housing crash
- Thread starter silk
- Start date
I think you are right to be concerned because I am too. I see a lot of downright blind speculation and these interest only loans are fueling the insanity. It reminds me of Nasdaq 2000 when people in stock chat rooms told me that tech stocks were the new economy and did not go down like old economy stocks, LOL. I am probably early and I got my butt kicked shorting some home builders but this bubble is going to POP just like all the others. That said, our economy will weather the economic consequences just like it has before. Food for thought. MPH
crash will occur when osama drops a nuclear bomb or 2 esp in nyc and/or sf.
Quote from Midas:
I made my living day trading at the height of the stock market bubble and during its meltdown.
Now I make my living "selling picks and shovels" to the new age real estate gold rush participants in Florida. I also build spec homes.
When the real estate market cools I will most likely move to the next frenzy........................I enjoy being where the action is. With a conservative risk management approach I am able to limit the downside when things do turn.
Who knows when the frenzy in over heated cities will end? Will it be in 1 year or 5? I do not know the answer to these questions but one thing I know for sure; when it does I will have alot more money than I did before.
Interesting. What "picks and shovels" are you selling? And what is your risk control method with building homes? IMO it's a bit trickier to cut and run with a half-built development or even an identikit apartment than it is to click "sell" on 1000 shares of YHOO. I agree with the "follow the money" approach, but I'm curious as to how you plan to protect yourself in a downturn.
re:"Interesting. What "picks and shovels" are you selling?"
I started a mortgage company.
Re: How do I limit risk?
On the "picks and shovels" side:
All my brokers are independent contractors so I only pay them when they bring in loans. They work from home and I have a shared conference room that they meet with clients. Overhead is minimal and the profits are very good. We (my wife and I) were profitable in the first 4 months. Things are set up so that when business slows so does our over head.
This is how:
Employees are paid when they bring in business
Credit reports are generated when we have loan prospects
Office supplies are only needed when we have business
Of course rent, power, and utilities are constant bills but we are in a month to month lease.
On the building of spec. homes:
I build homes for the lower end buyer and I use modular construction (similar to frame construction and not to be confused with mobile homes) From the time I purchase a lot to the time construction is completed usually takes only 2 to 3 months since most of the work is done in a plant and shipped in pieces.
With such a short build out I can gauge the market climate and simply stop building when the market cools off. I have only been building one at a time (however I am starting to do 2 at a time). I am only using risk capital that I am comfortable with. When things sour the worst case I rent the properties out (the rental market in this area is good and since I build less expensive homes .75 to 80 cents on the dollar renters will service the debt.)
My niche is lower end affordable housing. It is not glamorous but there is a good profit to be made.
I started a mortgage company.
Re: How do I limit risk?
On the "picks and shovels" side:
All my brokers are independent contractors so I only pay them when they bring in loans. They work from home and I have a shared conference room that they meet with clients. Overhead is minimal and the profits are very good. We (my wife and I) were profitable in the first 4 months. Things are set up so that when business slows so does our over head.
This is how:
Employees are paid when they bring in business
Credit reports are generated when we have loan prospects
Office supplies are only needed when we have business
Of course rent, power, and utilities are constant bills but we are in a month to month lease.
On the building of spec. homes:
I build homes for the lower end buyer and I use modular construction (similar to frame construction and not to be confused with mobile homes) From the time I purchase a lot to the time construction is completed usually takes only 2 to 3 months since most of the work is done in a plant and shipped in pieces.
With such a short build out I can gauge the market climate and simply stop building when the market cools off. I have only been building one at a time (however I am starting to do 2 at a time). I am only using risk capital that I am comfortable with. When things sour the worst case I rent the properties out (the rental market in this area is good and since I build less expensive homes .75 to 80 cents on the dollar renters will service the debt.)
My niche is lower end affordable housing. It is not glamorous but there is a good profit to be made.
Quote from Midas:
I build homes for the lower end buyer and I use modular construction (similar to frame construction and not to be confused with mobile homes) From the time I purchase a lot to the time construction is completed usually takes only 2 to 3 months since most of the work is done in a plant and shipped in pieces.
With such a short build out I can gauge the market climate and simply stop building when the market cools off. I have only been building one at a time (however I am starting to do 2 at a time). I am only using risk capital that I am comfortable with. When things sour the worst case I rent the properties out (the rental market in this area is good and since I build less expensive homes .75 to 80 cents on the dollar renters will service the debt.)
My niche is lower end affordable housing. It is not glamorous but there is a good profit to be made.
Just curious, which states do you operate in?
If you are in the right states, I would like to buy a few houses from you.
Quote from Midas:
re:"Interesting. What "picks and shovels" are you selling?"
I started a mortgage company.
Re: How do I limit risk?
I build less expensive homes .75 to 80 cents on the dollar renters will service the debt.)
My niche is lower end affordable housing. It is not glamorous but there is a good profit to be made.
i operate ethe same way... most of my expenses are variable - i own everything F&C. no one can undercut me in price and produce similar quality - i work outta my home-office, etc, etc and this past year i took off for 3 months - doing Europe this summer - need to hedge USD!
you are wise to the the modular vs. stick bhuilt. less carry, less expensive and faster delivery to buyer..... do you buy raw land and subdivide, or do you buy lots in bulk?
one question for everyone - what kind of median income to median home price ratio do you look for when investing?
good luck midas!
Re:which states do you operate in?
The houses I put up are in south central FL (traditionally a agricultural area) but now it is seeing a great deal of migration from over priced Palm Beach County (over 3000 new homesites are in permitting as we speak). This is what some people call double migration (1st being people moving to FL from the North 2nd being people moving within the state from areas seeing to much growth, congestion, and over priced houses.) I have primarily been doing business in the blue collar towns around Lake Okeechobee but I am looking at the Lake Placid area (in my opinion a hidden secret).
I build and sell on a speculative basis but I am working on setting up a construction company that will allow me to build for other people (which allows them to pull down the construction loan and close in their name further limiting any risk on my part)
The houses I put up are in south central FL (traditionally a agricultural area) but now it is seeing a great deal of migration from over priced Palm Beach County (over 3000 new homesites are in permitting as we speak). This is what some people call double migration (1st being people moving to FL from the North 2nd being people moving within the state from areas seeing to much growth, congestion, and over priced houses.) I have primarily been doing business in the blue collar towns around Lake Okeechobee but I am looking at the Lake Placid area (in my opinion a hidden secret).
I build and sell on a speculative basis but I am working on setting up a construction company that will allow me to build for other people (which allows them to pull down the construction loan and close in their name further limiting any risk on my part)