All Forum Posts by: Chris Mason

Trigger warning: bigger pockets heresy incoming. 

The heresy: 

She's 60. Let her retire. 

If you are her son and want to play with $2m, go earn $2m.

For mom, go look at things that are actually passive income, which direct ownership of real estate is not. If she wants it to be real estate related (which isn't crazy, rents hit an upwards inflection point a few months ago due to rising consumer-facing mortgage rates and how "substitute goods" work, and all the real estate builders switching from SFR to multifamily tells you where they think the football is going to be in 2-3 years+), look at shares of some of the Wall Street megacorporation landlords that everyone loves to hate. Blackrock pays a 3% dividend (to pick one that everyone loves to hate, that I have no personal vested interest, or shares, of). If we're talking $2m (I made that number up), that's $5k/mo, more if the builders are right. There are also some ETFs which aggregate/pool the risk of one company making bad choices. 

If she wants to increase the risk and return, without giving up it being passive, while still in the real estate realm, lots of mortgage stocks are completely in the dumps right now. It's a "too big to fail" industry that's indifferent to anti-landlord and anti-investor legislation ("ok, so we do more loans for primary residence owners, and less for investors, whatever"), adding a layer of safety. Some of the mortgage stocks have gotten so cheap they are paying a >10% dividend (share price is the denominator in the ROI division, so as that goes down without the dividend decreasing proportionately, it forces ROI up, because math).

 It has limitations as noted, but if you're just trying to track ballpark up/down direction of movement ("is my credit score going up, or down?"), it's accurate. 

 FYI you can actually do a refinance without taking it out of the revocable living trust. You can (and perhaps should) close in the name of the trust for a vanilla refinance. 

For the HELOC, it's up to the individual bank. Some will allow it to close in a trust, some will not. You have to ask.

Quote from @Jason V.:

Buyer gave me a low-ball offer.  Then they came up to $95k all cash, saying that's the best they could do.  OK.... Well, I said $99k was the lowest I would go, considering the buyer's agent commission % is really coming off the top, right?  That would leave me with $96k.  I've determined I could budge another $1.5k, but I need $94.5k after everything's said and done.  Period.  So that means $97.5k is the lowest offer I can accept.

Even if the buyer & seller won't budge, the buyer's agent could simply agree to a 0.5% commission, close the deal, and buyer & seller would both be happy.  But there's really a whole range of percentages that the buyer's agent could agree to that are likely NEVER considered to be on the chopping block.  If a buyer's agent could drop to 1.4% commission in this case, then the buyer would only need another $900 which seems reasonable.  Everybody would be sacrificing to make the deal work.  Does anybody ever try negotiating the agent commissions when you're within a couple percent price difference??

I've come down as far as I realistically can.  $10k below asking.  Is asking the buyer to come up $1000, and the buyer's agent to come down $1,000 too much to ask for?  I mean... really, it comes down to how invested the buyers agent actually has been.  How much work did they really do?  What is their time worth?  $35/hr for 56hours = $1,960.  Buyer coming up $1,500 to cover that and buyers agent dropping commission to 2% could save her from another 56 hours of work...

Like I said, tho... there's a whole range of variable percentages that get us all to my rock bottom price.  Can I get anymore outside the box than this?!?  I'd imagine most negotiations aren't this tight.

An idiot is born every day, so sure you might get what you are after. 

Here's a reason why this is less likely than you think, however, that hasn't been mentioned:

- Seller needs to sell. And only has one of this house to sell.
- Buyer wants to buy. And apparently likes this house.
- Both realtors are in a position to say "NEXT!" and to work on multiple transactions at once. They want to do deals, but have less incentive to close particular deals than either the buyer or seller. 

 .

It's like playing chicken with someone in a sufficiently large car such that they aren't actually going to be harmed by the impact, meanwhile you are riding a bicycle with no helmet. Good luck. It might happen, you might stumble into a victory, sure, but as a game plan it's not very good at all. 

This cpa/accountant meme also feels relevant:

 More than likely, a mortgage statement will arrive showing the lowered balance. Way easier to do that than to attempt to coordinate with a consumer's auto-pay, bla bla bla.

 I've read "success stories" that started like this, and ended with a judge forcing the seller to sell to the buyer at the agreed upon price. And other times, they don't.

The only thing all these stories have in common is that it takes several years to produce either outcome (which is roughly a coin toss), and the lawyers make really good money in the process. 

Good luck...

 You signed some paperwork at the closing table promising to help correct admin errors like this. And the funds are going to be applied towards paying the balance down, so it's not being stolen from you. I doubt you will win this one. GL.

Since there is no such thing as PMI on a non-institutional loan, this is very obviously a scam. No different than if someone told you that you had to pay a car registration fee prior to purchasing a bicycle.

There actually is an interest rate floor. Set by the IRS, updated periodically. If the rate is below that, the IRS considers it a gift from the lender to the borrower. I don't know the details, but that's something for you to look into.

Markets find equilibrium. There's no better or worse, it depends on goals etc.

If you want cashflow next month, you buy a dumpy little $100k place in a midwest warzone with a monster cap rate and nominal cashflow. You need the cashflow to patch the bullet holes. It's worth $100k today because it doesn't appreciate, it was also worth $100k (in inflation adjusted terms) 10 years ago.

If you want wealth 10 or 15 years from now, you buy in a ritzy California location (San Jose, Hollywood, whatever) and watch one of our regional engines of the global economy lift all boats. Prop 13 is the icing on the cake, I've seen more than a few >$1m homes with annual property tax bills below $2k. Pair that with a fixed rate mortgage and rents trending up over time, and you've got the ultimate inflation hedge. A rental home per kid is a really good college savings plan.

Most people don't have, or want to have, the dial entirely set to either extreme. It's not fun to bleed cashflow for a decade with a-paper self-employed tenants who cannot qualify for a mortgage because they, like many higher income people, cheat on their taxes, nor is it fun to dodge bullets while posting eviction notices. 

Somewhere in the middle is where most fall, where the goals are aligned. The upper half of that dial, modest cashflow, lower maintenance tenants, with stronger than average appreciation, California has aplenty. The lower end of that dial, strong cashflow but weak appreciation, and high maintenance tenants, is where much of California comes in weak.

For people that go multiple directions at once, mixing it up for diversity early on, laziness eventually compels them to shift more towards the modest cashflow with lower maintenance tenants and higher appreciation direction. Or maybe they just get older, want to hustle/evict/etc less, and have more things in life on auto-pilot, or at least closer to it. Or maybe they got sick of property tax increases outpacing rent increases in locations without something similar to Prop 13.

But, yeah, that's the pattern. Young eager hustlers chase cap rate and cashflow, get wiser & more conservative as they age. Meme stocks are great when you're 23, not so much when you're 43, same thing.