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Author Archive: Irvine Renter

Land installment contracts provide a viable path to homeownership, but they are fraught with abuse. In yesterday's post, Three calculations every real estate investor must know, I discussed my personal criteria for buying rental investment properties. Everyone who actively invests has their own criteria, but nearly everyone has some criteria they use to filter out properties with problems they don't want to deal with. Have you ever wondered what happens to those properties that fail to meet anyone's criteria? What is the fate of those properties that are so far gone that it doesn't pay to renovate them and bring them up to a salable standard? Many might think these homes are demolished, and in places like Detroit, this does…[READ MORE]

The three main measures of financial performance for rental real estate are capitalization rate, cash-on-cash return, and internal rate of return. When people buy a personal residence, they often solace themselves that the high prices is warranted because the property is a "good investment". Novices generally assume that anything they sell for more than they paid is a good investment without any understanding of what a good investment really is. It’s not enough to merely make a profit, the amount of profit relative to the amount of money spent matters. If someone brags that they made $100,000 on a resale home investment, it's much more impressive if their initial investment was $100,000 than it is if they invested $1,000,000. It's…[READ MORE]

Analysts working for homebuilders see a flat market with weak sales as the likely future for OC Homebuilders. At first low MLS inventory was a boon to homebuilders, but housing market manipulations give homebuilders false signals, so Orange County homebuilders oversupplied the market, and as it turned out, reflating the housing bubble hurts homebuilders, rather than helps them. It wasn’t until early 2013 that homebuilding bounced off its five-year long malaise at 60-year lows. Homebuilding is still 40% below the average of the last 60 years, and with high prices and weak job growth, some are wondering when the industry will ever recover. Homebuilder's demand comes from financially stable households with sufficient savings, good credit, and a desire to own…[READ MORE]

Most borrowers don't realize the hidden benefits of using FHA financing they can use to game the system to their advantage. Most first-time homebuyers use FHA financing because they lack better alternatives. FHA insured loans carry weak qualification standards (they accept FICO scores down to 580), they don't limit debt-to-income ratios, and they only require the borrower to put 3.5% down. Most would-be homeowners know the FHA loans are easy to qualify for and require little savings, so the primary reasons for using FHA loans are not a secret. These loans also carry significant costs and fees that make them less attractive to buyers with sufficient resources to put 20% down; however, there are five secret reasons everyone should consider…[READ MORE]

Reducing the number of homes for sale was the essential ingredient to bail out bankers and loanowners whose foolish behavior caused the housing bubble. From early in the housing bust, I knew that how the banking cartel disposed of their REO would determine the fate of the housing market. Since lenders modify loans, hold non-performing loans on their books, and allow delinquent borrowers to squat, they control the flow of properties through the foreclosure process. Also, they control the approval of short sales; therefore, they control the flow of properties through the short sale process. Since distressed sales of foreclosure properties and short sales flooded the market during the bust, lenders controlled the bulk of the supply on the market. At the time,…[READ MORE]

The housing bubble in San Francisco is the fourth unsustainable price rally in the last 45 years. The only question is when the correction will happen and how deep it will go. In the ashes of the first technology bubble, the term web 2.0 was coined to describe the new and improved mania gripping Silicon Valley today. Adding the term "2.0" is now synonymous with any resurgent industry in the aftermath of a near total collapse. Some would like to call the housing bubble inflating in San Francisco today housing bubble 2.0, but that wouldn't be accurate: We're on housing bubble 4.0. Housing bubbles 1.0, 2.0, and 3.0 The first housing bubble in California inflated shortly after the passage of…[READ MORE]

Investors move out of stocks and into safe investments like government-backed mortgages, lowering rates and increasing housing demand. For the last several years, the real estate market observers awaited the imminent rise in mortgage rates sure to trigger a price crash. While the spike from 3.5% to 4.5% in a six-week period in mid 2013 certainly removed the strong backwind from real estate, it didn't signal the beginning of the end. On the contrary, since then mortgage rates have pushed back down near record lows, and despite high prices, housing is very payment affordable again. Since mortgage rates are near record lows, the consensus opinion is that mortgage rates will eventually rise again. It's very unlikely that 3.5% mortgage rates…[READ MORE]

Do you want free money?  If you buy a home from a homebuilder without an agent, you pay full price. If you buy a home with us as your agent, you get 1.5% back. Same house, but 1.5% of the purchase price refunded back to you. It’s free money! Take it!  As a bonus, you get full agent representation. Did you know many items in a builder’s sale contract are negotiable? Do you know which options are better installed by the builder and which ones are better done by others later? In addition to helping negotiate a better price, we also prepare detailed reports showing the cost of ownership of your new home. Why put yourself at the mercy of…[READ MORE]

Though realtors and politicians like to present home ownership as an entitlement, it's really a privilege bestowed on those who can sustain it. We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. US Declaration of Independence Did you notice that in the defining statement of American Entitlement, the right to own a single-family detached home was not mentioned? I remember when I learned to drive, I was told repeatedly that driving was not a right, it was a privilege, a privilege I earned by learning the rules of driving and demonstrating good judgment. Why…[READ MORE]

As the Yuan declines in value, houses become increasing expensive to Chinese Nationals, prompting further erosion of new home sales to this large buyer group. Last month I asked Will the slowdown in China hurt Irvine real estate? There is little doubt that stopping the flow of Chinese capital will impact new home sales in Irvine. Irvine homebuilders depend on Chinese buyers to purchase their overpriced houses, which becomes a problem if this flow of money dries up. Last year I documented that Chinese real estate investors are less active in Irvine. For years, Chinese could export cash by setting up dummy foreign corporations that import goods into China. The dummy corporation sends a bill to the Chinese mainland for…[READ MORE]


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In Memoriam: Tony Bliss 1966-2012