in the market is simply active listings, or the total number of homes actively for sale at any point during a given month. Active listings data come from the MLS.

Because there is not a similar metric measuring how many buyers are actively in the market, we developed one. We took active listings and pending sales from the MLS to estimate what fraction of homes on the market will sell within a given month. Analogously, we estimated what fraction of buyers on the market will find a home within a given month using Redfin data on the typical time from first tour to purchase. The ratio of these two data points approximates the ratio of buyers to sellers in the market. We then multiplied that ratio by the number of active listings to get the estimated total number of buyers in the market. Note that our estimate of buyers is not based on Redfin traffic or customer acquisition data, and the purpose of this analysis is to measure the number of buyers and sellers in the housing market as a whole. All metrics that go into our calculation of the number of buyers and sellers in the market are seasonally adjusted.

Your comment "I have no doubt there is micro markets of struggle out there, heck I detailed some. But to infer the whole is like those pieces is BS distortion, yet again."
(The struggle is countrywide, man - wake up and smell the coffee)

You have proven you are a logger who can't see the forest for the trees. 

Engineers are detail oriented, thankfully. I want bridges and cars and computers to be built by engineers. But engineers rarely make good forecasters. 

No offense meant. Just answering your wandering, lack of focus post. That's all.

 You can both be right, the market as a whole or on average may be moving to buyers markets but it may not matter if you are searching for quality.  As V.G. Jason is fond of saying, in the current environment we should be fleeing for quality and not quantity.  Ultimately nobody buys or sells the markets, they buy and sell a single house in a single neighborhood in a single city (or for investors multiple houses in a handful of neighborhoods). As we say real estate is all local.

I see a trend in Rochester, NY similar to what you are seeing in Minneapolis.  People want to move out of the city and there aren't anywhere close to enough homes in the nice suburbs.  So, the city has maybe 3 months of inventory and nicer suburbs have maybe a month.  Friends of mine took 6 months of making offers above listing price to get a home. 

 This is similar to what I am seeing, anecdotally, in Rochester, NY.  

Three thoughts:

1.) The only way out is through.  For better or worse you are going to have to press forward until the house appreciates enough that you can purchase a single family home.

2.) As others have noted, this is an unfortunate part of the business.  It's a really tough break that it happened back to back for you.

3.) Being a landlord isn't for everyone.  You are probably stuck trying to make it work for another couple of years, but if it isn't for you it isn't for you and that is okay.