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Things to do before you die...
Entered on: January 2, 2007 3:38 AM by BigFatty

Here is my list so far. I am sure to add to it. It is in no particular order.. 

  • Great Wall of China and the Terra Cotta Warriors
  • Visit more of the Grand Canyon
  • Motorcycle across West – Glacier Park
  • Sequoia National Park
  • Performance Race Car Driving and Motorcycle riding in Vegas
  • Learn to Surf
  • See more of Hawaii – helicopter over volcano
  • Inca Walk – Hike to Machu Picchu
  • Great Pyramids and Ride camel
  • African Safari
  • Visit India and ride elephant
  • Australia and dive the great reef
  • Motorcycle through Europe
  • Dogsled
  • Do the Cresta Run in Swiss
  • Angkor Watts
  • Hot air balloon
  • Hang Glide
  • Get Pilot’s license
  • Sail the Med and Greek Islands

What is your list?

NEWS 391 - 60 Comments
From: The Bone Entered on: January 2, 2007 10:28 AM

- Climb a serious mountain

- Run a marathon

- Sail the Med

- Have a million dollar portfolio

- Swim with a whale

- Great Pyramids 


From: BigFatty Entered on: January 2, 2007 11:08 AM
Sweet - Get a million dollar porfolio, buy a boat, I'll be your crew on the Med, and then I'll go swimming with you.  See three off your list knocked off!
From: The Bone Entered on: January 4, 2007 11:31 PM
I just turned $50 into $330 playing Black Jack and Roulette on Then with the winnings, I placed a $200 bet on James Toney over Sam Peter for Saturday's fight. If James' wins I'll be at $500, if he loses, I'm still up $80. This shit is better than my stock portfolio which I just liquidated for a $2000 loss after holding it for several years. I don't have the time or patients to make educated bets on stocks - I'll stick with gambling on boxing instead.
From: BigFatty Entered on: January 5, 2007 8:22 AM

That is very true - if you don't do your research and don't know about the company and industry, investing in stocks is pretty much a gamble.  Even if you do the due dilligence, there are many unseen factors that can screw your pooch.  So I can see your reasoning.  Gambling on cards or Boxing is a lot more fun AND you get your results much quicker.  A friend of mine makes his living over here playing online Texas Holdem.  He has no job.  Every night he is playing.  He puts his time in for sure.  He told me it took him about 2 years of playing to get where he makes money.  He is no highroller, but he did just take his girlfriend to NYC for a nice vacation for a week.

If Bone tries this route for investment, I have $20 on he loses a bunch cash - enough to quit all together within 6 months. 

From: Ross Entered on: January 5, 2007 9:09 AM

Then again, the market has been doing quite well for some time, and it seems like you can just pick a few big blue chippers or index funds and do okay.

Hey, isn't online gambling illegal now?  Or is that only for stuff like blackjack and poker?    

From: The Bone Entered on: January 5, 2007 9:13 AM
My index funds are actually doing well. Just when I pick individual stocks. I'm not aware of any illegalities in online gambling. It's possible, but laws and rules are for people too stupid to figure out life for themselves. I regard them as advisory in nature.
From: BigFatty Entered on: January 5, 2007 9:57 AM

I am a fan of the index fund too.  I have the Vanguard S&P 500 and have been recommending that for years.  It is far better option than doing all the work and getting crappy results to boot.  There are a few stocks in my portfolio, but all the work keeping up with them is starting to get old.  There is a bit of excess cash in my account, plus a stock I want to DUMP (JDSU - fond memories for everyone, right?)  So I guess I'd better look into my options.  I am thinking of Solar Power companies or looking into if there is a Solar index fund.  It is a very long term outlook, but solar power will eventually take off....

Online gambling is illegal, because the government cannot tax it.  They made banks and credit cards stop transfering funds to those sites.  I am not sure why Bone's site is running, unless it is a bonafide US company and is operating in Vegas or something. 

From: Jackzilla Entered on: January 5, 2007 10:25 AM
The Bone said: ...laws and rules are for people too stupid to figure out life for themselves. I regard them as advisory in nature.
From: The Bone Entered on: January 5, 2007 11:25 AM
Sportsbook is sweet. They transfer the funds through an intermediary. If James Toney wins, I'm going to pull out $300, and use the remaining $200 to continue to build my empire.

From: Ross Entered on: January 5, 2007 12:44 PM

Yeah, I have E-Trade's version of the S&P500 fund, which has been doing pretty well for a while now.  

And as for energy companies, seems to me that for the forseeable future, oil companies are still where it's at.  My dad has owned Exxon for years and I believe it's the most profitable stock there is right now.  Seems like as supply gets shorter, you only stand to make more money as a shareholder in a company like that.  Of course, the whole ethanol thing is starting to get big, so that's where owning farms comes in (my dad is not that sweet - his father did all this investing in the first place).  

As for online gambling, I know the poker sites and whatnot were shut down.  I'm sure that if the sports stuff was illegal a big site like sportsbook would be shut down as well, so it must be okay.  It's something you would have to worry about eventually if you made enough money on it, you'd need to start claiming your winnings on your taxes or else the IRS could start fucking with you.   

From: The Bone Entered on: January 5, 2007 4:13 PM
You can still gamble at sportsbook. In fact, I just made $30 in about 5 minutes just now. 
From: The Bone Entered on: January 5, 2007 5:05 PM
Fatty, too bad you aren't in the good ole USA. I've decided that since I'm buying a house and all that shit, I can't really justify the time and expense for a European vacation at the moment. However, since I am in California, I plan to rent a car when I check out of the command and fly to Hawaii from San Francisco vice San Diego. I'll drive up the very scenic Hwy 1 along th coast. Make a couple of stops here and there, spend a couple days in San Fran, and rol on out to Hawaii. Bert, Zilla, Roche - any takers? What about Kathleen? She'll have a blast. Bert, get her on the horn.
From: Heather Entered on: January 5, 2007 5:45 PM
Sorry Bone, Kathleen will most likely decline your offer.  She has reconnected with a high school classmate and is no longer single.  She actually may be moving back to Iowa and starting a new, matrimonial life there.  You had your chance in GR and BLEW IT!
From: The Bone Entered on: January 5, 2007 6:08 PM
That's unfortunate, but good for her. I only met her once but I was totally attracted to her. Oh well, bad timing. Congradulantions on the pregnancy by the way. 
From: BigFatty Entered on: January 8, 2007 11:22 AM

I have to admit that I am dissappointed in not having a Bone visit.  Plus, I have to throw a flag on the play - Improper Use of Fun Tickets.  I still don't see why you are Hell-Bent on buying a house in Hawaii.  It is certainly not a bad idea, but it might not be a great idea.  I might have this wrong, but how long do you see yourself in Hawaii?  I was thinking you are there for 3 years or so.  If that is the case, it may not be a sweet idea.  With your housing allowance and income, you CAN afford a 1/2 milly house, but it will limit your amount of available fun tickets.

Lets review FUN TICKETS


FUN TICKETS for Whores and Booze = FUN

FUN TICKETS for Fancy Cars and Watches = FUN

FUN TICKETS for trips to Eastern Europe to be surrounded by HOT porn stars and cheap booze, living the lifestyle of James Bond = FUN

FUN Tickets for Mortgage = BORING

From our previous conversations, you would have about 1,000 more FUN TICKETS a month if you only rented a sweet apartment in Hawaii.  You would still have a sweet pad, just not have a huge payment.  Each month in an apartment gives you plenty of extra tickets for use (The European Adventures! Tour is yours just after 1 month).

You can go into all you want about the investment potential....  BLAH BLAH BLAH.  You are just one natural disaster away (or poor Bush decision) from losing everything.  Your value probably will go up, but will it go up more than the guaranteed income of your 1,000 Fun Ticket/month savings?

Plus - Don't you have enough retirement security - Cushy Lifetime Pension, IRAs and other investments?  Laughing

The short of it - if you planned so well for retirement already, why cut yourself short from FUN TICKET enjoyment.  Sure, you could be SUPER RICH BEEYOTCH! when you are retired.  But lets not delude ourselves - I doubt you will have the same James Bond appeal as an old retired guy and I doubt you'd live life with the same amount of gusto after a decade of sedentary home ownership.

BigFatty is a self proclaimed financial genius and his commentary can be found in his never published column "Fatty's Fornicated Finance"

From: BigFatty Entered on: January 8, 2007 11:26 AM
BTW - I agree with the Bone on Kathleen.  She definately has a Hotness about her.  I'll have my Special K with some sugar anyday!
From: The Bone Entered on: January 8, 2007 4:06 PM
I've found a housing development on the Westside near Michelle's house that is reasonabmle priced $450,000 and I'll still have enough fun tickets left over to be big pimpin. I read a book about buying a house and did the math. After 3 years I'll be 9 grand ahead assuming a modest 6 percent increase in value annualized - but I may just stay longer so who knows.
From: Ross Entered on: January 8, 2007 9:34 PM

Bone, are property taxes figured into that calculation?  According to my math, you'd only be paying about 2100 per month on your mortgage, which strikes me as a bit low, considering what I pay, since my condo was quite a bit less than that.  But I do also pay my property taxes a bit each payment.  

But maybe I'm not quite understanding what you mean by being 9 grand ahead.  This is a fun exercise for me as well since we'll be moving a year or two most likely, so I'm eager to learn from what you've picked up.  My calculation:

450,000 * 1.06^3 = 535,957

Selling at that price, and assuming you put down 20%, you'd clear 535,957 - 360,000 = ~176,000.  Let's assume it's all profit and none goes to real estate agents.  But I'm also neglecting to factor in the small amount of principal you will have paid in three years.

To clear 9k, that means you'd have paid 77k (176k - 90k -77k =  9k) over three years of payments.  77,000 / 36 = 2137.  

Actually now that I do the math and factor out my property taxes, that number actually jibes with my experience.  But I would expect Hawaii's property taxes to be even higher than mine, plus the fact that your house is worth more, will make your property taxes run you around $600 a month, as a wild guess.  So that, at 6% appreciation at least, will negate your 9K profit.  Undecided

From: The Bone Entered on: January 9, 2007 12:07 AM

I plan on putting no money down. Navy Federal Credit Union has sweet 100 percent finacing deals at 6 percent with no PMI. Property taxes are actually very low in Hawaii - looking at about $150 - $175/month.

I've used various calculators I just used this one that has me $21k ahead in 3 years. I think you forgot to factor in the tax break. 

The main entering arguments I used is $2200/ for rent vs $550,000 loan at 6% interest, 0.5% property tax, and a 6% increase of 3 years.  

From: Ross Entered on: January 9, 2007 8:14 AM

Ah yes, I did forget about the tax break, which is definitely substantial. 

That calculator is sweet.  What it tells me is that the appreciation in the house price makes all the difference - by my shoddy calculations, the difference between making or losing money (rent vs buy) hinges on whether I could expect an appreciation of 6% vs 7%.  I really wish I knew how to gauge the appreciation of this place better...

From: BigFatty Entered on: January 9, 2007 8:47 AM

Ok, OK, I looked at the real numbers and ran them through the cruncher.  I like doing this stuff too!  With a real rent of $2200 a month, it is a no-brainer to buy a house for $450K. Especially when you get the Navy Semen Deal.  No money down virtually eliminates your risk of major loss.  I disagree with Ross on neglecting the principal paid, it is not so small - at this level, Bone will be paying $450+ month towards principal.  That brings down the true costs of owning down to renting level.  When you figure in Bone's tax savings (Hes in the 25% bracket) he starts to come out ahead of the game.  Bone's forcasting of appreciation is where things get crazy.  If you meant 6% appreciation a year, then you would make out like a bandit.  With $20k in principal banked and 7% closing costs, you would walk away with $66K (We don't have to worry about taxation here - we will assume you will plow the cash into another home).  But Hawaii's prices are at very high levels now.  It is anyones guess if they will keep climbing, stagnate, or drop.  (Bone, we should have bought homes when I was living with you.  We would be SUPER RICH BEEYOTCH! now.)  If home prices only climb a modest 2.5% a year, you walk with only $18K.   That is still way better than nothing.  They key for you is to buy a sweet property.  Sweet shit is easy to sell and you get a premium.  (You pay one too).  

The best way for you to make ca$h is to make some improvements on a house to make a dump, super sweet.  I don't see you strapping on a Bob Villa belt though..... 

From: Ross Entered on: January 9, 2007 10:01 AM

Yeah, I kind of wonder what kind of improvements are the best.  My place is relatively new, but there are things that I can do: my appliances are white, whereas stainless is all the rage.  Is it worth 2k+ to upgrade?  I'm not sure.  Fregly doesn't think so.  Also thinking of putting in crown molding in my living room.  One thing that was practically free for me to do that is worth money to buyers like me was to re-wire half the phone jacks in my house to network jacks.  

At this point, though, I think it's worth it to find someone to do the work like painting or crown molding, though.  You can do it yourself but it's probably not worth the hassle.   

From: The Bone Entered on: January 9, 2007 11:47 AM

By my calculations, all I need is a 2% increase in the value of my home per year for 3 years and I'm gold. I think that is very easy to do. I think the value of homes where I'm looking at will do at least that. The county just commited $2 mil to improving the parks and they are constantly improving the infrastructure. They also approved a bill to build a mass transit railway from that side of the island into town.

As for home improvements - any improvment to the kitchen is seen as a good deal. Just don't go overboard. Unless the place I bought had brand new appliances, I'd throw in stainless, pergo flooring, and new counter tops. You could do all this for under $5k which is money well spent in my opinion. 

Bottom line is I think that property prices will be fine. Right now the media is scaring people. Interest rates are still very low historically. People need to live somewhere.

From: BigFatty Entered on: January 9, 2007 11:52 AM

In your case, I am not sure what more improvements will generate xtra ca$h.  Your place was pretty much up-to-date when you bought it, and you've kept it that way.  Hawaii might be a different duck in this matter.  Crappy houses might be priced close to sweeter houses because at that price level, the cost of renovation is a small percentage of the price.  $5000 to renovate a bathroom is nothing on a $500k house compared to my $200K house.

I agree with Fregly.  While upgrading appliances might make your place sell easier, you won't get your all your money back.  People aren't buying your place because of the appliances. 

From: Ross Entered on: January 9, 2007 1:14 PM

Fregly is already coaching me to some extent on all of this... he's arguing that I should sell my condo and move sooner rather than later, since the market is slowing down, esp for big homes (which I plan to go at least double what I paid for my current place).  He's saying my current place probably won't appreciate much compared to what it already has in the next 2 years, either.  So the advantage is for people buying the big places.  

Man, if I accelerate all of this, it becomes a lot more real a lot more quickly.  But then again, I was hoping to have a couple more years to save for a bigger down payment, so I dunno if he's going to convince me... 

From: BigFatty Entered on: January 9, 2007 2:31 PM

If things are slowing down, does he think the market will slide backwards.  Is he saying that the big home market will slow down and not your area?  I don't see the harm in waiting - unless your condo market might go bad.  Isn't your area still up and coming with new condos and crap going in?  It favors you to wait, to save some more cash, but only if you think your condo market and the big suburb market move together.  If the Big House market looks to appreciate faster, then Fregs is right, move now - especially if you see a lot of brand new condos being built in the future.  (A new place is more attractive than an older one) You definately bought right and should have an easy time to sell your place.  The location is sweet.  There will always be a stronger demand for central condos in the bigger cities compared to the burbs - plus your price point attracts more buyers than the expensive burb houses.

Thinking this out some more.... If both markets appreciate at the same percentage, you will stand to make more with the big house because it has twice the value.  But it really comes down to if you are ready to move now and are you comfortable doing so.  At least you can be starting your home search now, so you become somewhat of a market expert.  When that sweet-ass deal comes along that is perfect for you, you will know enough to jump on it quick.

From: Ross Entered on: January 9, 2007 5:48 PM

Right - the bottom line is, unless somehow, magically, I can sell my place for a 50% gain after 4 years (10% gain year on year - not unheard of, but not likely), I'm going to have to wait at least an extra year to build up enough for the down payment I want to have (which will exceed 20% just to be able to make my mortgage payments).  

But I think Fregly's argument is that the condo market will start to flatten out and not appreciate much more in the near term, while the big home market will actually slow more.  So in that case, it seems like it would behoove me to wait, even if all else was equal, right?  He's saying I can get a good deal now on an expensive place, but shouldn't that be the case in the future as well?

From: The Bone Entered on: January 9, 2007 6:02 PM

Who the fuck really knows about these things. I thought real estate was outrageously high in 2000 when I first moved back to Hawaii but prices have gone up 80 percent since then. Even a year and a half ago, I thought for sure that the buble was about to burst and I thought Michelle was taking her chances when she bought her place at $289k - since then the value according to has it at $323K. Trying to figure the correlation between condo prices and house prices is just too fucking hard with respect to whether they'll go up or down or any which way. 


From: Ross Entered on: January 9, 2007 6:55 PM

Yeah, but I think pretty much all economists agree that the housing market as a whole is starting to slow down.  

Still, yeah, thanks for that site - according to that site, my condo value is up 20% after 3 years, comes out to 6% per year.  But the price has remained relatively flat over the past 6 months.  Now I think I know where Fregly is coming from. 

But it still sounds like if more expensive homes grow in appreciation at a slower rate than my condo (in the city, better price point), it can't hurt to wait a bit while I save more.

From: The Bone Entered on: January 9, 2007 8:32 PM
I agree that the housing market is slowing down but thats like saying you were driving 120mph down the freeway and slowed down to 85mph. Still, I really don't think there is too big of a split between condo and house appreciation/depreciation, maybe just a little bit of a lag. You are probably fine to hang on to your place for a while.
From: The Bone Entered on: January 23, 2007 5:08 PM

So I've been searching for a house for the past week and studying the real estate market. Wwat is perplexing is that in Hawaii, it is taking longer to sell houses than the last couple of years but the median price is actually still going up.

At any rate, my top prospect is about $20Gs above my price range considering it has a fucking $229 maintenace/association fee. I'm going to low ball them and see what happens. If I can get the bitch for $530,000 I'm in like Flynn.

From: Ross Entered on: January 23, 2007 9:01 PM
Pretty sweet, Bone!  Looks like a nice pad.
From: The Bone Entered on: January 24, 2007 12:47 AM

So yesterday my realtor asked me if it would be ok if her sister came along because her friend was also moving back to the island and was interested in one of the developments I was looking at. Although it introduced a potential competitor I'm a nice guy so I said sure. Well after a while I began to suspect it was a ruse to set me up with her sister who is actually an attractive lawyer. Well today my realtor kept dropping hints so I played along and she said her sister was interested in going on a date with me. How crazy is that? SHe set me up with her sister. Now either I will get top notch representation at the bargaining table as she wouldn't want to screw a potential family brother in law or this is some marvelous scheme to gain my confidence.

Well tommorrow I think I'm going to go to the bidding table on 2 home. Nothing like buying your first home ever at a cost of just over a half million.

From: Ross Entered on: January 24, 2007 8:16 AM
Only you, man...

From: Jackzilla Entered on: January 24, 2007 8:24 AM
Bone - Ah yes... the old "fuck my sister for a better commission" scheme.  You poor unsuspecting schmuck.
From: BigFatty Entered on: January 24, 2007 1:06 PM
Poor Tony.... Boo Hoo Hoo. I am crying a river.  The lawyer is probably a hot, rich, nympho, bi-curious, and likes threesomes with girls.  How can you live with such a crappy life?  Take away all sharp objects my man!
From: Crockett Entered on: January 24, 2007 4:25 PM

If she looks like her sister, you should be alright:



But you have to question her choice in men if this the realtor's husband:


From: The Bone Entered on: January 26, 2007 11:16 PM

I ended up having a competitor for the house but I won out at $550K. It's still the best deal going in that neighborhood. I saw other houses in the neighborhood that were going from $557 to $600 and this one had better ocean views by far and was on a better lot. Also, the price per square footage was much better than any sold in the last 6 months. So hopefully I can close without any problems. You are all invited to stay.


On a shittier note, I cut the fuck out my hand and required stitches. Loathe is far too soft a word for how I feel about hospitals but I have to use my hand on Tuesday to launch planes so I figured I'd bite the bullit and go to the ER. First thing the nurse did when I checked in was to take my bandage off to assess it. So he started to unwrap it and I warned him that it will probably bleed all over the place. After I told him this he put on gloves and got some guaze on the ready. Sure enough blood everywhere. So he says I'm going to need stitches (like I didn't already fucking know) and he wrapped it up again and told me to wait. Now my bandage job lasted for several hours without so much as a peep of blood.  Within 10 minutes the whole fucking thing was soaked in blood. Then I sat for 5 hours in the waiting room with all types repugnant humans and their filthy diseases. Finally, I told them to scratch me off the list, I'm going to close it up myself with super glue and I walked out. Guess what? Super glue works like a sumbitch. I'm never ever ever setting foot in the ER again. Dying is more convenient.

Remember my motto boys and girls, "splash some water on it and go to bed"

From: The Bone Entered on: February 22, 2007 4:01 PM
Ross - by the way. I was wondering why you would put any more money down on a house considering the relatively low interest rates when you could keep your money in another investment making probably twice the interest rate? That's finance 101.
From: Ross Entered on: February 22, 2007 7:49 PM

Because I want to lower the size of the loan and thus my monthly payments to an affordable level on an expensive house.   If I can currently barely afford the payments on, say, a $650k home by putting down 20% (a 520k loan, putting down 130k), I could afford a $720k home if I had 200k to put down instead.  Of course, this only makes sense if I really want the 720k home instead of the 650k one.  Otherwise, you're right, it would be foolish.  But it may turn out to be the case that I'll want the best one I can afford, and that means putting more money down.

I suppose in this example it would be possible to secure the loan for the 720k place with a 144k down payment, then just make higher payments, taking from the savings that I would have used for the larger down payment, that are theoretically making more money being invested elsewhere.  But I guess I figured that strategy wouldn't fly with a bank giving me a loan, as they tend to be concerned with your monthly income.  I could be wrong.  But even if they did, so what, I'd have 56k invested somewhere, that'd I'd be forced to use to help me pay my bills.  In order to beat a current mortgage interest rate (say 5.7%), I'd need to have it in something that is decidedly not liquid.  Talk about a pain in the ass!  And then what happens after a few years, when that money I'm dipping into runs out?  Then I'm stuck with my higher payments.  Hopefully I'd be able to cover them by then, but that's a big assumption.  

What am I missing?

From: The Bone Entered on: February 22, 2007 10:04 PM

I'm just trying to get different peoples perspective since I'm relatively weak when it comes to high finance. Some people are adamant that you not put any more money down than you have to. 

For me, I chose to put no money down because the bank (Navy Federal Credit Union) would give me up to $680K with no money down, no PMI, no points and a 6.125% interest rate. When I looked at what I could afford monthly payment wise under those terms, it was $550K. I figured this would leave me with enough cash to cover emergencies. Also, the money I would have used for a downpayment is otherwise engaged in mutual funds that have been returning me nearly 20%. The final factor is, I feel pretty good that if every thing goes to hell and I lose the house due to forclosure, I haven't lost all that much because I've stacked very little in the place. 

Now, I definitely see your point that if you want a house that is beyond your means for monthly payments, you would have to throw down a chunk of cash as the bank wouldn't finance your silly little ass. Although, I'm not sure that your monthly income is the whole piece of the lending pie. 

Also, do you plan on keeping the place for very long? Another big part of my decision to go this route is that I'll probably sell in 4 to 5yrs assuming the market has gone up.

From: Ross Entered on: February 23, 2007 2:52 PM

It all depends on your definition of "have to."  If you have to put down more money to make your payments bearable, then you have to.

Yeah, we plan to stay there for the foreseeable future, so I want to get the best I can afford.  

The Navy must be hooking you up if you can (comfortably) afford a loan for $550k on your income alone.  I just go by what the various mortgage calculators like this one claim you can afford, according to "the rules."   

From: The Bone Entered on: February 23, 2007 4:20 PM
Yeah, by those calculators no one could afford a house in Hawaii. But with my base pay, housing alowance, and a cost of living allowance, I can afford it. That's why I rpojected out all my expeses throughout the year via that spreadsheet to make sure I wasn't eating tuna and rice for the rest of my life.
From: Ross Entered on: October 26, 2007 4:44 PM
The Bone said:

Bottom line is I think that property prices will be fine. Right now the media is scaring people. Interest rates are still very low historically. People need to live somewhere.

Just re-read this.  How you feeling about this quote these days, Bone?

From: BigFatty Entered on: October 26, 2007 5:43 PM

Well, they certainly need someplace to live in San Diego.  Good thing Bone didn't buy anything there.  I'll wager that the rebuilt houses will not have the same value as they recently had.   Atlanta is also having some problems..... no water!!!!  The Great Lake states might start looking good to folks if more of this disaster crap happens.

I agree with the Bones point on putting the least down as possible if he is looking at this as a 4-5 year investment. The more he leverages reduces his risk and increases his potential return.  But, I was wondering if his quality of life would suffer with high monthly payments.  Are you eating mac and cheese??  We already know you are eating a lot of tuna.

But I think I am missing something....  Is something going on in the US that I am missing??  Why the revisit Ross?? 

From: Ross Entered on: October 26, 2007 10:15 PM

Hmmm... perhaps the fact that the entire US economy is shivering at the thought of the very real housing slump ?  Or the fact that the impetus for it is the subprime mortgage collapse that will likely precipitate major layoffs at most US banks, including my employer, Bank of America, is looking to cut 3,000 jobs in the investment bank (where I happen to work) any day now? 

Where have you been, Fatty?  You'd think you'd been having babies in Hungary or something! 


From: BigFatty Entered on: October 27, 2007 6:04 AM

Oh... that stuff ;)

Fatty knows about the housing slump....  I still am still the proud homo-ner in GR!  The BoA cuts were on a headline I caught.  Was kinda hoping that was not your area.  But, are you really worried?  If they have to cut your job, you could get moved to another area.  Or even if you get let go... well I am sure you'll get a nice little package and be able to find another sweet job without too much trouble.  It just might not be as cushy as you bank job.  But, of course the unknown and uncertainty is quite shitty.

On another note.... I saw Oracle was buying BEA.  You still have shares in that?  How did you fare with that company?

The housing slump hit one of my Michigan banks really hard - Mackatawa Bank.  It was doing extremely well for 3 years (like most banks) but its share price dropped 60 percent in the past few months.

Its hard to say what is going to happen with this lending fiasco.  Surely the housing market will slow down since mortgages should be harder to get.  Prices will drop in areas that where hit hard.  Appraisals will become more conservative and will be under more scrutiny.  But, I think the popular areas like where you live now, will not be hurt as much.  There is still high demand to live in the big cities.  Bone should be OK too.  Hawaii is a place for the rich.  They don't usually have issues buying premium properties.  Plus, with the falling dollar, it becomes relatively cheap for foreigners to buy a piece of paradise.  But it was wise in your case to have waited to see what shakes out.

From: Jackzilla Entered on: October 27, 2007 8:05 AM
Shit ninja!  With some of the prices houses are going for Ang & I are thinking about increasing our real estate portfolio!  A house in the city of Lowell just sold for $52,000 yesterday!  A couple years ago the lot alone would have sold for 30K.  I'm just not so sure I want to be a land lord (and thus be forced into being a handyman and bill collector).  It might eat into my Gears playing.
From: Ross Entered on: October 27, 2007 8:49 AM

I'm not really all that worried about my job, no.  Regardless of what happens, it will probably work out to my benefit - if I go, well, I need a change anyway, and I've been saying so for a while now.  Like you said, I can find another job pretty quickly.  If I stay, they will still probably devastate my group and I'll be around to pick up the pieces, which will be a pretty big change.  

As for BEA/Oracle - the deal isn't done yet.  There has been talk of this type for years, and BEA is making it clear that they want anyone to pay a pretty hefty premium for the company.  I sold all my BEAS when I bought my condo, so I've got no skin in the game - kind of wish I did, now, though.

Regarding the lending/housing market, it already is quite clearly slowing way down.  My real comment to Bone (which wasn't clear based on my tiny blurb) was that above, everyone's talking about making 6-7% as modest gains year-on-year on their homes.   Even a few months after that conversation, these notions seem absurd, even in Hawaii.  Even the 2% for 3 years that Bone mentions seems unlikely to me at this point, since in most places I'm pretty sure home prices are depreciating.  I'm sure there are pockets of exceptions, and Hawaii could be one of them, but I seriously doubt it - if for no other reason than lending standards are tightening up so much that not many people are going to be buying many of the more expensive places.  

For me, considering I'm going to be buying a place at least twice as expensive as my current one in the next couple of years, the slump is generally a good thing.   I'm sure it will mean some extra stress when trying to sell my current place, but hopefully that will be offset by savings on the future place.

From: Ross Entered on: October 27, 2007 9:25 AM
Jackzilla said:
Shit ninja! With some of the prices houses are going for Ang & I are thinking about increasing our real estate portfolio! A house in the city of Lowell just sold for $52,000 yesterday! A couple years ago the lot alone would have sold for 30K. I'm just not so sure I want to be a land lord (and thus be forced into being a handyman and bill collector). It might eat into my Gears playing.

It's just a question of how long you want to hold onto the property to turn a profit.  I don't think real estate is a particularly wise investment, even in the best of times.  I'd rather stick to equities.  I think for both my parents and my dad's parents, their homes accounted for something like 2% of their entire net worth. 

I've been reading a lot of interesting stuff on this blog - the one lesson that really hits home (feel free to disagree, but at least read the arguments) is that your home is not an investment - and that when inflation is taken into account, over time, there is generally zero net gain. 

Have I stirred up the hornet's nest yet? 

From: Bunky Entered on: October 27, 2007 9:39 AM

I have to disagree with you Ross.... While the housing market pretty much blows everywhere right now, I built my house 3 years ago. I sold the house I had been living in for 7 years, which I purchased during the previous housing slump, and made double the purchase price. It was purchased by someone in the Bay area as an investment.

The housing boom, combined with Jackasses' from LA and the Bay area buying up houses like candy for investments, drove our property values through the roof.  While the escalating costs are unfortunate for first time home owners, it has worked to my advantage.  During the peak of the market, I had $475,000 equity in my house. With current conditions, I still am holding strong at about $350,000, if I sold it on the lower end and pissed off my neighbors. I also put 25% down, so my payment is low, my house is sweet, and my interest rate is locked in at 5%!

So is $350,000 over a 3 year period a good "investment"? Even if you don't make a lot of money on your house, it sure as hell beats throwing away money on rent plus a nice tax write off.


From: Jackzilla Entered on: October 27, 2007 11:21 AM

Yep, gotta go with Bunky on this one, Bert.  But of course, real estate has been my family's business for years (when my dad retired due to his health his company was the 4th largest in the area).  My dad's motto has always been you can't beat investing in real estate -- particularly land.  Only recently would you even question such advice (because of the bad housing market), but generally I gotta agree.

Me?  I've got quite a bit of capital tied up in Pokemon cards.

From: BigFatty Entered on: October 27, 2007 11:48 AM

HAHAHA Ross, you are funny.  I see how you are trying to get another debate going.  Of course you can make the argument that your home is not your best investment.  I will mostly agree to that blanket statement, but of course you know that real estate can be a great investment.  The problem is that most people buy homes to be homes and think that they are then making a good investment.  This is often wrong.  People should buy if they plan to live in the house for 30-plus years and will have the mortgage paid off.  It still doesn't make it a great investment.  There are many factors to consider.  Monthly payments vs. rents - if they are close, then buying is better in this situation.  But other major factors to consider:

The type of housing market you are in - if you are in a 'hot' market then buying can be a good investment.

If you buy a property as an investment because you understand how it can make you more money by being undervalued or through further investment (fixer-upper).  This type of investor is looking at the returns being realized in the short-term (1-3 years)

The amount of time you spend in the house - if you are moving around then you will lose money through the high transaction costs of buying and selling.

The amount of money you need to put into your living expenses verses your income - If you put every available penny into getting as much house as you can, then you are clearly not diversified in your investments - a bad move anyway.  But if you are poor, you are not likely to have extra money for investment anyway, so buying is the better option baring other poor reasons for buying (i.e. short time frame).

Bunky - You lived in a hot market.  If you try to come to GR or Lowell with the same mindset... well, it will take quite a while for Jack's $52,000 house to hit the $400,000 mark to make the same money you made in a few years.  The problem with Hot Markets is, most people don't live in them.  They hear the stories of making all that cash in real estate, but it is only in those markets.

More to say.... but I hate to type.... 


From: BigFatty Entered on: October 27, 2007 11:57 AM

Jack - you missed the agrument.  Your dad made money being a broker and an expert in real estate.  He bought property as an investment for investment purposes, and may have had this mindset when he bought his home.  Most people don't have this expertise.  Plus, it is to your dad's benefit to perpetuate this way of thinking.

Ross is correct for most people, homes are not a great investment.  But that does not mean that homes cannot be good investments.  It is just rare that they.  You have to compare the opportunity costs of investing the money in other investments - most notable, equities.  This is especially true when you see more people not staying in there homes very long.  Their gains get eaten up by the transaction costs.

From: Ross Entered on: October 27, 2007 12:38 PM

Yup, you summed it up for me, Fatty.  Thanks. 

People can and do make money on their homes.  I'm just arguing that making your primary residence your biggest investment is generally not a great idea unless you know what you're doing and you can weather the slumps.  

I also emphatically insist that as a long term investing strategy, stocks beat the ever loving shit out of real estate

From: Ross Entered on: October 27, 2007 12:54 PM
Jackzilla said:

Yep, gotta go with Bunky on this one, Bert. But of course, real estate has been my family's business for years (when my dad retired due to his health his company was the 4th largest in the area).

Right, most of the people who make money in real estate are the brokers/agents, not people who sink most of their money into their home.  

Read the Mommy Millionaire page I posted above - it's got lots of interesting stuff.  I can't argue with stories like Bunky's, but for one thing, anecdotes aren't real evidence of the overall trend, and also stories like hers are less and less likely to be happening these days, which is the entire reason I brought all this up - the times, they are a changin'.  The days of 10% gains year-on-year are over for a while - it was textbook irrational exuberance.  That market was properly called a bubble, and now we are going to be undergoing a correction for at least a couple of years, in all likelihood.

From: Bunky Entered on: October 28, 2007 4:46 PM

I am not going to complain, because I am very lucky.  I spent a lot of time researching what part of town to build in, what features increase the resale value of your home, etc. 

We built before the whole bubble factor, which worked out well. I think the key is knowing when to sell, and knowing when to buy. It wouldn't make sense for me to sell right now, and turn around and spend $750k building the same house. However, after hearing you can buy a house for $52k in Michigan, maybe I should relocate and bank some money!!! I can't imagine your property taxes are as bad as out here!

From: NickNick Entered on: October 29, 2007 1:06 PM
Yeah, I didn't read through this entire subject because I didn't want to get to bitter. Trust me. The housing market sucks and it's gonna get worse. Our mortgage company just tried to tell us that our house was $5k less than when we bought it 5 uears ago. I don't think so. We've tried to sell it for the last two years and there's just not any bites. Bone, You looking to move back to Michigan anytime soon? We got a hell of a house for a player like you.
From: Jackzilla Entered on: October 29, 2007 1:16 PM
House values have dropped, no doubt, Nick Nick.  The Roches made an offer on one of the houses by us, it was accepted by the seller and it didn't appraise high enough for the loan!  It worked out for the Roches -- they ended up getting a better, newer house at a heck of a bargain -- but it sucks for those original sellers.  Imagine being them: They finally had a buyer and still couldn't sell!  (And it's still for sale.)  The only way to really sell something right now is to cut the price drastically unfortunately.
From: Ross Entered on: October 30, 2007 9:29 AM
Just came across this insane graph that shows just how bad a bubble this housing "boom" was. 


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