A Possible 2-Bedroom Comp Killer in Randolph Place: 165 N. Canal in the West Loop
This 2-bedroom unit in Randolph Place at 165 N. Canal in the West Loop has just gone under contract.
On the market since January 2010, it was reduced $100,000 and is now listed $112,100 under the 2007 purchase price (if you include the parking).
It is the cheapest 2-bedroom unit for sale in the building.
At 1800 square feet, it is priced at what some of the 1-bedrooms used to list for.
The unit is a “soft-loft” with high ceilings and crown molding but some walls do not go to the ceiling.
The kitchen has stainless steel appliances and granite counter tops.
The master bathroom has a steam rain shower and Grohe body spray.
Converted into condos in 2000, Randolph Place, with about 340 units, has been hot with buyers over the years seeking space and city views.
One side of the building overlooks the Chicago River, one side overlooks the El line and one side looks west over the Metra Market.
Will the sale of this unit be a comp killer for all the other larger 2-bedroom units in the building?
Gwen Huges at Koenig & Strey Real Living has the listing. See the pictures here.
Unit #1529: 2 bedrooms, 2 baths, 1800 square feet, bonus room
- Sold in February 2000 for $259,500
- Sold in July 2004 for $375,000
- Sold in September 2007 for $482,000
- Originally listed in January 2010 for $429,900
- Reduced numerous times
- Currently listed for $329,900 (plus $40k for tandem parking)
- Under contract
- Assessments of $512 a month
- Taxes of $5326
- Central Air
- Washer/Dryer in the unit
- Bedroom #1: 20×12
- Bedroom #2: 13×12
- Bonus room: 21×11
This entire unit could be assembled from supplies at lowes.
decent space for 1800 sq ft. Good to see places like this coming back to earth – it’s large enough and decent, not high end at all but fine.
2000 price + 3%/yr = $350k. Ask price is in line with history, except that 2000 was already a bit bubbly.
“master bath with steam rain shower”
Is it *actually* a steam shower, with steam generator? If so, that’s a *nice* and expensive add. If not, I’m sorry that someone will fall for that one.
definitely doesn’t give new life to comps.
but given that this seller kept slashing into the bad time of year…well, it’s pretty obvious they had to sell.
sellers do have the upper hand. but they don’t have all the bargaining power.
i would call that a comp floor. not a comp killer.
at least through the winter.
I wish Sabrina would save the shocking phrases for where they are real like in the South Loop. There are some godzilla sized comp killers going on down there these days. Bunch of peeps got CMK’d.
“i would call that a comp floor. not a comp killer. ”
Depends what %age of the 2/2s traded in 05/06/07. For them (I’d bet it’s ~50%) it is a killer. For anyone who has owned since before the 04 sale of this one, bad news, but not a killer. (yes, mixing metaphors or something similar. whatever.)
“sellers do have the upper hand. ”
Bwahahaha yeah only to someone desperate to own a specific piece of real estate these days*
*basically an idiot.
*hangs head in shame*
sorry, late in the day…i said that totally backwards. swap buyers and sellers.
oops.
eesh, brutal!
I don’t think either bedroom has as window.
I have been in a few pricier 2/2s in this building and they are exponentially nicer than this unit. This place definitely will hurt comps, but many of the units have significantly nicer finishes and in some cases views.
the master bedroom has windows. the second bedroom is an interior bedroom. there’s also a very large “bonus room” attached. and yes, the shower is a steam shower.
Is this cash flowing at this point? Could it rent at $2,500 a month right now?
If so $300k at 5% is 15k/year plus 5k in taxes and 6k in assessments; I get $26k/year in costs. $2,500 a month yields $30k. If Bernanke cuases inflation your debt will evaporate with a fixed rate and it will slowly cash flow.
Is $2,500 too high for a large 2 br with decent features in this neighborhood?
“Is $2,500 too high for a large 2 br with decent features in this neighborhood?”
No, it’s not too high at all – but don’t forget the downsides of being a landlord:
1. 1 month rent for agents commission
2. lost rent when the place is empty – you can’t assume it will be continuously rented or even rented at all.
3. upkeep and special assessments (probably not that bad for a condo)
4. middle of the night phone calls and ridiculous phone calls (I JUST got a call tonight from a hysterical tenant who rents one of my nicer Hinsdale houses who said that she saw a field mouse in the kitchen and told me that “I MUST do something about it NOW – PLEASE CALL AN EMERGENCY exterminator”. Seriously… do you want to deal with this?!!!
oh , I forgot #5 – your equity is tied up and inaccessible – you never know what the future holds or when you will need that money.
Clio, a few things. First, note that you are making an argument against buying (this seems a bit out of character for you). Second, if I had mice in a rental, be it a studio or a six bedroom house in Hinsdale, you had better believe that I would be reading my landlord the riot act to get the situation handled. Third, if you have a nice place, you should not need to pay a broker one month’s rent to get a tenant. If you’re just extremely busy, with far more lucrative endeavors (e.g., plastic surgery, etc.), then fine, pay a broker a month’s rent to close the deal. But in my experience, it’s mostly the units that don’t “rent themselves” that require broker assistance.
This is perhaps the single biggest distinguishing factor between NYC and Chicago (I know how you like to compare cities). In NYC, the prospective renter of an awesome rental pays a month and a half rent to a broker (who often greases the landlord and super with between $500-1,000 cash for the privilege of renting their place for them), whereas here, a unit owner pays a month’s rent to a broker.
“But in my experience, it’s mostly the units that don’t “rent themselves” that require broker assistance”
What?!! You must be kidding!!!!! Where do you expect me to advertise my houses/condos? “craigslist” ?!!!! are you kidding me- that is only for low-end rentals, everyone know that. Most rentals (and especially ones that are over 3000/month) are listed through brokers who charge the owner 1 month rent – this is standard (the east coast is different).
In terms of the mouse (singular) – ARE YOU FRICKIN KIDDING ME?!!! It should not be the landlord’s responsibility to take care of one little mouse (I would understand if there was a manifestation of rats/mice/cockroaches, etc. – but come on!!!). Is it also my responsbility to wipe their frickin ass, too?!! I told the bitch to deal with it herself or get out….. I will gladly refund her security deposit and let her out of her lease. This is what landlords all around should do with these moronic RENTERS who are more demanding and picky than the richest/wealthiest BUYERS. Good riddance!!
Most spectacular Troll explosion ever.
Joe, try to keep the discussion to real estate.
It is becoming quite clear to me that the vast majority of visitors to this site are either renters or first time buyers who think they know it all and deserve it all. I am slowly realizing that I am wasting my effort trying to explain my point to 20-30 year olds my point of view. As I have said numerous times – I don’t do this because I have something to sell or personally gain, I just want to add another perspective. However, you guys want to live in your immature self-centered fantasy world where prices are going to continue to free fall, interest rates will stay low and you will all be able to live in mansions by the lake for 100k. Well good luck to you all…. my last piece of advice: don’t wake up, you won’t like what you see.
So… back to this property…
One of the biggest downsides I see with places in this immediate area is being right on top of all the Metra tracks. Most annoying are the gate bells, which at some locations seem to go every couple of minutes.
It is directly between the Northwestern and (I think?) Burlington tracks. The Northwestern trains sit idling right next to this building. Living one mile from freight rail yards significantly increases your risk of all sorts of cancers. While not a freight yard, there is considerable activity here all the time and this building is on 100 yards away from the terminal, not to mention the Burlington trains that also crawl by regularly on the other side of this building. Oh yea and you’re also a quarter-mile downwind from the Kennedy. Do the assessments include a monthly bag of Taxotere?
“oh , I forgot #5 – your equity is tied up and inaccessible – you never know what the future holds or when you will need that money.”
Not if you have more than 20% in it vs. current market prices. In that case just keep a HELOC revolver on it to tap that equity if you need it. I realize these are very much out of vogue vs. a few years ago but to those who still have substantial equity in their place this is still a good option.
“It is becoming quite clear to me that the vast majority of visitors to this site are either renters or first time buyers who think they know it all and deserve it all. I am slowly realizing that I am wasting my effort trying to explain my point to 20-30 year olds my point of view”
Better troll explosion, IMO. And the sad part is clio you need this demographic to keep the housing market from collapsing. They are the bottom rung of the totem pole. And I am all for knocking the legs out from the housing market via eliminating FHA 3.5% down loans. Then we’ll see how much sh_t flows upstream.
“And I am all for knocking the legs out from the housing market via eliminating FHA 3.5% down loans.”
This is the big unknown, right? The head of FHA has said numerous times in the last year that it is not sustainable having the FHA backing 40% of all mortgages. So, what’s the alternative?
Now that the republicans are going to be in power- what’s going to happen with Fannie and Freddie? The White House has said they’re going to put forth a proposal in January. If it’s privatized some way, with NO government guarantee, what kind of down payments will now be required? There’s no way there is privatization with just 3.5% down.
“Now that the republicans are going to be in power- ”
They’re definitely NOT in power. They control the lower house and from what I’ve seen so far there will be no significant changes in leadership. Reid hangs on as senate majority leader, Pelosi the skeleteress goes from majority house speaker to minority house speaker (50/50 shot on this) and Boehner goes from minority house speaker to majority house speaker. Likely an impasse on most issues the next two years.
Nothing substantive will happen with Fannie, Freddie, or the FHA likely. Unless the FHA comes begging for a bailout that is. In that case there might be some reform done but even then I wouldn’t count on it.
There is a huge ideological rift between both parties so don’t look for much to get done or much compromise. For a hilarious and brief clip that exemplifies this a reporter Wednesday or yesterday asked the WH spokesperson about the differences between the voters who voted for Rand Paul and the voters who voted for Pelosi and asked if these are irreconcilable differences between these two sets of people–absolutely.
“And the sad part is clio you need this demographic to keep the housing market from collapsing.”
uhh – no I don’t. There is only so much crap anyone is willing to take. I seriously would rather have my houses empty to not deal with the crap that the renters give me (and yes, there are PLENTY of people out there who are going to be just fine even if the “bottom rung” of the totem pole is wiped out).
“It should not be the landlord’s responsibility to take care of one little mouse (I would understand if there was a manifestation of rats/mice/cockroaches, etc. – but come on!!!). Is it also my responsbility to wipe their frickin ass, too?!!”
Depends what the lease says.
And, of course, the answer with such things in your situation is to tell the tenant to take reasonable steps, get a paid invoice and include with invoice with the check for Rent less the invoice.
The housing market is totally screwed for at least a decade. I used to have a target ‘bottom’ of 2012-2013 due to the recasting of the option arms and the final ARM resets but so much has happened in the interim. Interest rates are low so resets don’t mean much. Many if not most option arms defaulted long ago without the necessity of a recast; and I think the most potentially disastrous factor are the loan mods. I’m seeing more and more people get loan mods regardless of their income or financial situation $1,400 a month PITI’s have become $850 a month PITI’s; amortized over a new 30 and often 40 year term, with increasing payments again starting in 3 to 5 years, usually with a balloon payment at the end.
What are they going to do if they need to move for job/school/life change? They’re just going to give the house back – jingle keys so to speak, and the house will go into foreclosure. With loan mods the banks have effectively taken they’re foreclosures and instead of having them all between now and 2012, they’ve spread as many as they can out between now and 2016 or longer.
Moreover, how many 20-30 years are really interested in buying? How many 20-30 years olds have already pre-spent their downpayment in the form of student loans? Especially with terrible job prospects like they are – it is extremely difficult for a 20-30 year old to save up the $40k necessary for a 20% down payment on a $200k home (what can you get for $200k nowadays anyway). 30 and late 30 year olds who are established have a much easier time saving the $40k or more necessary for a down payment but today’s youth, no way.
“And, of course, the answer with such things in your situation is to tell the tenant to take reasonable steps, get a paid invoice and include with invoice with the check for Rent less the invoice”
No – the reasonable thing to do is to tell the tenant to deal with it on her own. Seriously, can I deduct an exterminator cost from my mortgage payment – no- so the tenant should learn how to deal with it on her own. It’s time to stop catering to the low lifes/leeches of society. I’m tired of paying for them, working for them, etc. – in fact, I think I am going to joing Bob’s angry man club.
I think there is a much greater risk to real estate than the foreclosure problem. With the direction the Fed is taking, I foresee a significant diminishing value of the dollar leading to inflation – this is yet another reason to buy now: your money is not going to go as far in 2014-2015. Yeah, house prices will go up w/ inflation, but the value of the dollar is down, so it will be a wash or even a net negative. Either way, in that type of environment rents ARE going to go up – no question about that. The time to buy is NOW
“It is becoming quite clear to me that the vast majority of visitors to this site are either renters or first time buyers who think they know it all and deserve it all. I am slowly realizing that I am wasting my effort trying to explain my point to 20-30 year olds my point of view. As I have said numerous times – I don’t do this because I have something to sell or personally gain, I just want to add another perspective. However, you guys want to live in your immature self-centered fantasy world where prices are going to continue to free fall, interest rates will stay low and you will all be able to live in mansions by the lake for 100k. Well good luck to you all…. my last piece of advice: don’t wake up, you won’t like what you see.”
GTFO then
“No – the reasonable thing to do is to tell the tenant to deal with it on her own. Seriously, can I deduct an exterminator cost from my mortgage payment – no- so the tenant should learn how to deal with it on her own. It’s time to stop catering to the low lifes/leeches of society. I’m tired of paying for them, working for them, etc. – in fact, I think I am going to joing Bob’s angry man club.”
I suggest you consult an attorney before you take any such hard line with your tenants.
Barry, I don’t need you to tell me what to do. If you don’t like what I have to say, then ignore it. I suspect you probably ignore much that you don’t want to hear – think about that in a few years when you are wondering what “went wrong” in your life. Furthermore, look back at EVERYTHING I have posted – nothing has ever been an unprovoked attack on anyone – so please stop being so nasty.
But don’t you get it anon? They’re just living in some self-centered fantasy world where they deserve everything. God damn renters. Why don’t they just get rich already and buy a house so they can stop burdening clio with their trivial little problems like disease bearing rodents?
“I think I am going to joing Bob’s angry man club.”
Bob’s angry man club is on vacation Fridays.
clio, my apologies, I’m not in the mood to pick a fight on the internet on Friday morning before I’ve even shuffled my first time buyer, know-it-all-deserve-it-all to the kitchen for a cup of coffee. Please carry on.
“Why don’t they just get rich already and buy a house so they can stop burdening clio with their trivial little problems like disease bearing rodents?”
It’s a field mouse, in a suburban home, in the first actually cold week of the year. It’s to be expected, and anyone who freaks about it (other than the first time, when the damn thing startles you), probably should just live in a high rise.
Were it my house, I’d want to deal with it, but I’ve had squirrels in the walls of a rental without mentioning it to the landlord because I knew I was moving out soon. One mouse isn’t really a big deal, but the damage that the mouse family can do over time is. And, frankly, were I the landlord, I’d suggest the tenant get traps for the visible one(s) and I would get the exterminator out (note: not at overtime rates) to protect against substantial damage inside the walls.
“The time to buy is NOW”
I disagree. At the end of 2012 many of the stop-gap financial rescues put in place for the 2008 crisis expire. Additionally we should have more visibility into what the Fed is doing by then and all option-ARMs will have worked through the system. We’ll also know more about the future landscape of Fannie, Freddie and the FHA.
There is still far too much regulatory uncertainty to buy these days. Maybe we will know this within two years time.
Its crazy to commit oneself to a large asset one plans to pay off in 15 or 30 years time with the current clouded environment. Especially given we will hopefully know within two years whats going on.
Buying today is crazy in any case as I suspect the Chicagoland CS index is going to crater. I’ve been calling for Case-Shiller values of 94 for quite some time now and we’re still in the 120s. Lets see what happens.
“and all option-ARMs will have worked through the system.”
Err all option-ARMs will have recast by then. It will still take two more years for them to work thru the foreclosure pipeline but this amount will likely be very small.
Thanks anon – very level headed approach to the problem.
Bob, you are right – there is uncertainty in the markets BUT if you are fairly certain you will be not be changing jobs and are going to be living in a certain area for 10-15 years, it WOULD be smart to aggressively start looking now. Things are NOT going to get better for buyers (even if prices go down a little more, interest rates are sure to increase in the next couple of years and the dollar is not going to be worth as much – things, including real estate will be relatively more expensive) it would be smart to lock in at a low price/low rate.
“even if prices go down a little more, interest rates are sure to increase in the next couple of years and the dollar is not going to be worth as much – things, including real estate will be relatively more expensive”
Might be the most rational thing you’ve ever posted on the narrow subject. Gold Star! (even if it turns out to be wrong)
“it WOULD be smart to aggressively start looking now. ”
Always aggressively looking. Even though job stability is an issue in my field.
But my situation is as follows, based on years out & saving:
1: can get a 1/1 distressed or below market place. Likely won’t have all amenities like parking. 125k-145k
2: can get similar property non-distressed = much more selection. Might have all amenities and parking. 200-230k.
4: can get a very nice much bigger place levering up and stretching. 400-450k. will not need to move again or upgrade for some time (10+ years).
Which do you think I’m aiming for these days? I’m spooked out of the interim segment as it just doesn’t make sense and too many horror stories. So I’m likely sidelined for 4 years.
Option 1 might still make sense for me but I would need to find another property like 519 w melrose unit 406 which was a newer 1/1 listed for 125k with everything but parking. Only if the property is obviously priced below market does this option make sense though because with market properties there is significant resale risk.
“(even if it turns out to be wrong)”
I think the Fed is doing this just to try to stabilize RE prices in nominal terms = lower real RE prices. But even if so solving the nominal pricing issue solves the bank insolvency issue so…
“Might be the most rational thing you’ve ever posted on the narrow subject.”
yeah, i think the haldol is kicking in
“I think the Fed is doing this just to try to stabilize RE prices in nominal terms = lower real RE prices. But even if so solving the nominal pricing issue solves the bank insolvency issue so…”
Of course that’s what they’re trying to do. And it would work pretty well, except the risk that comes from doing so while having a DTI of 1:1 and spending about $1.15 for every $1 of income for the foreseeable future.
“solving the nominal pricing issue solves the bank insolvency issue”
Is that right? Won’t bank liabilities get mostly inflation adjusted?
Thank you, very well reasoned without insult. I think many agree that this is a good time to buy if you’re in a position to do so and stay put for a while
“even if prices go down a little more, interest rates are sure to increase in the next couple of years and the dollar is not going to be worth as much – things, including real estate will be relatively more expensive”
Many more people are on to the govt intervention now and are choosing to sit out at current propped-up prices. That is why the govt will increase the cheese with even lower rates. This will create diminishing returns. What worked to keep price declines at a crawl this year won’t work so well next year. But it will keep money flowing to the banks, thus making their plan a success. Remember, the game now is in keeping underwater homemoaners paying as long as possible. The correction is inevitable, and delaying it will only result in a greater over-correction.
“Is that right? Won’t bank liabilities get mostly inflation adjusted?”
Isn’t their solvency problem related primarily to (1) Resi RE, (2) CRE, (3) CDS liabilities largely related to 1 & 2? And 1 & 2 are all debts denominated in nominal dollars, primarily with fixed rate or capped rate notes. If the collateral in 1 & 2 reverses and comes to have a nominal value in excess of the debt, then, even if there is a default on the note (unlikely if the RE is worth more than the debt), the bank has an asset worth more than the note was, which prevents default of the RMBS and CMBS which avoids any obligations under the CDS.
Does it resolve everything? Of course not. And it has **HUGE** risk of unintended consequences. And I’d feel better about it if either (1) there were less US federal/state/local debt that might need to roll over and (2) a higher %age of the currently outstanding federal/state/local debt were longer dated.
“Isn’t their solvency problem related primarily to (1) Resi RE, (2) CRE, (3) CDS liabilities largely related to 1 & 2? And 1 & 2 are all debts denominated in nominal dollars, primarily with fixed rate or capped rate notes. If the collateral in 1 & 2 reverses and comes to have a nominal value in excess of the debt, then, even if there is a default on the note (unlikely if the RE is worth more than the debt), the bank has an asset worth more than the note was, which prevents default of the RMBS and CMBS which avoids any obligations under the CDS.”
What are the banks’ liabilities? (I realize it depends on what types of banks.) Deposits, loans that the bank owes, obligations on CDS it has issued? Other stuff? I take the point that this approach would deal with CDS obligations, but I wasn’t really thinking those were major ongoing issue, but acknowledge may well be wrong). Deposits would get adjusted for inflation mostly I’d think.
Does RMBS/CMBS figure into banks’ liabilities? I was thinking they were assets held by banks and that they would go up with inflation approach from less default and greater underlying property values, but was questioning whether they’d go up as much as deposits. I may have something woefully wrong, haven’t thought about this before now.
“Deposits would get adjusted for inflation mostly I’d think.”
I think savings rate will lag, as they have at most points lately. And if we get double digits, a short time lag will make a big difference. Or do you know a bank paying interest at CPI + Spread?
“Does RMBS/CMBS figure into banks’ liabilities?”
To the extent that (as Bob posits regularly and essentially correctly) they are holding at model MBS that is at market worth a fraction because of current and expected non-performance and b/c of REO worth less than the Note being held at note par rather than the value of the REO. “Liabilities” hidden within assets + assets becoming worth what they say they are = resolution of the disguised solvency crisis of virtually every bank in the largest 100 or so.
Then, and only then, would it be okay from a systemic risk perspective to press on the non-RE related “true” solvency issues of some banks [cough]Citi[cough] to force them to break up and/or liquidate.
“If so $300k at 5% is 15k/year”
You can do much better than 5% these days. I just refinanced for 3.875.
“it WOULD be smart to aggressively start looking now. ”
It would be smart to aggressively start investing in the stock market now if you haven’t already. You can always invest in a REIT without the commitment of purchasing a property outright.
“You can do much better than 5% these days. I just refinanced for 3.875.”
You can now get a 30yr fixed as low as 3.75% with a little over one point. I expect in the future this is going to go lower with QE2. I’m still not buying–the Fed can’t print money ad infinitum and if they think that I’ll eventually not be sidelined and jump into RE ownership they’re wrong. I think renting is a perfect (and less expensive) substitute for owning.
“You can now get a 30yr fixed as low as 3.75% with a little over one point. I expect in the future this is going to go lower with QE2. I’m still not buying–the Fed can’t print money ad infinitum and if they think that I’ll eventually not be sidelined and jump into RE ownership they’re wrong. I think renting is a perfect (and less expensive) substitute for owning.”
I guess it’s Sybil-Bob Friday.
“I guess it’s Sybil-Bob Friday.”
The problem isn’t the interest rates. The problem is the deflationary spiral–what good is a low interest rate if there is significant chance of the asset depreciating?
Who is offering 3.75% with 1 point on a 30-year fixed?
“The problem isn’t the interest rates. The problem is the deflationary spiral–what good is a low interest rate if there is significant chance of the asset depreciating?”
You were just talking about maybe buying a 1/1 if it were cheap enough–and $125k is still not chump change.
“I think renting is a perfect (and less expensive) substitute for owning.”
you’re talking about inflation and dollar destruction and how renting is better? i’m a bit confused care to go over that logic again?
“you’re talking about inflation and dollar destruction and how renting is better? i’m a bit confused care to go over that logic again?”
Cuz I don’t see any signs yet of inflation & I’m pretty sure I won’t be paying euros for my place so not too worried about dollar destruction.
i suggest you take a look at some of the commodity indexes
i also suggest you take a look at employment & wages both increasing while at the same time balance sheets both personal and corporate are getting much better
Hi Clio –
I’m sure you don’t want to deal with the hassle and lost rental income while trying to find a new tenant in this market. I think you should try to keep a good and friendly relationship with her.
An inexpensive solution would be for you to go over in person and put a couple of glue traps down. You can buy them at any hardware store. There might be a food source which is attracting the mice. Make sure she is storing grains and cereals in metal containers. She will see you are acting in good faith and the time and trouble you take out of your day to find a solution and listen to her complain for awhile will go a long way.
Thanks Milkster for the rational solution. I am an extremely passionate person and sometimes I let my emotions get in the way of normal reasoning!!! Of course I already sent my contractor over there and he is sealing all the holes in the kitchen (from where the pipes come in) – but let this be just another example to would-be investors: you really have to be willing, able and ready to deal with all types of problems/tenant issues. If you are not ready to do so, you will regret becoming a landlord!!!
I spoke to my mortgage officer at Citibank this week and he offered me a 30 year fixed rate for 4.250% with no points.
I had a mouse once when I lived in Spanish Harlem, so my super loaned me his cat overnight. A cat is the best solution! Mice smell them and won’t come near you 🙂
“I had a mouse once when I lived in Spanish Harlem, so my super loaned me his cat overnight. A cat is the best solution! Mice smell them and won’t come near you”
But then you need a dog to scare off the cat, and a tiger to scare of the dog and a gorilla to scare of the tiger and then you’ve got a permanent roommate.
“But then you need a dog to scare off the cat, and a tiger to scare of the dog and a gorilla to scare of the tiger and then you’ve got a permanent roommate”
and I’m sure I could scare the gorilla!!!
with the QEII taking aim at the middle term rates do you think it will really have a material impact on the long term stuff? The FED is very much trying to avoid having a long duration exposure and isn’t bulking up on 30 year notes. If they were that would have a huge downward impact on mortgages but I don’t see rates falling off a cliff. 15 year however…
In a couple years I don’t think I will be as comfortable as a renter. Think of it as a 1-1 ARM, re adjusts every year and if inflation happens you can guess what will happen to rents. There may never be 70/80s style inflation but given the way our society has lived a semi-strong uptick could be a stumbling block for many. The best time to leverage up is before inflation actually happens. We aren’t really under the gun right now because the velocity of money is so low but the time is not infinite.
“If they were that would have a huge downward impact on mortgages but I don’t see rates falling off a cliff”
Except mortgages are mostly correlated with ten-year treasuries. Is the Fed buying 10-year treasuries? Not many. But I don’t envision a scenario where the yield curve is close to zero for 0-7 year treasuries then skyrockets between years 7-10.
“I spoke to my mortgage officer at Citibank this week and he offered me a 30 year fixed rate for 4.250% with no points.”
The big banks always tack on 50bps. Go with a warehouse lender like aimloan.com and you can get that same loan for 4%.
Err..they mark em up 25bps.
Although if it did, look at what the stock market did (90s) last time we had such a steep yield curve. Thanks for the info, I hadn’t taken a hard look at correlations and made an assumption.
“But I don’t envision a scenario where the yield curve is close to zero for 0-7 year treasuries then skyrockets between years 7-10.”
“Thanks for the info, I hadn’t taken a hard look at correlations and made an assumption.”
If you graph the ten-year and mortgage rates they move almost in lockstep. Its almost as if there is some centralized database or universally used formula by all major lenders the correlation is so strong.
Which is pretty stupid because that still leaves 20 years of huge interest rate risk on bank balance sheets. I guess they figure since the typical duration of mortgage is like 7-8 years the ten year is the preferred benchmark.
AimLoan.com’s origination fees are double what most mortgage brokers charge.
that would make the most logical sense.
“since the typical duration of mortgage is like 7-8 years the ten year is the preferred benchmark.”
“Which is pretty stupid because that still leaves 20 years of huge interest rate risk on bank balance sheets. I guess they figure since the typical duration of mortgage is like 7-8 years the ten year is the preferred benchmark.”
That’s one part. And the other is the relative aggregate of interest in the out years–on $100k at 4%, in the first 120 months total interest is $36,073.79; for the last 240 months the total interest is $35,795.72.
Citibank mentioned that if you have a Citigold account, they will subtract $500 from the loan origination fees. These fees typically run $660, so you will only end up paying $160 to get the mortgage.
If you do not have a Citigold account but someone in your family does, you can do what is called a “household link” which gives you all the benefits and privileges of a Citigold account holder. (Your relative will not have access to your accounts or vice versa.) However you still reap the benefits and the cheap fees. Just beware, if the Citigold account holder does not maintain the requirements for that account, you will be charged $30/month in service fees.
Bob – I am curious and will look into AimLoan. How much are their origination fees?
Milster–I have a Citigold account and asked them about their rates when I was looking to refinance. They were at 0.25%-0.375% higher than the mortgage broker competition. It doesn’t matter if the orignation fee is low if the rate is high. You want to compare the APR, which takes into consideration the rate and the fees.
There is a high correlation between the 10 year treasury, but mortgage rates are determined by mortgage backed securities, not the 10 year. MBS and the 10 year yield have been decoupled quite a bit over the past couple of years though. It used to be that you could add 1.5% to the 10 year and it would give you an approximation of the 30 year.
The cheapest rates are found through referrals. You want to find a loan officer at an independent lender who works on referrals.
Retail banks (a la Citibank) will almost always be higher than than smaller independent lenders. They rely on people assuming if they open a checking account etc they will get a good deal.
Online lenders that advertise heavily are just boiler rooms. The rates advertised are almost always too good to be true. The LOs don’t know what they are doing and there is a high likelihood the deal won’t ever close.
The thing about rates is that EVERY deal is different and there are all kinds of adjustments that get made. It really is almost impossible to advertise mortgage rates and have them be reasonably accurate. 99% of people won’t qualify for advertised rates once you get into the specifics of the transaction.
“How much are their origination fees?”
They have all their fee estimates on their website. They actually don’t advertise heavily like AmeriSave (which is a sham from what I can tell). But not sure if they are a bait & switcher or not. They say their advertised rates are those with a 750+ FICO. If they are legit they are the best deal around. A close second I would recommend is the Pentagon Federal credit union which also has very competitive rates and a backdoor to membership via signing up for the National Military Family Association (NMFA, which is a one time fee of $25 I believe).
“MBS and the 10 year yield have been decoupled quite a bit over the past couple of years though. It used to be that you could add 1.5% to the 10 year and it would give you an approximation of the 30 year.”
Benny’s bailout to the banking sector–allowing them to lower their cost basis significantly on newly borrowed money from Uncle Ben then only pass on a fraction of the cost savings. Its likely a large source of these outsized bank profits lately. I’m surprised no smaller outfits haven’t broke rank and passed on more of the savings.
You are correct. The demise of small mortgage brokers is a big factor in what is keeping rates higher. There is a significant lack of competition right now, so margins are quite a bit higher so rates aren’t nearly as low as they historically would be under the same conditions.
With that said, it is a lot more intensive to underwrite these days too so there are in fact more intangible operational cost that lenders are dealing with that weren’t as much of an issue previously.
Pen Fed did offer some decent deals though. Most of the outfits that people see online (bankrate advertisers) will bait & switch though. We call it fakerate. Good local independent lenders generally will be able to offer better rates and service though.
The best lenders and LOs do not advertise heavily as their referrals bring in the business (lower overhead = lower cost for clients).
#clio sez:
“No – the reasonable thing to do is to tell the tenant to deal with it on her own. Seriously, can I deduct an exterminator cost from my mortgage payment – no- so the tenant should learn how to deal with it on her own. It’s time to stop catering to the low lifes/leeches of society. I’m tired of paying for them, working for them, etc. – in fact, I think I am going to joing Bob’s angry man club.”
You can’t deduct on your mortgage, but it does go on your Schedule E(?) “Rents and Royalties” at tax time. The fact of the matter is, it sounds like you’re not such a good landlord, or you aren’t familiar with your own properties, or you don’t screen your tenants well or you haven’t read the lease you have them sign.
I’ve been a landlady for over 20 years now. In all that time, with all those tenants, I’ve gotten an emergency call maybe 3 times total; The furnace went out, but _I_ was able to fix it, by swapping in a new relay. The other times, I checked out the problem and called in a repairman. No “forgot my keys” calls at midnight, nothing. We haven’t done so badly, with our low-end property and our low-end tenants we’ve recruited from craigslist or before that, the Reader. Sheeze.
“You can’t deduct on your mortgage, but it does go on your Schedule E(?) “Rents and Royalties” at tax time”
uhhh – even though you can deduct expenses on income, it still leaves you with less as compared to having the tenants deal with these normal everyday issues. My problem is not with being bothered or spending money, it is with the sense of entitlement that many renters have. I don’t know if it is because they are clueless and never owned a home before, but it is almost like they are royalty and I am their slave. THEY are the ones who should be happy and grateful to live in a place for less than it would cost to own it…. so double “sheeze” to you!!!
logansquarean,
my point was that anyone who is seriously thinking about being a landlord should really examine their own life and see if it fits into their lifestyle. Being a landlord is not just a financial decision, but cuts into personal/social time as well. You might be a handy person and have a job that allows you to leave for an hour here and there to meet with repairmen, check things out, etc. Not everyone has that type of job/ability. So, anyone thinking about being a landlord should REALLY take a good look at their life first (also, see the movie “Pacific Heights” if you have any further doubts).
Clio, a rent-paying tenant is not a “low life” or “leech”, but is your PAYING CUSTOMER. You are entitled to be paid, and have the right to expect the tenant to meet the terms of the lease, which usually include taking reasonably good care of the rental unit- keeping it decently clean and avoiding doing damage to it. In return, the tenant has the right to expect a decently-maintained, vermin-free home.
While you are providing a home for your tenants, they are making it possible for you to own property and (presumably) build equity. It’s a value-for-value transaction, after all, and if it isn’t, why engage in it?
If you feel that your tenants are “leeching” off you by demanding extermination (which is required by ordinance in most municipalities), you should perhaps ditch your rental property and find another way to make money.
If the property costs substantially more to own than it does to rent, it is overpriced.
This unit is under contract as is unit 1513 (3 bed 2 bath)
Thank you, Laura!
My thoughts exactly. I suspect it’s been a long time since clio’s been an actual tenant. I very clearly remember the good landlords I’ve had, vs. the a-holes, and I’ve always modeled my own landlording style after the good ones. I sure as heck don’t see my tenants as a chore or a nuisance.
If clio’s got so much dough how come he doesn’t have a management company take care of the landlording. Cash flow isn’t a problem for Mr. Moneybags, right? Or is it penny wise, pound foolish?
I have an altogether excellent landlord, and he absolutely does not tolerate vermin on his property. Just report a problem and it is taken care of immediately.
Note: we DID have one tenant, a very sickly, weak woman, who let her big apartment get totally out of control, and our tier had an infestation of roaches as a result. This problem was taken care of expeditiously.
We appreciate the service and care our landlords here give this great building and care for this beautiful place as our own, and they return the favor by providing us with a beautiful, warm, well-kept vintage building. Take good care of your property and deliver good service, and your tenants will put work into their places, pick up trash that neighborhood lowlifes chuck on the lawn, and stay for a long time. Maintain your property like a slum and fail to do things like exterminate, clean, repair, and groom, and you will get “leeches” and “lowlifes” for tenants.