Foreclosure Alert: $148K Under the 2005 Price in Lincoln Park: 350 W. Belden
This 2-bedroom duplex unit just came on the market at 350 W. Belden in Lincoln Park.
It is bank-owned.
It is listed for $148,100 less than the 2005 purchase price.
The listing says it needs some “TLC” and there are no pictures of the kitchen. However, the listing describes the kitchen as having cherry cabinets and granite. So, the unit appears to at least have a kitchen.
There’s also a spiral staircase to the second level.
Seems like a 2-bedroom unit for a 1-bedroom price.
Is this a steal?
Arthur Cirignani at Chicago Realty Partners, Ltd. has the listing. See the pictures here.
Unit #607: 2 bedrooms, 2 baths, no square footage listed
- Sold in May 2005 for $438,000
- Bank owned as of January 2009
- Currently listed for $289,900 (parking included)
- Assessments of $436 a month
- Taxes of $5478
- Central Air
- The listing doesn’t say anything about an in-unit washer/dryer
- Bedroom #1: 11×13
- Bedroom #2: 13×18
Assuming taxes can be rolled back to reflect the purchase price at 290k this looks like a deal. Then again watch as someone, likely an investor, bids this up to levels that don’t CF.
This place is a steal in that location for a 2/2 with parking on a high floor….
Don’t tell Sabrina it is a steal. She has no idea and thinks this is FMV 🙂
“Assuming taxes can be rolled back to reflect the purchase price at 290k this looks like a deal. Then again watch as someone, likely an investor, bids this up to levels that don’t CF.”
This is the interesting thing about the foreclosures right now. Six months ago, the juicy foreclosures in the “better” neighborhoods were selling the first day on the market.
This unit has already been listed for, gasp, four or five days and so far it’s still available.
I see the same thing happening in the South Loop or in buildings like The Sterling, in River North (which we’ve chattered about many times.)
2-bedroom foreclosures in the Sterling used to sell within a few weeks but now they sit for much longer (60 days and more). A 2-bedroom unit on a relatively high floor just closed for what I believe is a record low for the building of $249,000. The low floor 2-bedrooms sold out of foreclosure last year for $255,000 to $260,000- so prices are still trickling lower in the building.
The excitement over foreclosures seems to no longer be there.
We’ll see how long this one sits on the market.
But the SHill told us those foreclosures in the Sterling were a deal last year. You mean to tell us they have continued to go lower, as some of us suggested?
I guess the SHill was wrong on that, too.
The SHill is wrong on a lot of things. Most importantly, he’s an FB. He’s overleveraged with IO ARM mortgages on a ‘million dollar home’ (his words) in Lincoln Park. He claims he could rent it out for IIRC $6,000. It is sooooooooooooooooo difficult to give even the smallest inkling of credibility to a guy who drank more kool-aid than his clients.
Sabrina – I just called and they 8 offers. You are such a putz:)
On the Sterling. There are no bank owned properties left. Everyone bought them and will make a good deal of money in the next 5 years.
I can think of at least two reasons why: 1) serious buyers are tired of the runaround from the banks. The forclosures may “sell” in a day but then they take months to close. Seems to me like banks aren’t really serious yet about getting rid of their foreclosure holdings. 2) Many of the foreclosures are in distressed buildings — with the recent tightening of standards buyers either can’t get financing due to the building situation OR are deciding they don’t want to own in distressed buildings.
“The excitement over foreclosures seems to no longer be there.”
I have hesitated to say this but you guys are just a bunch of idiots. You have Sabrina saying no one wnats to buy this place when is reality there are 8 offers in 1 week. You have this moron from above trying to rationalize why no one wants to buy bank owned properties while again this very property has 8 offers in 1 week.
Open you f’n eyes!!!
“The SHill is wrong on a lot of things. Most importantly, he’s an FB. He’s overleveraged with IO ARM mortgages on a ‘million dollar home’ (his words) in Lincoln Park. He claims he could rent it out for IIRC $6,000. It is sooooooooooooooooo difficult to give even the smallest inkling of credibility to a guy who drank more kool-aid than his clients.”
Except that I refianced last month into a 30 year fixed with a HELOC. My housing expense is half of what I could rent the palce for. Overleveraged, or just plain smart?
What flavor kool-aid are you drinking Steve?
HD – On which point?
Brings back memories of Tower Records 🙂
“The forclosures may “sell” in a day but then they take months to close. Seems to me like banks aren’t really serious yet about getting rid of their foreclosure holdings.”
They are getting more serious when they can. For some reason unless the place is really trashed to crap they aren’t doing massive price cuts most of the time, but are offering incentives such as paying buyers closing costs and point buydowns and other gimmicks.
I suspected this is becuase the banks did not want to have to write these down as it would provide more comps for other properties in their portfolio to write down before MtM was suspended. Now that MtM is suspended I do see the banks are more willing to price their properties for quick sale.
And who cares about the inconvenience of taking months to close if your saving tens of thousands of dollars? I’m not going to overestimate that my time is worth that much.
SH clearly has too much time on his hands…
Clearly!
SH has a fixed plus a heloc. How much equity do you have? No wonder you so boldly assert that LP will hold its value because you stand to lose big if it does.
I have a $417k 4.5% 30 year and a $250k HELOC at Prime. MY DTI is 20%. Is that risky HD?
No, it seems like a 2 bedroom at what a 2 bedroom price should be and everyone thinks 1br’s are worth too much.
I’d rather live in that studio in streeterville at this price!
Ok, not really 🙂 seems ok although the taxes are really high! And this place is in a great location compared to most of the bank owneds that always have some glaring flaw.
Is that 20% dti of your 2005 income or your 2008 income….you have nearly 700,000 in debt against a depreciating asset in an extremely difficult environment for your profession. I think you’re the smartest guy in the room.
My 2008 income was 25% higher than my 2005 income. it was based on the average of my 2007 and 2008 income.
Thanks HD!
Heitman… I would have thought a big swinger like you would just pay cash out of convenience.
You’re welcome.
I have the cash to pay to HELOC if rates spike but not the 1st. I am working on it…
I’ll bet the appliances are gone.
I’m with Jason. If there’s a fridge or oven in the unit, I’ll be amazed. That’s probably why there’s no pictures of the kitchen. Honestly, I’m surprised the metal on the railings hasn’t been stripped off…
Having said that, great LP location. And that loft space that might not suck. Taxes & amenities seem high to me, but I suppose that’s LP for you.
I have friends who rented here before conversion, it was one of the loudest buildings I have ever been in, while the price may be right I wouldn’t want to live in the building.
I am still amused at the commentary…I am waiting for someone to say that real estate values are going to $0 because the sky is falling.
I understand “as is”, but what’s the deal with the Seller providing “no Survey”? Any lawyers care to explain any ramifications? Can’t the Seller or Buyer just hire a surveyor?
“I am waiting for someone to say that real estate values are going to $0 because the sky is falling”
Actually some places they are negative. So negative that the bank would rather demolish newly built homes rather than fix foreclose them.
http://www.calculatedriskblog.com/2009/04/new-homes-demolished-in-victorville-ca.html
take a look at 2224 n orchard. Just closed at $800k for a duplex down (remember the wrightwood property??). They purchased this very end of 2002 for $720k. I guess LP has appreciated 10 in the past 5 years. Yeah!!
Purchased 9/26/02 for $722,500
Mortgage 9/26/02 for $578,000
Down Payment = $144,500 (20%)
Listed 9/11/07 for $899,000 lowered to $879,000
Expired 12/27/07
Listed 1/21/08 for $879,000
Cancelled 6/23/08
Listed 2/3/09 for $849,000
Contract 3/16/09
Closed 5/1/09 for $800,000
Transaction costs:
0.75% transfer tax at purchase = $5,419
misc costs at purchase = $800
points paid at purchase = 0
5% commission at sale = $40,000
0.45% transfer tax at sale = $3600
misc costs at sale = $800
Total transaction costs (minimum) = $50,619
Sale price – purch price – trans costs = $26,881
Now, a SHill would claim this as appreciation. However, that wouldn’t take inflation into consideration.
Sep 2002 – March 2009 Inflation = 17.52%
2002 Sale Price inflation projection = $849,082
Loss to inflation = $800,000 – $849,082 = -$49,082
$26,881 – $49,082 = Real loss of $22,201
But G, you didn’t inflate/defalte all of the costs. You’re painting a distorted picture!
I hope that “!” was sarcasm.
“I hope that “!” was sarcasm.”
Hmm. I dunno. I think you’re shilling, G. Minus 2.whatever%/year seems pretty good right now.
And you didn’t even consider their rent savings from being able to live in their home for another 20 months. That has to make it a good deal, right? Right, G?
They aren’t contemptible as at least they had 20% down. At 20% down they are speculating with _their own_ money. With less than 20% down and the closer you get to zero they are speculating with _my money_ (taxpayer).
I don’t care if they are rich, they are still far better citizens the the losers who put down a little then go into default or the banks that enabled them.
“they are still far better citizens the the losers who put down a little then go into default”
But what if those guys decide to trash the house* on the way out? That makes them something close to heroes, right Bob?
*That you, Bob, indirectly own.
LOL, anon.
anon(tfo),
My disdain for commercial bankers runs deeper than those who transfer losses to the public. If someone is getting foreclosed on chances are things aren’t going so well in their life. The bankers were at the center of this mess and for the vast majority of them life continues on as if nothing happened. As if their institutions weren’t engaged in colossally stupid behavior to give out 90%+LTV mortgages. In certain instances exceeding 100%, essentially paying people to borrow more money.
Anybody looking at the data would soon see these banks were engaged in racketeering and whose leadership should be charged under criminal RICO laws. The banks knew full and well these mortgages were garbage, they just didn’t care because they were going to securitize them and sell them off.
That was a LOL from your last comment to me, anon.
Bob:
I suspect you won’t believe me, but I agree with much of what you say as to the basically pureplay mortgage lenders. IMO, there is little doubt that CountryWide, IndyMac, NCF, and a host of other residential lenders (esp. the SubPrime specialists) were–at best–willfully ignoring the plain facts that they were pushing cash into a not-very-elaborate ponzi scheme.
I do think you tar with too broad a brush “banks” and “bankers”, at least w/r/t residential lending (there’s plenty else to criticize, but they were aided and abetted by the OCC and SEC handing out exemptions to capital requirements like candy). Yes, Merrill, Morgan, Bear and Lehman all bought pure-play subprime lenders, and didn’t do their diligence–but the only egregiously stupid commercial bank was Wachovia (World Savings–or whatever it was called)–and they’re in the process of going away.
Oh G. what about the rent increases, tax savings, and value of not being called a “renter” LOL!
I think we were discussing housing values and the rate of increase. Not everyone pays commissions so don’t make assumptions.
Did they really lose money G?
“Not everyone pays commissions so don’t make assumptions. ”
Dammit. I almost included that, too. Why, G, Why?
Taxes do not reflect a homeowner’s exemption.
Honestly, you guys are really funny. You have to understand how pathetic you look when you write this crap. Some how you think a renter would have faired better for this 5 year period? Rents for duplex downs in east Lincoln Park are $4k and up. I guess you not understanding this is the very reason you are in the position and class you are in.
Rent on little guys!!
“Not everyone pays commissions so don’t make assumptions.”
No assumption. This one paid 5%. However, I do agree that this number will decline in the future due to UHS complicity in the bubble.
“Oh G. what about the rent increases, tax savings, and value of not being called a “renter” LOL!”
“Some how you think a renter would have faired better for this 5 year period?”
I anxiously await your analysis.
Then I will happily debunk it.
I’m sure you’ll give it your best shot, though, just like always.
“this 5 year period?”
Let me help you not miss the obvious: that’s over 6.5 years.
Impress us all with your analysis now.
Wow G, with that analysis how big is the real loss on your 401K 🙂
Show us your rent vs own analysis on that unit. We all have to live somewhere, right? What did you use for your inflation number the CPI? We all know there has been deflation for years now even though it is not calculated by the Gov. Look at my flat screen tv, almost 80% cheaper than 3 years ago. LOL 🙂
No offense, I like HD but why don’t you to guys get a room? What’s up with the pissing match?
You are both wrong. Its getting annoying.
You TWO guys, sory.
Damn, another type-o. SORRY.
All of you, actually.
“You are both wrong.”
Enlighten us, Jason.
Will your answer include actual analysis, or just feces-flinging like the SHill?
And we should all listen how owning a place is crazy because the appreciation did not match the CPI. Let’s see the rent vs own analysis G.
They lose even more money.
I really don’t know if you aren’t able to do the analysis for yourself or if you just won’t show it since it proves you wrong yet again.
G – I don’t think it makes sense to include transaction costs… Stevo was trying to point out that some condos in LP have appreciated, which indicates that other comparable properties, which have not tried to sell, also performed reasonbly well over the same time period. (One could argue he cherry-picks the best performers.) If he said that they made a lot of money, then it would be correct to include tc’s.
Stevo – you basically just said that you make $150K, which by your own “stats” makes you nowhere near the top 5% of real estate agents… actually half the income of the top 5%.
Fullhouse – I think what I said was I qualified for my loan based on a DTI of 20%. I can promiss you that a 20% DTI gives you no idea of what i made last year.
G – Here is my take on the rent vs own. I show a monthly housing exp of roughly $2,750 and an average rental rate of $3,900. I could spend the time running the numbers but I don;t have to. I know the answer suuport owning or I would have not of said it.
Show me how renting at $3,900 per month was a better move that buying at $722k. And yes, Full house is correct that a selling commission is not required. People can sell their homes without realtors. You guys say we are worthless anyway, so why would you need one to list a property?
I will be waiting…
No, you said it was your average income in 2007 and 2008… and I definitely don’t believe that you understated your income – if anything overstated, given the fact that you were trying to brag about your low DTI (and your general insecurity and need to brag any chance you get).
“Fullhouse – I think what I said was I qualified for my loan based on a DTI of 20%. I can promiss you that a 20% DTI gives you no idea of what i made last year.”
“it was based on the average of my 2007 and 2008 income. “
Fullhouse – When you are self-employed your DTI is determined by the average of your AGI for the past 2 years. Your AGI is the sum of your reported income items for a particular year. My AGi is made up of my business net income and the net loss of my rental activities (depreciation is a wonderful thing). I was making a point to HD that the 20% DTI was very conservative and not over leveraging as he suggested. Read the thread!
I will repeat meself. Stating a 20% DTI gives you no idea what I earn each year. I could owe on 10 cars as part of the stated DTI ratio.
There is no way for you to know what makes up eaiter side of that # other than my total currect expenses are 20% of the average of my last 2 years reported income.
“”“You are both wrong.”
Enlighten us, Jason.
Will your answer include actual analysis, or just feces-flinging like the SHill?”
You ask for analysis after posting what you posted? Take a few classes on cash flows and maybe you would understand how to get out of the rental hol eyou are in.
I will start another bet here (I realize I lost the last). Sabrina, you start with your prediction on the following…
Will 350 w Belden close for above or below the asking price? I will say at least $10K above and I will say the bank will be finsihed reviewing their multiple offer and have it under contract by Friday.
I will also say that this place will go back on the market in less than 4 weeks and will sell for close to $400k when flipped.
Let’s here it renters???
Stevo: “sell for close to $400k when flipped”
Define “close”. Less than $10k (i.e., over $390k)?
Also–serious question–are you actually asserting that inflation from 2002 to 2009 was less than 10% in the aggregate? About 1.5% per year? What are you using to calculate inflation.
Finally, you know what Jason was referring to? Help a fella out, then.
“G – Here is my take on the rent vs own. I show a monthly housing exp of roughly $2,750 and an average rental rate of $3,900. I could spend the time running the numbers but I don;t have to. I know the answer suuport owning or I would have not of said it.
Show me how renting at $3,900 per month was a better move that buying at $722k. And yes, Full house is correct that a selling commission is not required. People can sell their homes without realtors. You guys say we are worthless anyway, so why would you need one to list a property?
I will be waiting…”
According to the NYT rent to own calculator- you would be better off renting if you intend to live there anywhere less than 7 years.
That is with a 20% downpayment and a 5.5% mortgage rate (which is generous for a jumbo rate.) That is comparing a 3% increase on your rent a year with a 2% home appreciation. Lower the home appreciation to 1% and it will take you 12 years before buying is more cost effective than renting. (And this doesn’t even include things like the stove breaking down, special assessments, etc.)
Yeah, thanks, captain obvious – I know how reported income works for business owners, I just don’t believe that you stated a lower, reported income, when your entire purpose was to show how great your situation is… That’s why I said “I definitely don’t believe that you understated your income – if anything overstated, given the fact that you were trying to brag about your low DTI”… That’s the thing with insecure people who say way too much – they don’t often choose modesty, rather than trying to show how great they are.
“I will repeat meself. Stating a 20% DTI gives you no idea what I earn each year. I could owe on 10 cars as part of the stated DTI ratio.
There is no way for you to know what makes up eaiter side of that # other than my total currect expenses are 20% of the average of my last 2 years reported income.
“
What about 4.75% rate, and 3% home appreciation? Also, does this include tax deductions for interest?
“That is with a 20% downpayment and a 5.5% mortgage rate (which is generous for a jumbo rate.) That is comparing a 3% increase on your rent a year with a 2% home appreciation. “
Okay Sabrina – Show me the breakdown. I don’t use rent vs own calculators. I calculate myself.
Fullhouse – If you knew what a DTI was you would understand a little better.
Yo, Stevo, what about my legit questions–really not trying to “gotcha”, just want to define some terms.
And, especially, if you actually know what Jason is referring to.
My beef with the banking system is summarized in this letter I sent to my Durbin and Biggert today (apologizing in advance for the rant, but I don’t argue on here much):
“If any of the TOO BIG TO EXIST banks fail the stress test, even after receiving TARP funds, then listen to the taxpayers and liquidate them. And yes, that means exchanging debt for stock. Goldman Sachs and the rest of the bondholders will finally have to take the hit. If it is done in an orderly way, over time, it will be the safest way out of this debacle. You have already rewarded risk taking when you allowed the Treasury to make good the $100+ billion in so-called “CDS” written by AIG. Counterparty risk in derivatives should not be something Congress is willing to foist off on the taxpayers. It begins to sound like corruption, especially with all the GOLDMAN SACHS ties in Washington, like Paulson’s and Friedman’s. Or are they just taking the taxpayers for all they’re worth? Are you like Barney Frank, with his revolving door that goes between his front door and Goldman’s? When will someone take leadership and set things right? The continued propping up of these institutions allows ongoing systemic risk to our economy. Listen to what Kansas City Fed Chief Thomas Hoenig is saying:
“Non-viable institutions would be allowed to fail and be placed into a negotiated conservatorship or a bridge institution, with the bad assets liquidated while the remainder of the firm is operated under new management and re-privatized as soon as is feasible. This plan is similar to what was done in Sweden in the 1990s and in the US with the failure of Continental Illinois in the 1980s.
This plan has many advantages, including that management and shareholders bear the costs for their actions before taxpayer funds are committed. This process also is equitable across all firms; is similar to what is currently done with smaller banks; and provides a definitive process that should reduce market uncertainty. These are important reasons to implement this kind of resolution process.You must finally loosen your ties with the banking lobbyists and do what’s right for the taxpayers. And that means taking some of the federal reserves powers away so that a stealth bailout, again ultimately at the taxpayers expense, cannot be done through that channel.”
This is what the taxpayers have been screaming for you to do since before you passed the bailout bill. Letters were supposedly upwards of 100 to 1 against TARP, but you chose to listen to the lobbyists. Now will you continue to let GOLDMAN SACHS be above the interests of the voters and taxpayers? Or will you finally eliminate this systemic risk from our economy forever?”
(tfo): “I do think you tar with too broad a brush “banks” and “bankers”, at least w/r/t residential lending (there’s plenty else to criticize, but they were aided and abetted by the OCC and SEC handing out exemptions to capital requirements like candy). Yes, Merrill, Morgan, Bear and Lehman all bought pure-play subprime lenders, and didn’t do their diligence–but the only egregiously stupid commercial bank was Wachovia (World Savings–or whatever it was called)–and they’re in the process of going away.”
“Yo, Stevo, what about my legit questions–really not trying to “gotcha”, just want to define some terms.”
What questions?
The NYT rent to own calculator is a great tool, that any potential buyer should use. Projections indicate another 20% drop in RE prices over the next five years. The Chicago condo market is ripe for a catch-up to SFH price drops. We are planning to move Near North and would not dream of buying in this environment, since we do not want an albatross around around our neck.
“What about 4.75% rate, and 3% home appreciation? Also, does this include tax deductions for interest?”
There’s a link to the calculator on the blogroll. Go check it out. It has advanced settings that you can adjust as well.
Also- where are you getting a 4.75% rate for a jumbo? From what I understand- those don’t exist.
In 2002 they did exist Sabrina. Also, this person could have easily done a conforming 1st loan and HELOAN for the 2nd. Rates were rock bottom in 2002.
Let’s see your present value of cash flow calculation on this.
“liquidate them. And yes, that means exchanging debt for stock”
??? “Liquidation” is not the same as exchanging debt for stock. Exchanging debt for stock would be “restructuring” or “reorganization”.
Very roughly speaking, Liquidation = Chapter 7 BK; “Debt for Stock” = Chapter 11.
And this: “Non-viable institutions would be allowed to fail and be placed into a negotiated conservatorship or a bridge institution, … re-privatized as soon as is feasible.” is a *third* different proposal.
“allowed the Treasury to make good the $100+ billion in so-called “CDS” written by AIG”–Most of the AIG dollars have been used to post required collateral on CDS. It’s unfortunate that we don’t actually know then full terms of the AIG loans, but after Lehman, they’ve erred on the side of “kick the can down the road”, which posting the collateral does. Right decision? I have no idea and neither does anyone else.
Finally, I don’t understand how “This plan has many advantages, including that management … bear the costs for their actions” comes to pass under any of the three proposals, unless we know that “management” of the subject banks all have Lehman-like %ages** of their net worth tied up in their company’s stock OR, to really make it work, you are silently proposing bonus clawbacks.
**Jimmy Cayne had something like 90% of his $1B+ net worth in Lehman stock. He’s still a very rich man, but very much less so than 18 months ago.
Stevo: These questions:
“Stevo: “sell for close to $400k when flipped”
Define “close”. Less than $10k (i.e., over $390k)?
Also–serious question–are you actually asserting that inflation from 2002 to 2009 was less than 10% in the aggregate? About 1.5% per year? What are you using to calculate inflation.
Finally, you know what Jason was referring to? Help a fella out, then.”
Within 5% for $400k
I was not any serious way pointing to any inflation #. I don’t care about nominal vs. real returns. I look at practical real life examples. For example – If a person bought a place and put 20% down the opportunity cost is not determined by the treasuries, but determined by where a person most likely had their money. I would guess that the majority of people would have had their money in the markets and therefore the opporuntiy costs for most would be negative. Not text book but it is practical. I use the same when the markets gain so I am not being biased. Who keeps their money in a risk free investment anyway??
I don’t have any idea what Jason was talking about. I did not read his post.
Thx, stevo.
So, more than $380k on the flip. What’re the stakes?
Dinner and a movie 🙂
Pretty nice pricing there. Someone’s gonna get a decent deal.
Even if she was off on the debt for stock being liquidation, juliana was spot on that liquidation is the best way out of this. Essentially due to the Fed keeping interest rates artificially low and the financial services industry effectively lobbying congress for deregulation, financial services grew to an unwieldly 21% of GDP during the peak boom year (2006). In prior more normal periods it represented as little as less than 10%.
Now that we’ve seen the misallocations of capital caused by excessive leverage and speculation we are in a period of deleveraging. There is no reason to prop up ailing financial institutions where the demand for their services is a fraction of what it once was. Its just giving government money away to those who least deserve it.
The finance sector needs to shrink and shrink rapidly. It is abundently clear that when such things such as “ability to repay” the loans are taken into consideration there is just way too much business out there for the market to absorb. Let the firms that gambled incorrectly go out of business.
Similarly let the stockholders get wiped out and the let the creditors take the haircut as well. The creditors were the enablers for a lot of these firms.
Anon(tfo)’s position that the bondholders should not take haircuts is akin to saying a bartender isn’t responsible for serving an alkie a bottle of Jack Daniels then helping him into his car if he then goes off and kills somebody.
does the NYT calculator take into account that the tax benefit of owning is only the amount in excess of the standard deduction?
“Anon(tfo)’s position that the bondholders should not take haircuts”
And your “position” that we should summarily execute all the hipsters has as much basis in anything you’ve posted here.
Make crap up much Bob?
Send letters asking for three inconsistent courses of action, prepare to be ignored.
anon(tfo),
From your posts and positions here you sound like a bond portfolio mgr. Once outed it might help the audience to show the inherent bias in your view that you’re more worried about your returns than the best possible outcome in a bad situation. Your positions are more rooted in your own vested interest than in equitable outcomes for the participants.
Its sad really, our taxpayer dollars are going to subsidize people like you and other wall street fatcats. Such is the plutocracy of modern day America I suppose. Crony capitalism at its finest.
Here are some comparable historical rents for the rent v. own analyis (I have more, these are representative of duplex downs):
1827 N MOHAWK 1S 12/16/2002 $3,350 4BR/3BA
1709 N LARRABEE 1N 3/6/2003 $3,650 3BR/3BA
1709 N LARRABEE 1N 8/7/2003 $3,600 3BR/3BA
1709 N LARRABEE 1N 8/11/2004 $3,600 3BR/3BA
1709 N LARRABEE 1N 7/28/2005 $3,500 3BR/3BA
1827 N MOHAWK ST 1S 2/7/2007 $3,500 4BR/3BA
1827 N MOHAWK ST 1S 4/14/2008 $4,250 4BR/3BA
1827 N MOHAWK ST 1S 5/1/2009 $3,995 4BR/3BA
As can be seen, the SHill’s guess of $3900 rent is not representative of the 2002-2009 market.
Here are some more facts:
The sellers had an 80% LTV mortgage on the prop.
The assessment in 2002 was $200, 03-06 ?, $269 in 2007-2009.
Taxes were approx $5577 in 2002-03, $7700 in 04-06, and $8421 in 07-08.
Let’s see the SHill’s present value of cash flow calculation on this.
Although I don’t agree with everything Roubini says (to me he has softened a lot of his criticism, maybe angling for a government gig) I do agree with what he wrote in today’s Wall Street Journal:
“The government has got to come up with a plan to deal with these institutions that does not involve a bottomless pit of taxpayer money. This means it will have the unenviable tasks of managing the systemic risk resulting from the failure of these institutions and then managing it in receivership But it will also mean transferring risk from taxpayers to creditors This is fair: Metaphorically speaking, these are the guys who served alcohol to the banks just before they took off down the highway”
“Is there anything more important in solving the financial crisis than creating a law (an “insolvency regime law”) that empowers the government to handle complex financial institutions in receivership?”
So what I’m asking for is new legislation, so your technicalities can be dismissed.
anon (tfo): “??? “Liquidation” is not the same as exchanging debt for stock. Exchanging debt for stock would be “restructuring” or “reorganization”.
Very roughly speaking, Liquidation = Chapter 7 BK; “Debt for Stock” = Chapter 11.
And this: “Non-viable institutions would be allowed to fail and be placed into a negotiated conservatorship or a bridge institution, … re-privatized as soon as is feasible.” is a *third* different proposal.”
I got 6 years and 10 years, respectively when I typed in those numbers (5.5% rate)… 4 years if I used 3% annual home appreciation. And it does have default annual costs for maintenance and renovation of $7K to cover the stove breaking down, specials, etc.
Why is the default cost of buying 4% – seems high – the numbers drop to 5, 8, 3, respectively if the cost of buying is 2%.
”
According to the NYT rent to own calculator- you would be better off renting if you intend to live there anywhere less than 7 years.
That is with a 20% downpayment and a 5.5% mortgage rate (which is generous for a jumbo rate.) That is comparing a 3% increase on your rent a year with a 2% home appreciation. Lower the home appreciation to 1% and it will take you 12 years before buying is more cost effective than renting. (And this doesn’t even include things like the stove breaking down, special assessments, etc.)
“
“a bond portfolio mgr”
HAHA, not even in the ballpark, dude.* Unfortuntely, given the tenor of this place, I’m not inclined to divulge any true details.
Much of the time, you sound like someone’s grandpa. “Damn kids these days.”
*Or maybe I’m fibbing and I’m actually Bill Gross slumming around here.
Guaranty Bank of Austin Texas, who acquired 16 unfinished homes through a foreclosure action, would rather demolish unsold & near finished homes than give them away.
http://www.marketwatch.com/video/asset/bank-decides-demolish-new-homes/509981D0-7AAF-4A29-AE46-A490D7FE2A93
And this is all perfectly legal apparently. And we’re giving taxpayer money to banks like this that made bad bets in an effort to keep them afloat. With several million homeless people in the US the bankers would rather destroy near completed assets rather than take responsibililty for the houses they foreclosed on and fix them and sell them.
Thanks G – I will stick with my numbers. You used 1 comp (1827 n Mohawk) and it basically supported my average. The Larrabee comp is accross next to low income housing and below market rents.
Your other point that assessments and taxes were lower back in 2002 only further support my claim. You see I know they were lower but even at 2008 levels they still support ownership as being more beneficial.
You dig deeper and see if you can suuport my claims further:)
My question again to you is… was it more beneficial to rent or to own this property? I am waiting…
No, but it does have a very low default income tax rate of 20%, so that kind of accounts for it. Also, it has a default rate of return on investements of 5%, which doesn’t really factor in the risk premium to generate those returns.
“does the NYT calculator take into account that the tax benefit of owning is only the amount in excess of the standard deduction?”
anon(tfo) isn’t a bond portfolio manager; my hunch is that he’s an executive or a accountant or a finance guy in an office for a large contractor or developer; now that things are a bit slow he’s got time on his hands.
btw, I have no legitimate basis for that hunch so I’m not trying to out you or anyting anon(tfo); you could be a lowly appraiser like G for all I know! just kidding I’ve got nothing against appraisers (or realtors).
fullhouse, Sabrina was talking specifically about the 2224 Orchard example.
The appreciation (CAGR) in nominal terms from 9/26/02 (SP $722,500) to 5/1/2009 (SP $800,000 was 1.56%.
I believe that is why she said to put 2% and 1% in for appreciation since that is the range it fell into.
Come on G- Answer the darn question already. Take your time and get every number right. Or, you can just look at it like I can, and answer the darn question.
Where are you G?
“So what I’m asking for is new legislation, so your technicalities can be dismissed.”
You’re asking for legislation changing the meaning of words?
Liquidation =/= debt 4 equity =/= nationalization. And no legislation to change that would even get proposed (unless, maybe, you address you letter to Ms. Bachman).
I found this cool efficiency calculator and it told me I was better off walking to work everyday instead of driving to work. It actually said I would save money. I don’t think the calculator understand how expensive my shoes are 🙂
“Thanks G – I will stick with my numbers. You used 1 comp (1827 n Mohawk) and it basically supported my average.”
I used those that most clearly represented the market trend. I have more that confirm the conclusion. Funny that you think the Mohawk “basically” supports your $3900 average for 2002-09 when it clearly doesn’t (and it has one more bedroom):
1827 N MOHAWK 1S 12/16/2002 $3,350 4BR/3BA
2003 estimated $3425
2004 estimated $3450
2005 estimated $3475
2006 estimated $3500
1827 N MOHAWK ST 1S 2/7/2007 $3,500 4BR/3BA
1827 N MOHAWK ST 1S 4/14/2008 $4,250 4BR/3BA
1827 N MOHAWK ST 1S 5/1/2009 $3,995 4BR/3BA
The SHill tells a fib in every post.
MPS on May 5th, 2009 at 9:31 am
does the NYT calculator take into account that the tax benefit of owning is only the amount in excess of the standard deduction?
The NYT rent to own calculator, on the far right under Advanced Settings has areas to add deduction information. The general category has a place to add income tax rate. The buying category also has a place to add the deductability of common charges.
In rereading the methodology and article, there is no mention of the standard deduction or the fact that deductions can be limited at higher income levels.
Okay G – Use your one comp you tool. The last one rented for $4250 so work backwards from that. The orchard place is the same size expcet 3 beds with a 40 ft family room.
Let’s see you analysis. Better to rent or better to own?
“The last one rented for $4250 so work backwards from that.”
What does that even mean? Do we work all the way back to 2007 when it rented for $3500?
Bob,
Thanks for the video. Very interesting.
G – Quit being such an ass and answer the question. I don’t care what number you use for the average rental rate.
Just answer the damn question. I think everyone here knows you are a bag of wind. Now what is your answer?
HD:
I know you aren’t trying to out me, but, as I know you know, speculation about the identity of anonymous posters on anonymous message boards is hella uncool.
That said, it shouldbe obvious by now that I get all my information from looking at the stuff that should have gone into the shredder bins. That’s right, I’m a janitor (for my day job). And I post all this stuff from my iPhone during my numerous smoke breaks. At night, I valet at Stevo’s favorite restaurant (loooooove that Bimmer, Stevo!! The chix really dig it, too!), before going home to my uptown “studio”.
GGGGGGGGGGGGGGGGG!!!!!
Where you go? Let’s see your analysis. I bet I know why you are still renting… you don’t quite get it now do you G?
SH–
It is remarkable to me how a superstar agent such as yourself has so much time to blatantly harass and belittle renters on the interwebs. Rather than be secure in your position as a wealthy and successful home owner, you feel the need to scream at renters that their status makes them low class and is something they should be embarrassed about.
I know agents. Good friends, actually. Honest, nice people. They were quite successful in the boom. Not so much in the last year or so. Things might not be as bad as Bob makes them out to be, but no-one I know is very optimistic about the market, and that includes realtors.
So given your boorish, crass and self-aggrandizing behavior and the state of the world around me, it is difficult to avoid the conclusion that you are just a troll looking to piss people off and make yourself look better while tearing others down. That’s just sad, man.
As much as Bob pisses me off from time to time, your antics and attitude are a million times worse.
Ignored.
I enjoyed that!
Sorry, anon(tfo) not trying to out you in anyway – just trying to pin you to a profession. But in reality, we all know you work part=time in the service industry because you’re a lazy entitled me-me-me hipster.
LMAO. The answer is obvious if you do the analysis with the correct facts.
The SHill would know this if he could do it.
G – Which is it G? Own or rent?
Anyone else wondering if G is a bunch of hot air or if he has any idea what he is talking about?
Yeah, and I’m long tinfoil too. It all boils down to debt for equity. Look at whats happening to Chrysler, even without legislation. The rules about creditor preference look to be flexible when the going gets tough. Obama is putting the interests of the UAW ahead of the bondholders. How about putting the interests of the taxpayers over the bank bondholders and Credit Default Swap counterparties? And put an end to the bailouts.
Anon (tfo):” And no legislation to change that would even get proposed (unless, maybe, you address you letter to Ms. Bachman).”
HD:
You wouldn’t beleive the stuff people throw away. I eat “out” every day, but haven’t pad for a meal in years. The freegan lifestyle rocks! Leaves tons of cash for me to build wealth thru real estate investing (and pay $5 a can for PBR (tallboys!)).
LOL anon(tfo) is one of the homeless drunks you can hear dumpster diving to get at the almost empty bottles of liquor the bars discard and collecting the few drops of remanants. Its always a nice weekend alarm clock to hear the bottles clanging, a sure sign that he’s nearby.
And once a week anon(tfo) can clean out his beard for another conglomerate freebie meal!
“It all boils down to debt for equity. Look at whats happening to Chrysler, even without legislation. The rules about creditor preference look to be flexible when the going gets tough.”
Yes, it does. And should.
**BUT**, with respect to Chrysler, keep in mind the origin of those bonds–it was an LBO* of an insolvent entity. Daimler *PAID* Cerberus (well over $1B) to take Chrysler off its hands. The lenders *knew* they were funding an insolvent entity. They poured almost $7B of cash into Chrysler even tho it was already several Billion underwater. Now you want to protect their “rights” to absolute priority?
When a lender makes a bad loan (and the Chrysler loans were *really* bad from day one), they’re putting themselves at risk. Now, because the holdouts wanted to be aggressive, they are stuck in a court of equity (if you didn’t know, BK courts are equity courts, not courts of law). And the judge gets to take more things into consideration. And, when it’s time to vote on the plan, they’re stuck with their tranche–which has (apparently) already signed on at 60%+ by number and 90%+ by amount–in approving their impairment. They can scream all they want about how it’s unfair b/c the govt is threatening the big holders, but who do they really think is going to offer $2.5B+ along with something for pension-funding and retiree medical?
That’s why the equity court aspect is important. The Bondholder class has already basically voted in favor of impairment of their class. With that, then choosing b/t the plan offered by Chrysler and the Dissident Bondholder plan isn’t about what gets the senior lender the most $$, it’s about what gets the most aggregate $$. If the Dissident Bondholders think they can find someone who would pony up ~$15B+ (gotta take out the US Taxpayers, first, as they are the DIP Lender), then they might stand a chance at prevailing. I don’t think there is anyone willing to pay $5B, much less 3 times that.
*in this case, Leveraged Bail Out.
Wow anon(tfo) I feel like a giddy 1L all over again – equity v. law, chancery vs. equity, pretty soon we’ll start discussing all those damn whale and bird cases from 17th century England.
Dissident bondholder’s debt is already trading at pennies on the dollar. They are likely just exercising one of their only options left: the ransom option. They still have power in that there isn’t enough support for a cramdown. They are gambling that they have the ability to destroy more in enterprise value via holding out and dragging out negotiations than by tendering.
And they are perfectly within their rights to do so. Nothing is done in a vacuum–any modification by government (and our short-sighted administration will try) would throw credit markets into chaos. The government cannot on a whim throw out the priority rule in bankruptcy court.
“They still have power in that there isn’t enough support for a cramdown.”
Don’t need a cramdown. The bondholder class is already locked up in favor (2/3 by $$, 1/2 + 1 by headcount) and there’s no way that the court finds that the class members do better in a liquidation than w/ the plan unless they scare up a potential buyer from Voltron.
I *am* presuming that there will not be a dissenting class other than the bondholders.
Also, this doesn’t mean they don’t have leverage–they do. But it’s all about delay, delay, delay (and attendant expenses and risks) rather than actually preventing confirmation. And their out is to get one or more of the other bondholders to by them out at a premium to the plan payout.
Yeah as an MBA I only had one class in law school. Most of the cases were terribly boring (from a finance perspective) except BK cases. Also had a finance class where BK and absolute priority was discussed.
I think this Chrysler case is fascinating. From what I know about BK though Chrysler is gonna be Eastern Airlines all over again, subsidized by Mr. Joe Taxpayer’s teet.
Cerberus already voluntarily gave up their stake, its just the unions and mgt vs. gov’t vs. the creditors. Honestly the gov’t is leaning more towards the unions/mgt via their “full employment” preference. I hope the creditors win. Liquidate the puppy to show other businesses bad business practices aren’t always rewarded in the end.
Whats this Chrysler’s 3rd BK/near-BK in my lifetime and I’m not even _that_ old.
“Cerberus already voluntarily gave up their stake”
I think they are (indirectly) getting the Finance Co. thru GMAC.
Daimler surrendered their stake along with the last installment of pension contributions.
Don’t forget, the USA as DIP lender gets the first ~$7B in a liquidation (avoiding any argument about the pre-petition “super-priority” loans). I doubt they’d get that for the pieces in a liquidation, in the current market, nevermind more than the $9.25B+ needed to top the last offer to bondholders pre-petition.
So you guys think I could pick up a 2009 challenger SRT8 for about 20k any time soon?
Crap I’ll be bidding against Sonies at the liquidation auction. Don’t worry Sonies I’m only interest in the General Lee Orange color.
Haha let me know the time and the place and i’ll let you have the Orange as long as I can get a black/black!
Good article in WSJ Opinions today on the banking crisis titled “Banks Need Fewer Carrots and More Sticks”. It calls for the establishment of “good bank” and “bad bank” parts in insolvent banks (ie, those that can’t fund themselves in the private market). Toxic assets would be in the bad bank, along with shareholders and long term debtholders, who are compensated by getting all the equity in the good bank. The good bank gets all the other assets and makes a long term loan to the bad bank to cover the difference between toxic assets and long term debt. It points out that the bondholders “will be better off under this plan than if the bank were liquidated…[in which case] they would stand to lose almost all of their investment.”
The plan calls for legislation that would allow the FDIC procedures for handling failed banks be applied to bank holding companies.
http://online.wsj.com/article/SB124157669428590515.html