Real Estate Investor Warns US Is Entering Greatest Correction of His Lifetime

originally posted by: Xtrozero
a reply to: tanstaafl
No, my house is in WA, and my rental is in VA.

Ok, so... a rental should be income - unless you mean you moved into a rental in VA and kept your house in WA? Why not just rent out your house in WA?

They have done well, and their colleges are free because of that, so give and take. One is a Electrical Engineer and the other will start as a doctor in the military. I'm a boomer, so I hear you.

Ok, well, not my business anyway, but sounds like you have good kids, so thats good.

I did it through Quicken loans and they begged me...lol All three never cost me a thing. On my last one, they offered 2.8% and I was already at 3.5ish and told them unless they can do better it's not worth it to me, and the guy was like give me a day I need to run this up to my boss, the next day he came back with 2.3%.

And if you didn't pay for it up front, they rolled it into the new loan then, right? Otherwise, what was their incentive? They have to make money somewhere...

a reply to: FlyersFan

Commercial real estate is about to collapse. Office buildings specifically. No one went back to the office after covid.

I’ve been reading these forums for 10+ years. And just now decided to make an account so I could comment on this. The article referenced is an interview with Grant Cardone, who is a known grifter and conman. It’s essentially an infomercial/ click bait to get attention and investors for his company. Which allows non-accredited investors to invest as little as $1k. He’s also a Scientologist.

originally posted by: Xtrozero
a reply to: tanstaafl
I had zero closing costs each time with Rocket mortgage, they used to be Quicken loans. About 200 less a month per refi in interest, so I'm not sure what your definition of free is or what the pay upfront would be. They take your balance owed and reestablish a new 30/15 year loan.

They added the closing/refi costs into the new mortgage. Sure, you had a lower payment and rate, but you still paid for the closing costs for the refi, just not up front.

At least, I've never seen a mortgage company actually and truly do it for nothing.

a reply to: tanstaafl

It is never free. There are always closing costs.

However, the loan can be structured so that the borrower doesn't have to pay any of the costs out of pocket. The cost to refinance depend on the state, but typically it runs from $2000-$4000 to refinance.

When doing a no cost refinance, what is actually happening in most cases is the bank is not giving you the lowest rate possible. We get something called a service release premium (SRP) or in the case of a broker it is called yield spread premium (YSP). This is essentially profit above the par rate of the mortgage.

For example, let's say I can get you 3%. Your have a $500k loan. To get 3% you have to pay all the closing costs out of pocket which might be say $3,000. However, if you take 3.25%, the SRP might be .75%. So at 3.25%, the bank makes an extra $3750 ($500k * .0075%). We can then take that $3,750 and pay all the closing costs on your behalf whereas at 3%, you'd have to pay it out of pocket.

This isn't necessarily a bad thing. A $500k mortgage payment at 3% is $2108. The payment at 3.25% is $2176. So $2176 - 2108 = $68/mo. $3000 / $68 = 44 mos to breakeven. So the 3% rate isn't a better deal until you keep that loan for at least 44 months due to the upfront closing costs. If someone knows they might sell within four years, taking a higher rate and no closing costs is a better deal. OR if it is a situation where rates are falling and the person might refinance again, you don't want to waste money in closing costs because you'll never recoup to costs... I've refinanced clients every six months in some cases when rates are falling so they don't want to pay closing costs.

The other way is some banks roll the costs into the mortgage balance. So instead of a $500k loan, you get a loan of $505k to cover closing costs.

originally posted by: Toddfrankel
I’ve been reading these forums for 10+ years. And just now decided to make an account so I could comment on this. The article referenced is an interview with Grant Cardone, who is a known grifter and conman. It’s essentially an infomercial/ click bait to get attention and investors for his company. Which allows non-accredited investors to invest as little as $1k. He’s also a Scientologist.

www.huffpost.com...

a reply to: 777Vader

My rule is that one home should never cast a shadow on the others.

i agree, good rule.

originally posted by: tanstaafl
Why not just rent out your house in WA?

I'm living in a rental in VA and trying to sell my house in WA, so paying on both right now. I just invested about 50k to turn my house into a spotless turnkey move-in. It's also a big house 4700 sq ft. I would rather put the equity into an investment for a couple of years.

Ok, well, not my business anyway, but sounds like you have good kids, so thats good.

They know the support is only good if they are doing things right. If they do what is expected then I support them, but if they go in a bad direction then support stops.

And if you didn't pay for it up front, they rolled it into the new loan then, right? Otherwise, what was their incentive? They have to make money somewhere...

Yep, I never paid closing costs, and the weird part was it wasn't like they were assuming from another lender. The only thing I can think of as an incentive is the guy who got credit for the loan made money off it or was added to his total, but I really could not understand why they refi from their own higher interest loan to another one with lower interest.

originally posted by: Xtrozero

originally posted by: tanstaafl
Why not just rent out your house in WA?

I'm living in a rental in VA and trying to sell my house in WA, so paying on both right now. I just invested about 50k to turn my house into a spotless turnkey move-in. It's also a big house 4700 sq ft. I would rather put the equity into an investment for a couple of years.

Ok, well, not my business anyway, but sounds like you have good kids, so thats good.

They know the support is only good if they are doing things right. If they do what is expected then I support them, but if they go in a bad direction then support stops.

And if you didn't pay for it up front, they rolled it into the new loan then, right? Otherwise, what was their incentive? They have to make money somewhere...

Yep, I never paid closing costs, and the weird part was it wasn't like they were assuming from another lender. The only thing I can think of as an incentive is the guy who got credit for the loan made money off it or was added to his total, but I really could not understand why they refi from their own higher interest loan to another one with lower interest.

See my post above.... the incentive was they gave you a slightly higher rate

originally posted by: tanstaafl

At least, I've never seen a mortgage company actually and truly do it for nothing.

They would add it in and then give a credit for the same amount to cancel it out. I can't explain why they did that or why it worked for them.

originally posted by: Edumakated

See my post above.... the incentive was they gave you a slightly higher rate

They never rolled it into the next loan and each time I was getting about 1% less, so if it was 1.2% if I paid the closing cost I do not care since it is less than what I had before.

originally posted by: Xtrozero
a reply to: tanstaafl
Yep, I never paid closing costs, and the weird part was it wasn't like they were assuming from another lender. The only thing I can think of as an incentive is the guy who got credit for the loan made money off it or was added to his total,

Edumakated explained the other way - they just charge you a slightly higher interest rate.
One way or the other, though, they always get their pound of flesh. L)

originally posted by: tanstaafl

One way or the other, though, they always get their pound of flesh. L)

I think the last one was they offered me 2.8 and I was at 3.3 at the time. I said it wasn't worth it to me so no thanks, the guy told me he would need to run it by his boss to go lower and I said OK NP see ya. The next day he offered me 2.3% and I took it, so I do not think there were loans much lower than that offered.

a reply to: FlyersFan

Wow, Grant Cardone does real estate now?

For decades he was in car sales, used and new. He used to give seminars and sell CDs on how to sell cars better. I guess it's a step up from used cars to real estate.

He's been accused of fraud often, by his own investors, and has had class action lawsuits against him. He may be selling houses now, but he's still a used car salesman. Like the saying goes, you can take the girl out of a trailer park, but you can't take the trailer park out of the girl.

Knowing his background, I would say he's still selling opinions.

originally posted by: Xtrozero

originally posted by: Edumakated

See my post above.... the incentive was they gave you a slightly higher rate

They never rolled it into the next loan and each time I was getting about 1% less, so if it was 1.2% if I paid the closing cost I do not care since it is less than what I had before.

Yes, that is basically what is going on. You are saving money, but you paid for it indirectly through a slightly higher rate than they could have offered you. The end investor of the mortgage basically paid a "premium" for your loan because the rate is higher than the par coupon rate. Your lender takes that premium and pays the closing costs you otherwise would have incurred.

Our favorite Native American Senator Elizabeth Warren actually tried to make that illegal back in the day before she became a Senator. She couldn't wrap her little brain around why it was beneficial to consumers.

originally posted by: Xtrozero

originally posted by: tanstaafl

One way or the other, though, they always get their pound of flesh. L)

I think the last one was they offered me 2.8 and I was at 3.3 at the time. I said it wasn't worth it to me so no thanks, the guy told me he would need to run it by his boss to go lower and I said OK NP see ya. The next day he offered me 2.3% and I took it, so I do not think there were loans much lower than that offered.

Quicken/Rocket isn't the most competitive lender.... if they offered you 2.3, the market was probably at 2%.

If the value of our house drops in half, it won't make me feel sad. It will be down to the value it was ten years ago if that happens.

The house is paid off and even at the half price, we will have gotten all our money back for all the materials, plus the replacement furnace and house roof, plus much of what we paid for interest. That amount includes the carpet installation costs, the septic tank installation L+M, the well, and the cost of having the labor to have the neighbor do some bulldozing.

We still have paid home owners insurance and taxes and all utilities though plus phone and internet which averages about five hundred a month over all over those years.

Doesn't matter anyway, we plan on passing the house down to a selected daughter or grandkid....our house has no asset value to us. It is our home, and hopefully who we leave the house to will live here all their life too.

Most of the houses around here are going for way more than their real value....and many people would be over their heads in debt if things collapsed, lots of houses would go to the banks here if it crashed.

The interest rates really sucked when I bought my home in 1987. I ended up at 10%. That was fair then. I refinanced it a few years or so later and got it down to 7 1/4% and paid on that for a quarter century. The only thing that saved me was the price. I was a renter and bought my neighbor's house for an agreed upon 90K. I looked it up last month and it was at 420K on Zillow. You need either low home costs or very low interest rates to qualify for something decent. If you dont have either, you are screwed

originally posted by: rickymouse
If the value of our house drops in half, it won't make me feel sad. It will be down to the value it was ten years ago if that happens.

The house is paid off and even at the half price, we will have gotten all our money back for all the materials, plus the replacement furnace and house roof, plus much of what we paid for interest. That amount includes the carpet installation costs, the septic tank installation L+M, the well, and the cost of having the labor to have the neighbor do some bulldozing.

We still have paid home owners insurance and taxes and all utilities though plus phone and internet which averages about five hundred a month over all over those years.

Doesn't matter anyway, we plan on passing the house down to a selected daughter or grandkid....our house has no asset value to us. It is our home, and hopefully who we leave the house to will live here all their life too.

Most of the houses around here are going for way more than their real value....and many people would be over their heads in debt if things collapsed, lots of houses would go to the banks here if it crashed.

Home value is irrelevant unless you are selling. Too many people look at homes as a short term investment...

Housing typically appreciated with inflation. People now think housing is supposed to go up 10 or 20٪ a year. It isnt normal.

well of course when your housing market is artificially sustained through regulations that promotes excessive loans and irresponsible financial decision making, of course a correction is inevitable, home ownership should not be over 65% of adults, that's an unnatural level of ownership. its not just biden, its every president since our founding either indirectly before 100 years ago or directly within the last 100 years trying to push home ownership to an unnatural obsessive degree, people shouldn't be as obsessed over it as we Americans seem to be, hopefully we'll finally get the message to deregulate our housing market this time, maybe, and stop giving out loans so readily to everyone, even those who cant pay for it, for everything. we need to cast aside the illusion of wealth it has created in the minds of so many of us Americans, and learn some humility.