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Clothing and the rich

Discussion in 'Classic Menswear' started by esquire., Feb 2, 2005.

  1. drizzt3117

    drizzt3117 Senior member

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    Ouch, $125k for a 900 sq/ft 2 bdrm condo? I just paid $415k for one here in the Newport Beach area, and am going to flip it for a nice profit fairly soon... my buddy paid $285k for a 1100 sq/ft 2/3 condo in Irvine and flipped it for more than $485k in 18 months. Not quite SF or NYC prices, but still damn expensive for suburbia.
     
  2. whnay.

    whnay. Senior member Dubiously Honored

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    Most VC's along with IBanks on Wall Street, in Charlotte, and SF love the idea that they hold the cards in the deal game. But unfortunately, in today's market, its simply not the case. You could be Joe's Clown shop and get a deal done today, heck you could be 8x levered and get BBB pricing if you wanted. The I-bankers (myself included), VC's, et al are the whores at the moment, stubbling over each other as we chase deals that don't make sense. The Private Equity guys I deal with on a daily basis complain all the time about the lack of traction they have at the moment, the clients are pushing the envelope these days. Its 1998-1999 all over again. Most VC's and Ibanks won't fuss because they sell off most of there exposure early and feast on the fees, but lots of investors and mutual funds will get hit hard. I'm hopeful this won't happen but lets just say that I'm looking a lot harder at real estate investments than I ever thought I would.
     
  3. esquire.

    esquire. Senior member

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    Dz,

    If you're really interested in real estate and don't think we're in a housing bubble, I found a condomenium in Newport Beach about a month ago that you could scoop up for a really good deal. Its about 2 or 3 bedrooms, and has ocean view. The owners are trying to sell it themselves, and have done a really poor job. They haven't painted the walls, replaced the carpets, or even put out colored brochures. When I saw it, they had already slashed the price two times and it was pretty obvious they were desperate to sell. I think they already bought something else. You could probably still knock off at least another 20-30 at least.
     
  4. drizzt3117

    drizzt3117 Senior member

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    Hmm, interesting, newport though? unless it's very inland and bordering on costa mesa, i'd imagine it'd still be fairly pricey?
     
  5. esquire.

    esquire. Senior member

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    Yeah, even at 'bargain' price, it was still around 700 I think. If you were to sell a similar piece, it would definitely be more expensive. Because the owners were trying to sell it themselves, I don't think they were able to spread the word out very effectively.

    But, the location's great. Its on PCH, got an ocean view, and is probably less than half a mile from the water?
     
  6. drizzt3117

    drizzt3117 Senior member

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    That doesn't sound too bad, however, I don't do many real estate purchases where rental payments from the property in question won't cover (or mostly cover) my payments, unlike many speculators in the Irvine area, which doesn't make much sense to me. You need to have a huge increase in the housing price to make money once you take closing costs, capital gains, and interest into account.
     
  7. globetrotter

    globetrotter Senior member

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    (globetrotter @ Feb. 02 2005,19:45) I read an article with john travolta serval years ago that made an impression on me. he said that he was a millionaire who lived like a bilionaire - not by wasting money but by making due on cheaper things, say, the less flashy luxury stuff.
    john travolta makes due with cheaper things? Â have you seen him on mtv cribs? Â he shows his extensive luxury car collection and his multi-million dollar G4 private jet that has more amenities in it than your home. Â i really doubt his eating peanut butter and jelly sandwiches to save up for the vehicles.
    actually, as strange as it may sound, yes. for instance, he said (in this article) that he bought used planes and cars, didn't have many cars, didn't waste money on ultra premium consumables - sounded reasonable. I am very far from his league, but I am also not going back to buying clothes at thrift shops. I think the idea of being able to live well without wasting money, however it is done, seems to be an ideal to aim for.
     
  8. esquire.

    esquire. Senior member

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    What??.. I just read this, and this doesn't pass the smell test. So, he's saying that even with white flight from the city, that housing prices didn't drop? Or, that the prices in NYC in the 70s didn't drop when the whole city verged on bankruptcy or that the prices in Detroit weren't affected by the trobules of the american autobile industry??
     
  9. Concordia

    Concordia Senior member Dubiously Honored

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    As recently as the early 90s, housing prices dropped in the Boston-New York corridor. And they didn't have to drop a lot to spread a lot of pain.
     
  10. linux_pro

    linux_pro Senior member

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    esquire -

    The point he was making with us was more along the lines that over a period of time, urban housing markets will always increase in value.

    My father picked up his condo in the Upper Westside sometime in the mid-to-late 70's, I believe. It probably would have been around 76-78 because I vaguely remember us first moving in there. Anyway, he bought at around $250k, I think. The value of the unit now is obviously quite higher than that, probably closer to $1m - $1.25m. He was friends with the developers involved in that project so he may have gotten a better deal than average, but still, the overall point remains valid that the value of the property has increased.

    As with any investment, it is impossible to make a sensible decision without very thorough research. Those who might have bought properties in the Detroit region during its decline would have done well to consider their investment beforehand, and probably would have been able to avoid losses. There are still many strong markets, obviously, it's just a matter of finding them.
     
  11. Horace

    Horace Senior member

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    I think this is a reasonable and worthy aim.
     
  12. esquire.

    esquire. Senior member

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    linux pro:

    Then why did you state it differently, that in 40 years, there have never been any drop in urban real estate values in every urban market. The way I read your original statement, you were saying that every year, the value would go up with no downturn or corrections.

    I could probably say the same blanket statement about the home prices in the suburbs as well. Most things have increased in price due to inflation. What's so special about urban real estate vs. real estate in the suburbs?

    In fact, I'd question the whole 40 year timespan for urban real estate. Maybe your gf's father can correct me, but it seems that during this time, urban property hasn't been very popular at all. Its only been in the last ten years that you've seen this renaissance in urban living, where people wanted to move into the city.

    And, like I said earlier, housing is a good investment if you can keep it for a long time to weather any volatility in the housing market. But, keep this in mind, stocks have been historically a good investment. But, during the 70s, they were mainly flat. How long are you really willing to tie up your capital in something as illiquid as housing?
     
  13. drizzt3117

    drizzt3117 Senior member

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    Remember, urban housing prices have gone up in flagship markets in the last 10 years, but that's not necessarily true of many urban areas, especially midsized cities in the Midwest and Deep South...

    esquire,

    typically you wouldn't be tying up much capital. This is the typical real estate investment that I would make.

    Purchase condo (or duplex, etc...) for, let's say $250k (this may be in Long Beach, Tustin, HB, etc...1000 sq/ft, 2 bdrm, 2 bath) Let's say we're putting 15% down, or about $40k, and we're not paying any agency fees or the like. Total including closing costs, we're in for about $45k. The condo will rent for about $1500, give or take. Let's just assume that we're able to get a decent rate, somewhere around 4.5% which will yield a payment of approximately $1350. Management/upkeep fee for the condo is approximately 10% (on the high side, but let's just say) so basically this is a revenue neutral investment. You are only on the hook for about 1% of assessed value per year, but in California (with Prop 13) this is going to be $2500/yr regardless of the value going forward. Let's assume that you're getting 7% appreciation per year (which is very low for this area, but we'll consider a long term situation) Given these parameters, you're looking at a capital appreciation per year of $17500, on an initial investment of $45k, less the $2500 that you pay in property taxes, and you're building equity that can be used for future borrowing. In this type of situation, you are not tying up capital, rather, you're increasing your equity, while having someone else pay your mortgage. This is of course extremely simplified for the purposes of this discussion, but you should be able to see my point, that if you can find an easy to rent property, you should do fairly well.
     
  14. linux_pro

    linux_pro Senior member

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    I lost a sizeable chunk of capital in securities in the late 90's. And that was with an extremely diverse portfolio, 40% of which was in mutual funds like Vanguard and American (my faves), and a bit in indexes, and the securities were spread pretty even across about 8 different industries. Of course, I can't really complain, the boom was MUCH better than the crash, and did things for my capital which would have taken dozens of years otherwise (thank you Redhat and VA Linux...). Point is, you can definitely lose money in securities, I guess. I've seen it happen to a few people, although I think they were being completely stupid, trying to day-trade and all that.

    I don't think it would be wise for a newbie, like myself, to invest in real estate with the mindset of trying to recover gains over an extremely short period like a year or two. I just don't know enough about real estate to try that yet. And that's not really the point of real estate for most investors, anyway. You're much better off playing commodities, futures, forex, even bonds or CDs, if you're just looking for short-term gains and liquidity.

    My initial goal will be to drop about 50-75% of my current capital into real estate in order to further diversify, add some stability to my capital. The point of investing in real estate, for me, is the equity, and I'm looking at it as a sort of "hedge" for some extremely aggressive investing I am doing with about 10-15% of the remaining capital (forex, futures, and private investment). I have also been talking extensively with my tax guy about methods of using real estate as a way to reinvest some capital gains income, and reduce the associated tax burden. He has shown me some very good things there. Basically, if we can even see 0.5% annual growth over 5-6 years, I would be happy. I'm just investigating still... at the learning stage.


    Anyway... yeah, I think he was trying to tell me that over a short-term period, say 3-5 years, urban properties have not declined in value over the last 40 years.
     
  15. linux_pro

    linux_pro Senior member

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    drizz - I've got a question about your numbers. I've been told that commercial investors are required, generally, to have 25-50% down in order to secure financing. My bank told me they would not finance commercial properties (such as multi-unit rentals) without 50% down. Have you experienced this? Are you financing through banks, or you using an MMA or the like? If I could get into some properties at $50k a pop, that would be sweet. I'm coming to LA in March. Let's have a drink. I would love to discuss it all with you a bit further, pick your brain a bit if that's kosher, and the dinner would be on me (no holds barred, I'm not cheap when it comes to a good steak and lobster). [​IMG]
     
  16. drizzt3117

    drizzt3117 Senior member

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    Commercial loans in Cali are > 4 units. I'm not sure what the statute is in WA, but generally a single or 2 unit is going to be a personal loan... Depending on your credit, commerical (non-construction) loans are normally 20% down, but can be higher depending on certain factors (such as the property in question)
     
  17. esquire.

    esquire. Senior member

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    Maybe, its really late and I'm just tired, but this statement doesn't make any sense at all, even if you were to thin slice the time period. Housing prices go up, and they go down. Are you sure he's not trying to drum up business for himself here?

    And, I wouldn't call investing all your money into different stocks in different industries really diversification, if that's what you were trying to do.

    Look at what happened to LTCM. They leveraged themselves as much as they could, but tried to hedge their arbritrage trades by going into different foreign markets, etc... In the end, when the Russians defaulted on their loans, all of LTCM's trades went down regardless of how much they thought they had diversified. They got wiped out.
     

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