All Forum Posts by: Chris Martin

I'll keep this short.

I plan on submitting claim forms for properties I've sold that fall within the "Settlement Class" as defined by the US District Courts as part of the class action suits against NAR. The definition is on page 12 of this District Court document. The full details are here: https://www.realestatecommissionlitigation.com/.

My view is that since I've paid quite a bit in commissions for millions in property value I handed off to brokers during the settlement
timeline, I should be able to get part of the estimated $12 per property that will be awarded. LOL!

Unless I am missing something, I don't see a downside to filing a claim. If you do, please post what it is.

@Jay Hinrichs I agree. The GR/GFC forever changed the lending business. I've documented some of the bank pre=GFC "policies" here on BiggerPockets. (e.g. my March 16, 2019 post on a bank calling ALL HELOC loans due in 2008-2010 timeframe.) 

We are at the front end of some very serious, sector specific, residential real estate challenges. 

@Jack B. sounds like a good game plan. A few items of note... Depreciation recapture comes into play (line 19 of Schedule D) for rental real estate. When you fill out the worksheet on page D-14, the cumulative depreciation ends up taxable at 25% (Schedule D Tax Worksheet page D-16, lines 35-40). As you already know, the 121 exclusion doesn't provide much benefit if you've owned the rental for a long time. I looked into this last year and the (tax) benefit was not significant for rentals that have been in service for a long (15+ years) time. 

The Goldilocks line is Line 22 since "This amount is taxed at 0%". My goal when planning for the next tax year is to get Line 22 as close to (or over, but not excessively) the maximum ($89,250 in my case) as possible. I'm sure about everyone on this site is doing the same. 

Hmmm.  I'm not buying the correlation between variable rate loans, GFC, and forward-looking defaults.

The FNMA "New Book of Business" instituted circa 2010 (see this SEC document that mentions the term) https://www.sec.gov/Archives/edgar/data/310522/0000950123110... completely revamped GSE underwriting as @Jack B pointed out. The "fog a mirror" test and other underwriting sins were purged. People applying for a mortgage actually needed a job and income. 

Today 28% of all homes bought are mortgage free. A majority of older people (roughly 50+) buy with cash. These will have a mortgage default rate of zero. https://www.nar.realtor/blogs/economists-outlook/cash-rules?...

Default rates through 2024, barring a catastrophic collapse in valuations, will stay low since most homes have positive equity. Note that some property classes, like coastal FL condos, may experience valuation collapse for reasons not directly related to mortgages. Rapidly escalating HOA fees, special assessments, and large insurance premium increases may contribute to substantial drop in affordability and impact valuations. Some flippers who mis-timed the market may default, but these will be a small number of properties relative to overall sales and defaults.

My 2 cents. 

All of the rentals I've sold recently (past two years) have been flipped vs. remained rentals. Why?

The following looks at hypothetical purchases, anecdotally and in relative isolation, meaning there may be a reason (for instance to generate large tax losses for "active participation" investors to offset other income) for some individuals to undertake a particular kind of purchase. Here are some scenarios.

For a (Raleigh median) $382,650 purchase, rented at $1,400 /month rent, let's assume an all-cash purchase. Other than taxes and insurance, I'll assume the best case in that there are no other expenses. Income would be roughly $12,706 ($16,800-$4,094) based on projected annual tax (Wake County 0.96% of AV (taxed at 0.5 market value)) and insurance (0.59%). That's a pre-tax return of 3.3%. As an alternative, that $382,650 placed in 4-week T-bills with zero risk will yield (at today's 5% rate) $1,594 per month interest income but with no tax benefits.

On the other extreme, for a (median) $382,650 purchase, rented at $1,400 /month rent, a mortgage at 0% down, 5% interest fixed for 30 years, the interest payment alone starts at $1,594 / month. Simple math results in a significant absolute negative cash flow if fully leveraged. This property would not pass my first screening (rent >= PITIH at full leverage). This scenario results in over $535 negative cash flow. 

At a typical 20% down ($306,120 loan), 5% interest fixed for 30 years, Interest starts at $1,276 / month. After taxes and insurance, your $76,530 down payment "investment" will yield a negative cash return for many years. The non-tax Depreciation Expense (assuming 80/20 improvement to land) will result in an annual $11,132 ($382,650 * 80% / 27.5) depreciation expense which will exceed the $3,000 IRS limit but will guarantee you have no current tax liability for this investment for a long time. As an alternative, that $76,530 placed in 4-week T-bills will yield (at today's rate) $318.88 per month interest income with no tax benefits.

At the moment, I see no compelling reason to buy rentals (arguably at the top of the market) that return less than the short-term treasury bill alternative. Hence, to answer the "trend" question, I see a large number of investor purchases becoming flips. 

https://www.americanfinancing.net/mortgage-calculators/amort...

Good stuff. 

One suggestion would be to allow a color choice for the population growth to be absolute (# change) or relative (% change). For example, in NC the only dark blue areas are the largest counties in the state, even though Brunswick (Wilmington NC) and Pender Counties are growing faster as a percentage of population increase. It would be nice to see the Median Price/Median Purchase graphically on the state/national map as well. 

This post belongs under the Rental Property Management Forum since it is definitely 'on topic.'  If I get the facts correctly, your lease expires 3/31 and you requested a one-month early relinquishment of the lease. The landlord effectively refused your request, since March rent is included in her 'options'. As a former leasing manager, I would not have charged the reletting fee, and probably returned your deposit, but all that depends on the wording of the lease and property condition. I agree with Greg, on both points. As a Realtor, you need to know every single line in your lease inside and out. That applies to the 'standard' leases in your state as well -- assuming your lease is not a 'standard' lease. Let the owner/manager decide if they want to go after the up-to 2 months' worth of rent. Put the ball in their court (pun intended) and provide the facts to the judge. Given you state you "past (sic) all my 7-8 preliminary inspections" a judge may rule in favor of returning the security deposit since items in question (e.g. "very old carpet") are normal wear and tear. 

Good luck to you. 

Interesting problem. This should have been posted under a more relevant forum, like the Land & New Construction forum. 

The county Transfer of Density Units (TDU) page doesn't provide (from what I saw) a fee schedule. I didn't read the whole ordinance at 
Transfer-Of-Density-Units-Ordinace.pdf (charlottecountyfl.gov) but there is a provision for limited relief under section 3-9-150(i). Might start there....

This tokenization stuff sounds like a solution looking for a problem. I'll stick to LLCs where members can, in my state (NC) and probably like most states, transfer their member (voting) interest and/or economic (non-voting) interest (see NCGS Transfer of economic interests) at will. The key is to understand that the member or economic interest in an LLC is considered personal property (see NCGS Nature of ownership interest) and transfer is relatively easy. In this scenario, the member or economic interest is coupled to the performance of the underlying asset. There is limited opportunity for price manipulation, and I think that is a feature, not a bug. Contrast that feature to the tokenized 'security': "So, if you are in a property early, wait 6 months or whatever the hold period of the offering type is, and then unleash your tokens onto an exchange, you potentially influence the value of that token forever, no matter how the underlying asset performs."

Attorneys know all about LLCs and (in general) Operating Agreements. I don't see the (NC in my case) legal system embracing unknown products where tokens are created, decoupled from the underlying asset, and potentially price manipulated by "token investors". Looks like nothing but a problem waiting to happen. 

My 2 cents. 

This chart, which mashes together some of the FED charts, tells me that the debt of the US as a percentage of disposable personal income is not alarming. It seems to me we are back to pre-pandemic levels.