An interesting Real Estate saga in CA

Zeke · 09-11-2004, 05:24 PM

I just completed my small part of a $35,000 rehab job on a 75 yr. old 2 br, 1 bath Spanish syle stucco bungalow here in Long Beach. While the rehab was planned when the market was hot, by the time the contactors got to the work and it was completed, a total duration of about 4 months, the house lost more value than the rehab cost.

But let's look at another case first: Same style house purchased by a real estate broker/contractor in November of last year and needing the same amount of work for $450,000 (I thought he was crazy). Same neighborhood, mine.

But he puts more into the house like a new kichen and a new bath totalling $80,000 The next door neighbor bought it for $600,000 before it was done. This would have been in June, they moved in in July.

Lets look at the numbers.

$450,000 minus his share of the commission is approximately $437,000. Now plus the 80 K, he is into the house for $517,000.

A profit of $83,000 in a little more than 6 months. And he hit a home run because he sold his own house before listing it with his own company.

Now let's look at the numbers on the first house, finished yesterday.

Value of house (and appreciating) in June as a fixer, $500,000

Today's market: Yet another same style/size 2br/1 ba Spanish house in good condition is sitting on the market unsold for $459,000.

Equity loss in 4 months plus rehab costs, $76,000.

The profitable house was done by a pro. The recent house was done by a greedy private party.

The market is still falling. This is why you have to know what you are doing when investing in real estate.

flyenby · 09-11-2004, 05:38 PM

AND it will begin to fall faster............

CarreraS2 · 09-11-2004, 06:31 PM

Quote:

Originally posted by Zeke

The market is still falling. This is why you have to know what you are doing when investing in real estate.

*Still* falling?

It's barely begun its fall. If this is a skier, he's just gotten off the lift and made his first turn.

You ain't seen nothin' yet!

SteveStromberg · 09-11-2004, 06:52 PM

The House next door is on the Market For $950,000, They havent had anyone even look at it in the last month.

Zeke · 09-11-2004, 07:53 PM

Quote:

Originally posted by SoCal911SC
*Still* falling?

Good point. I sometimes don't say what I should. What I meant was that the market continues to slide. However, I will tend to disagree on it plummeting in a free fall. My premise? Simply that yes, history does repeat itself, just not in an exact manner. That would be too easy. We now have to guess the bottom. Some will do just that. I call them pros.

I kind of like it when the amateurs get stung. They are the ones that bring these things to a crescendo. The pros backed off a while back. I saw that happening. So did Tabs, as a matter of fact. I just don't like his panicky analysis.

Hell, I've seen this rise and fall 4 times in my adult lfe. Different timing, different severity. The most severe was last time in 90-93, IMO. I don't thind the contributing circumstances support as drastic of a crash thi time around. Let's hope I'm right.

tabs · 09-12-2004, 09:47 AM

Quote:

Originally posted by Zeke
The pros backed off a while back. I saw that happening. So did Tabs, as a matter of fact. I just don't like his panicky analysis.

U can help me here Zeke, what was "panicky" about my analysis?

I've got 3 houses in my neighborhood for sale with a 4th one being pulled off the market...

1. 4000 sq ft 769K
2. 3000 sq ft 585K
3. 3000 sq ft 554K
4 2200 sq ft 539K....off the market (way over priced)

..

pwd72s · 09-12-2004, 10:10 AM

Milt, it's not just real estate. A general economic rule is that when the speculators go crazy, driving prices to insane levels, the investors are more than willing to sell to them.

turbo6bar · 09-12-2004, 10:42 AM

Speculating is NOT investing.

It's not just the amateurs making the market unstable. When an unemployed person can get a mortgage, the system is totally focking upside down. Brokers, FHA, and buyers are creating an artificial stupid frenzy.

I have secretly wondered what the heck I will do when I have dozens of HUD foreclosures from which to pick. It's not a matter of if, but when.

Bill Douglas · 09-12-2004, 01:29 PM

Stop it, you're frightening me. I'm an unemployed and an amatuer, and own six properties.

Hee hee, mind you mine are nearly payed off so I'll look at buying more in a year or two

Zeke · 09-12-2004, 09:26 PM

Quote:

Originally posted by tabs
U can help me here Zeke, what was "panicky" about my analysis?

..

Oh, I think you punctuate your posts with a little more hyperbole and less fact. That one above wasn't too bad with the stats.

Does that help?

rcm · 09-13-2004, 06:01 AM

Real Estate is a tough one. Our hood has some nice houses that were selling for 175k about two years ago. Two of the same houses just sold for just 300k and there is a third on the market right now for 300k. In two years some foks almost doubled thier dough. They can't build houses fast enough right now in this price range. On the other hand...

We have a lake in town where prices have nearly tripled. Most stuff is around 1.5 mil now. They buy a house 750k and knock it down and build new for about the same in construction costs. Some of these folks are paying 20-30k for property taxes. There are 30 houses on the lake for sale between 750 and 2.7 right now, these are not moving.