Urbnlivn - Latest Comments in Leaking acid; I signed what?

Re: Leaking acid; I signed what?

Barboursm — Tue, 22 Jan 2008 12:24:25 -0000

ok, so I don't want to get in the investment debate but really want to comment on the parking...it sucks! I went in to ask about making a change and what the policy was around it, I was told that they were meeting about it and should have a solution in a week, I felt hope. I stopped by a week later and talked with Jim, he didn't know anything about it (not knocking Jim, because he is great) but I was pretty upset I was told they were going to come up with a solution and come to find out it was never even discussed. My spot is so compact that I can't open my door all the way, unless I want to hit my neighbors cars. I can't get my groceries out let alone my laptop bag. If I grow a size bigger I will have to find a parking spot outside of the building as there seems to be no flexibility in change. SO frustrating...just needed to vent!

Re: Leaking acid; I signed what?

mattgoyer — Thu, 10 Jan 2008 14:37:19 -0000

Can we stop debating the definition of the word investment? Thanks.

Re: Leaking acid; I signed what?

Peckhammer — Thu, 10 Jan 2008 14:17:45 -0000

"You think an investment has to pay income _while_ you hold it, thus buying Microsoft in 1986 would not have been buying an investment."

That is not what I think. An asset acquired for the purpose of producing income and/or capital gains is an investment.

"Buying land would also not be an investment in your eyes, since it actually consumes money for property taxes until it is sold or developed."

Land can be an asset acquired for the purpose of producing income and/or capital gains.

"I put 20% of the purchase price down that I had previously invested in the stock market, so Im going to call that 20% an investment.

You can call it your "little friend" for all I care; you are still wrong.

Re: Leaking acid; I signed what?

Eric K — Thu, 10 Jan 2008 12:41:36 -0000

You think an investment has to pay income _while_ you hold it, thus buying Microsoft in 1986 would not have been buying an investment.

Buying land would also not be an investment in your eyes, since it actually consumes money for property taxes until it is sold or developed.

I don't care what you call it. I put 20% of the purchase price down that I had previously invested in the stock market, so I'm going to call that 20% an investment.

Re: Leaking acid; I signed what?

Peckham — Thu, 10 Jan 2008 10:37:56 -0000

" just think its misleading to say that condos are always a terrible investment."

And I think it is wrong to call it an investment at all, unless it is an income property. No accountant on this planet will call your primary residence an investment. It is not. It is an asset that has a historical inflation adjusted appreciation on par with my checking account.

No offense Eric, but you are not absorbing this very well, and you do not appear to be able to calculate the costs of ownership either. This is not unique to you, however, and I don't mean to single you out. You just happen to be the guy talking when I was within earshot. ;)

I love hearing about the great tax "savings" that people get with that interest deduction. LOL! I want in on that card game: for every dollar you give me, I'll give you 27-cents back... and you'll think you are winning.

Re: Leaking acid; I signed what?

Eric K — Thu, 10 Jan 2008 02:31:03 -0000

In my friend's case, he bought in a building that was completed in 2002-3, and the builder paid the homeowners dues through mid 2004. Interest rates were very low in the winter of 2002-2003, which was the depths of the last bear market, and he had a 3 year fixed rate mortgage at some ridiculously low interest rate. You're right, though, that the calculation is more complicated. In his case, the cost of renting a new construction apartment was comparable to the monthly cost of his mortgage, property taxes, and (when he had to pay it) condo dues.

I don't believe that "real estate always goes up" or that it is a surefire investment. There are times when it is better to hold hard assets like real estate, and their are times when it is better to hold cash and rent. It's also true that larger condos (above 1,000 sq) have historically underperformed small condos, since the pool of buyers is smaller while the supply of large downtown condos is oddly larger. (This is even more true of the new buildings -- 1521 2nd ave is all 1650sq and up).

I just think it's misleading to say that condos are always a terrible investment. I wouldn't buy for a year or two, but at that time I think condos will make a great investment.

Re: Leaking acid; I signed what?

Mark W — Wed, 09 Jan 2008 22:53:55 -0000

Eric writes
... That still leaves a gain of 103k ...
What is his % return on that period? Most people would say 41%, since 103/250 = 41%. However, he didnt buy the place with cash he only put 20% down, or $50k. So his actual return is 103/50 = 206%. ....

Although I agree that the return shouldn't be based on purchase price, basing it only on the down payment isn't right, either. After all, he also had approx 44 months of payments, taxes and HOA dues (with payment interest and taxes partially offset by tax deductions). And there's also lost opportunity cost from not investing the down payment and subsequent payments money in something else instead. The 206% return ignores all of that.

(I effectively lost money on a house I sold in Ohio in 2002 after 7+ years of ownership, and "is Seattle housing experiencing a price bubble" headlines appeared with some regularity after I arrived here in 2002, so I'm gunshy rather than anti-condo, a newbie who figures a condo is in my future at some point.)

Re: Leaking acid; I signed what?

Peckhammer — Tue, 08 Jan 2008 15:47:44 -0000

"It sounds like you believe people should always rent. Is that really true?

When the cost of buying, in financial terms, is in step with well-established fundamentals, I believe buying is a good choice. There will always be a cost for housing, renting or buying.

There are other reasons for buying. Psychological satisfaction is one of them, for example. I accept that argument so long as it isn't justified with talk of "investment strategies" and other such hoo ha.

Re: Leaking acid; I signed what?

Eric K — Tue, 08 Jan 2008 14:29:21 -0000

So are you saving that rents don't increase with inflation? I could have used the unit below mine, whose rent increased 30% since I bought my unit in 2003. If you don't believe that inflation exists, then there's no point hedging it by owning a home with a fixed interest rate.

It sounds like you believe people should always rent. Is that really true?

I left off principal in the inital sum because because
1) by reducing the balance of the loan, it is a form of savings that has no equivalent in renting
2) I didn't include the tax deduction yet. Once the tax deduction is included, the total number of pretax dollars that I must allocate to principle, interest, taxes, and condo dues is the same as my downstairs neighboor who rents, yet I get the savings from paying down the principal and she doesn't.

Re: Leaking acid; I signed what?

nitsuj — Tue, 08 Jan 2008 13:36:17 -0000

ACK!!! stripped it out again. stereotype in brackets on both ends of that comment, good lord i fail at the innernets

Re: Leaking acid; I signed what?

nitsuj — Tue, 08 Jan 2008 13:35:45 -0000

oops, my "" and "" didn't come thru before the BR shopping comment. guess the blog strips out potential html commenting??

Re: Leaking acid; I signed what?

nitsuj — Tue, 08 Jan 2008 13:32:46 -0000

FWIW I actually enjoy (to a point) what Peckham and others add. Living in the Bay area I've seen too much of the "BR shopping, BMW driving, condo owning overleveraged metro with a smugness that comes from 'owning'", who think they are financial geniuses because they bought a place and never thought twice to renting an equivalent place for a fraction of the cost while investing the rest of the money (granted, most people just seem to up their consumption rather than invest). I think it's good to get that other viewpoint in here as it may cause others to think for a minute, but I do understand how it (negatively at times) changes the dynamic you probably expected when starting your blog.

Re: his last comment, interest only loan, thus nothing going towards principal?

Re: Leaking acid; I signed what?

Peckham — Tue, 08 Jan 2008 11:48:54 -0000

"My mortgage interest (~800) + taxes (~200) + HODs (~300) equals what my downstairs neighbor pays to rent her unit (1,300)."

I notice that you have conveniently left off mortgage principal in your calcualtion. When do they teach children to count, or don't they do that anymore?

Re: Leaking acid; I signed what?

Peckham — Tue, 08 Jan 2008 11:36:19 -0000

" I too am puzzled why the bears and anti-condo folks spend so much time here."

To offer balance to an otherwise lopsided representation of condo living and the real estate market.

IOW, we round-earth peeps can't let you flat earth folks go unchecked.

Re: Leaking acid; I signed what?

Peckham — Tue, 08 Jan 2008 10:46:48 -0000

"The 12% increase in rent is from Scott + Dupre, who have been tracking apartment rents for decades,and they look at a broad sample or properties.

Your statement is either disingenuous, or you don't understand how flawed your data source is in this context.

The Dupre + Scott report polls only apartment complexes of 20 units or more; it does not account for apartments of 19 units or less, rentals created by condo, or SFH rentals.

Re: Leaking acid; I signed what?

Eric K — Tue, 08 Jan 2008 01:48:42 -0000

Mark W - while I'm sure you did fine by renting, if you could have bought in 2003 you could done well buying something because the return on your down payment is what matters, not the % increase in the condo itself.

As an example, I'll use a friend of mine who bought a new construction condo in Belltown for $250k in Jan 2003. He sold it in Sept 2006 for $384k, and made no improvements to it. I do understand how much it costs to sell real estate (6% for a traditional brokerage, which you deserve to pay for not chosing Redfin!, plus about 2% in closing costs and excise tax), so let's say he grossed 92% of that, or 353. That still leaves a gain of 103k, and there weren't any special assessments during that time. (No, I don't work for Redfin - I just think that traditional agents charge too much and I really admire Redfin for taking on such an entrenched industry.)

What is his % return on that period? Most people would say 41%, since 103/250 = 41%. However, he didn't buy the place with cash -- he only put 20% down, or $50k. So his actual return is 103/50 = 206%.

Of course, leverage can cut both ways -- if your properly declines in value and you can't wait it out, the leverage can wipe you out. (That's why I was shorting the financials...) So you have to be very careful what price you pay.

Real estate is like any asset class -- it can be a good investment if your timing and holding period is appropriate. Saying that "buying a condominium is about the stupidest purchase a person could make" is like saying that stocks are a horrible investment because the S&P500 is now below where it was at the end of 1999 (with a divided yield less than inflation).

Re: Leaking acid; I signed what?

Eric K — Tue, 08 Jan 2008 00:38:55 -0000

I hope your car's paint wasn't damaged. I agree that Trace handled this poorly. Most businesses don't understand the power of blog communities yet. The web company where I work has been threatened with lawsuits many times by one company whose service is reviewed on our site. Trace obviously doesn't realize how important it is to be proactive to a current owner who's blog is the 3rd result in Google for Trace Lofts Seattle. Just think, if they had told everyone to park under the Trace Lofts portion, no future prospective owner would associate Trace with leaking acid. While water seeps are very normal for a construction zone, they could have at least asked you to park under Trace Lofts as soon as the leak started. The cover-up is always the biggest problem from a PR perspective.

Yeah, I don't think prices will crash -- there is too little new supply in Seattle (especially compared to Miami and Las Vegas, and especially in the ~500k segment). I do hope that some of the units that are currently asking close to $1,000/sq foot will drop 25%, but I think the average price per sq ft will remain over $500 for downtown condos because of the significant increase in construction costs since 2002.

Personally, I'm curious how many of the new proposed buildings will actually be built in this cycle, especially with the freeze in the credit markets. I would be surprised if AVA and the twin 40 story Weber-Thompson towers on 2nd are built within the next 5 years. Emporis has a section on proposed buildings:
http://www.emporis.com/en/wm/ci/bu/sk/li/?id=10...

It's interesting to see that some of the current projects (Olive8, 1 Hotel + Residences) were actually proposed back around 2000, but were shelved for 5 years.

Re: Leaking acid; I signed what?

Mark W — Tue, 08 Jan 2008 00:36:57 -0000

Re Eric's 12% rent increase figure - thanks for posting the source, as it notes that over 6 years it's averaged less than 3% - that's close to my experience renting in a newer downtown highrise for the last 6 years, even when I include the free month's rent I got my first year. Of course I do expect to see bigger increases the next year or two courtesy the conversions.

As for Eric vs Peckhammer - feel free to debate the investment pros & cons of my example :-) (2 bdrm, 2 bath, 1050 sq ft, downtown highrise apt w/nice amenities at $1995 rent vs. a comparable downtown highrise condo, and money not tied up in my home brings in just over 6% a year over the years.)

Re: Leaking acid; I signed what?

mattgoyer — Mon, 07 Jan 2008 23:49:51 -0000

Eric, thankfully they now have.

And I too am puzzled why the bears and anti-condo folks spend so much time here. It's as if they keep expect me to write about my own condo implosion or are waiting to hear what we have to say when the condo market drops 50% YOY. Both scenarios are of course highly unlikely :).

Re: Leaking acid; I signed what?

Eric K — Mon, 07 Jan 2008 23:34:25 -0000

The 12% increase in rent is from Scott + Dupre, who have been tracking apartment rents for decades, and they look at a broad sample or properties, which is why their average rent is only $1,169:
http://seattletimes.nwsource.com/cgi-bin/PrintS...

My mortgage interest (~800) + taxes (~200) + HODs (~300) equals what my downstairs neighbor pays to rent her unit (1,300). However, the mortgage interest and taxes are tax-deductible, and even when you deduct the writeoff I would otherwise get by using the standard deduction, it still lowers my taxes by $170/month. So I save $170/month by owning, which incidentally is the amount of principal that I pay down each month on my 30 year fixed mortgage.

So, for the amount of pretax dollars that I would otherwise need to allocate to rent, Im paying off a condo that I will own free and clear in 26 years. That seems like a good investment to me.
While the condo probably wont appreciate over the next year, I can always console myself with the 51% that I made last year shorting financial stocks and periodically buying ETFs.

So Im hardly a permabull. I just think its silly to say that condos are never a good investment. I do think current prices for new condos are inflated, which is why I wont trade up to another condo until 2010 at the soonest. When I do sell my condo in 2012 (most likely to my mother, who wants to trade down from her house), the capital gains will all be tax-free.

Peckham, you still havent explained why youre spending time on urbnlivn if you think condos are such bad investments How much schadenfreude do you really get by reading about leaky parking garages?

Matt - will they let you park under the Trace Lofts portion? They should have offered to let you park their sooner, of course...

Re: Leaking acid; I signed what?

EconE — Mon, 07 Jan 2008 17:00:26 -0000

You don't "invest" in gold et al...you speculate in it...just like people did with condos as of recent. That is why there are so many people that are gonna get Sker-ooood!

Re: Leaking acid; I signed what?

mattgoyer — Mon, 07 Jan 2008 14:51:27 -0000

The other thing that really bugs me about this email from Trace is that it wasn't signed by someone associated with the development. Its as if they don't want to take responsibility for what's occurred.

Re: Leaking acid; I signed what?

Peckhammer — Mon, 07 Jan 2008 14:04:21 -0000

"An investment need not generate income; it could appreciate (capital gain)."

A capital gain is considered income. That is why the IRS taxes capital gains.

Re: Leaking acid; I signed what?

Ross — Mon, 07 Jan 2008 13:03:03 -0000

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An investment need not generate income; it could appreciate (capital gain). i.e. gold, diamonds, stocks which don't pay dividends, etc. can all be considered investments.

Re: Leaking acid; I signed what?

Dan C. — Mon, 07 Jan 2008 11:55:15 -0000

Peckham,

I fully agree with you, although discussing residential real estate's value as an "investment" has almost become as taboo as talking about religion or politics at a party. This arguement is not worth starting...