When is the best time to buy??????????

NEW -> Contingent Buyer Assistance Program
[quote author="columbussquare.com" date=1223035749][quote author="IrvineRenter" date=1222944205]This is going to be very problematic to the local economy and California's economy in general. It took years for us to recover from the bubble of the late 80s. We had the same inefficient allocation of resources, and many people saw most of their high wages going to burdensome house payments due to the insanely high DTIs used. The economy in California from 1991-1996 is what we will see from 2008-2013, perhaps a little worse.</blockquote>


Today I had lunch with another investor. He stated that the current economic environment is, "the worst I've seen in my lifetime" and he predicted that it will take another two years to work itself out. The biggest impact on housing right now is due to deleveraging not a return to value as expressed on this site. Despite all this when asked about the cap rates for apartments he stated that 5.5% is viable. Additionally, when asked if buying a SFR property with 30-yr financing at 5.875% based on a 30% drop from the peak he agreed that this will be a good investment long-term. It might drop in the next 24 months but since there is no guarantee of financing at current levels he would still consider now a buying opportunity. This viewpoint is for both SFR & Residential Income (Apartments)</blockquote>


you had some good points up to here. but now you are loosing me.



real estate hasn't been a great investment in the past (except for some short term flippers), but even in the long run my 1990 property even though i could sell it right now for 3x what i paid for is not a great investment, especially considering taxes and broker fees. i see it as more off "i don't want to have all my eggs in one basket (stock market) )



that property rented out right now gives me about 6-8 % return on my total money invested



real estate especially in todays market should never be looked at an investment, it's a place to live and if the math works out between rental prices and cost of mortgage/taxes/hoa fees then go ahead, but don't plan on making money off it anytime soon, that means at least in the next 10 years
 
[quote author="flmgrip" date=1223068238][quote author="columbussquare.com" date=1223035749][quote author="IrvineRenter" date=1222944205]This is going to be very problematic to the local economy and California's economy in general. It took years for us to recover from the bubble of the late 80s. We had the same inefficient allocation of resources, and many people saw most of their high wages going to burdensome house payments due to the insanely high DTIs used. The economy in California from 1991-1996 is what we will see from 2008-2013, perhaps a little worse.</blockquote>


Today I had lunch with another investor. He stated that the current economic environment is, "the worst I've seen in my lifetime" and he predicted that it will take another two years to work itself out. The biggest impact on housing right now is due to deleveraging not a return to value as expressed on this site. Despite all this when asked about the cap rates for apartments he stated that 5.5% is viable. Additionally, when asked if buying a SFR property with 30-yr financing at 5.875% based on a 30% drop from the peak he agreed that this will be a good investment long-term. It might drop in the next 24 months but since there is no guarantee of financing at current levels he would still consider now a buying opportunity. This viewpoint is for both SFR & Residential Income (Apartments)</blockquote>


you had some good points up to here. but now you are loosing me.



real estate hasn't been a great investment in the past (except for some short term flippers), but even in the long run my 1990 property even though i could sell it right now for 3x what i paid for is not a great investment, especially considering taxes and broker fees. i see it as more off "i don't want to have all my eggs in one basket (stock market) )



that property rented out right now gives me about 6-8 % return on my total money invested



real estate especially in todays market should never be looked at an investment, it's a place to live and if the math works out between rental prices and cost of mortgage/taxes/hoa fees then go ahead, but don't plan on making money off it anytime soon, that means at least in the next 10 years</blockquote>


I agree with you that overall real estate will be dead for a atleast a decade. It will take a few years just for banks to fully recover and after that value of homes will rise enough to keep up with inflation if you are lucky. Nothing more than a flat line for a long time. As far as real estate making money? I also agree. Ever since we can measure rate of return on homes its been a fat zero. Sure there are real estate pockets that you can make a great return, but overall its not. It is simply a luxury item.



Stocks will probably follow the same situation as housing to an extent. They will continue to come down in value and then slowly trickle back up to the value we had a couple years ago where dow was around 13-14K. I am actually anticipating the DOW to be at 14K by 2014-2015. If we have a complete collapse...then add 10 extra years to recover.



If you have cash sitting around, it wouldn't be bad to start forming a shopping list of things you want to buy as you can profit a pretty penny in the next 5-6 years. Unlike housing, stocks will rebound to the levels they were before.



If you took a beating the past couple of years you will simply make back your money by 2014-2015...actually...throw in inflation and you will lose a bit.



However, there are always greater opportunities in emerging industries so keep your eyes open and do your homework.
 
[quote author="Daedalus" date=1223041398]IMO you and your friend are of a special, though perhaps not very unique, breed of "investor". You're making a case to purchase assets which, under the best assumptions of nothing going wrong, will return less than the cost of capital AND which might become cheaper in the next 24 months? I appreciate civil discussions and differing viewpoints, but reading these kinds of posts is difficult to say the least. To me you're completely ignoring basic, sound business principles and are instead relying on hopes for better times years from now to justify today's decisions. Buy now, or be priced out [of lending] forever?</blockquote>


There is a lot of smart money that is buying assets right now. Look at WellsFargo buying Wachovia today for more than CitiBank was going to pay to the FDIC. Or Warren Buffet buying a big chunk of GE. An academic discussion of "what is the bottom" focuses more on being right in the short-term than making money. There are buying opportunities for distressed assets that will not be available when all of the dust settles. Strategically everyone needs to make a decision for the allocation of their assets (if they have any). The underlying position on this board seems to be "equivalent rents are our only asset" therefore a worldview that says "real estate is only worth what equivalent rents can buy" is one that gets a lot of support.



This same investor that you're saying is so "special" has made millions in real estate (and that's not the only asset that he invests in). One example that would have never happened if everyone listened to the advise here is:



An additional 16 units were purchased by adding additional leverage to an existing portfolio of assets in 2003. This was done with no expectation of appreciation and no additional capital outside of a new mortgage or two. It was simply a hedge (<em>against a higher vacancy factor by maintaining the status quo) </em>that had a standard of equal or greater cashflow after the additional cost of capital, management, etc. In this scenario the net income increased $3,000/mo while adding much more stability. By 2005 the lack of other productive assets brought more money into real-estate thereby lowering cap rates and increasing prices. Even though appreciation was not the goal it had occurred (and significantly). The property was sold and all of the gains that were expected from the increased cashflow long-term were realized immediately.



Now is another opportunity to do it again. Smart money can make a profit in any type of cycle. If you buy now and the deal makes sense using models like cap rate and such that investors use (even if it's intended to be a primary residence for you) and the market continues to go down... so what? Your purchase wasn't based on appreciation. But if this is close or near to a bottom then any appreciation that you get will be a bonus.



Despite what most people at IHB say, you can make good investments at prices above what they say are valid.
 
When I say average rate of real estate over a long period of time is ZERO, I don't mean to say that you can't make money.



I meant that if you simply buy and hold, then your success will be inline with the historical average. Whether real estate is 0%, T-bills -1% (i think don't quote me on T-bills) and stock market being 8%. (all inflation adjusted)



The key is positioning and turning your investments when appropriate. Somebody buying a home in 1998 and selling in 2005 is a different position then somebody buying in 1999 and still holding. Not only did one realize their gains, but positioned themselves to capture future gains due to a fall in the market. All I just said is common sense...I'm just clarifying my statement since in a way I implied you can't make money on real estate.
 
[quote author="columbussquare.com" date=1223078061][quote author="Daedalus" date=1223041398]IMO you and your friend are of a special, though perhaps not very unique, breed of "investor". You're making a case to purchase assets which, under the best assumptions of nothing going wrong, will return less than the cost of capital AND which might become cheaper in the next 24 months? I appreciate civil discussions and differing viewpoints, but reading these kinds of posts is difficult to say the least. To me you're completely ignoring basic, sound business principles and are instead relying on hopes for better times years from now to justify today's decisions. Buy now, or be priced out [of lending] forever?</blockquote>


There is a lot of smart money that is buying assets right now. Look at WellsFargo buying Wachovia today for more than CitiBank was going to pay to the FDIC. Or Warren Buffet buying a big chunk of GE. An academic discussion of "what is the bottom" focuses more on being right in the short-term than making money. There are buying opportunities for distressed assets that will not be available when all of the dust settles. Strategically everyone needs to make a decision for the allocation of their assets (if they have any). The underlying position on this board seems to be "equivalent rents are our only asset" therefore a worldview that says "real estate is only worth what equivalent rents can buy" is one that gets a lot of support.</blockquote>


You are starting to "jump the shark" a bit here. Yes, there are people buying distressed assets, and Warren Buffet will be active <em>because he is buying assets below their cashflow value</em>. You are clearly starting to confuse cashflow investment is speculation. Buffet is not speculating. He is buying a cashflowing investment with a preferred return of 10%, plus he is getting upside equity participation. It is a great deal.



Your little quip about "(if they have any)" sounds dismissive and condescending. You have no idea the financial condition of people on this board, but I can assure you it is not populated by many destitute renters with no net worth.



You are making a rather silly "strawman" argument about "equivalent rents are out only asset." I don't know what this means. The idea of real estate being valued at equivalent rents does get a lot of support mainly because that is what real estate is worth. Take away the fantasies of speculative profits, and that is all people would be paying.



[quote author="columbussquare.com" date=1223078061]This same investor that you're saying is so "special" has made millions in real estate (and that's not the only asset that he invests in). One example that would have never happened if everyone listened to the advise here is:



An additional 16 units were purchased by adding additional leverage to an existing portfolio of assets in 2003. This was done with no expectation of appreciation and no additional capital outside of a new mortgage or two. It was simply a hedge (<em>against a higher vacancy factor by maintaining the status quo) </em>that had a standard of equal or greater cashflow after the additional cost of capital, management, etc. In this scenario the net income increased $3,000/mo while adding much more stability. By 2005 the lack of other productive assets brought more money into real-estate thereby lowering cap rates and increasing prices. Even though appreciation was not the goal it had occurred (and significantly). The property was sold and all of the gains that were expected from the increased cashflow long-term were realized immediately. </blockquote>


Your investor has properly managed his debt to increase is cash-on-cash return on his investment. A lot of smart people did this while interest rates were low. This is not against the advice anyone is giving on this board. For this investment to cashflow, he undoubtedly bought the property years ago when cap rates were much higher. You make money in real estate when you buy. When you sell you merely convert it to cash. If you are fortunate enough to sell it during a period of irrational exuberance, you profit more than you hoped. If not, you make your projected rate of return. If you overpay and speculate, you must sell during a period of irrational exuberance to make any money at all.



[quote author="columbussquare.com" date=1223078061]Now is another opportunity to do it again. Smart money can make a profit in any type of cycle. If you buy now and the deal makes sense using models like cap rate and such that investors use (even if it's intended to be a primary residence for you) and the market continues to go down... so what? Your purchase wasn't based on appreciation. But if this is close or near to a bottom then any appreciation that you get will be a bonus.



Despite what most people at IHB say, you can make good investments at prices above what they say are valid.</blockquote>


No you can't make money in real estate in any type of cycle. You can't short residential real estate, so there is no way to profit from the decline. (There are some futures contracts you can play with and other methods). You can speculate in any market, and most often you will get burned.



I don't think you are getting how cap rates work. Cap rates increase during recessions and during periods of rising borrowing costs. Cap rates represent the lowest rate of return an investor will accept on an investment, and this changes over time. Also, current cap rates are only justified by anticipated appreciation. Believing that cap rates justify current prices is as erroneous as believing comparative sales justify current prices.



You can believe current pricing is justified if you wish. I have no doubt you believed 2006 pricing was also justified even though prices have dropped 20%-25% locally. People believe what I write and what others write at the IHB because we have been right. We called the top of the housing market. We outlined why prices were going to crash, and it has been occurring just as we foretold. I made a series of predictions in early 2007 forecasting the decline in prices. My only error so far has been being to conservative. The price crash has been happening as we said it would. Is it any wonder people find the writings here as credible on where pricing will bottom? More credible than those who believed prices would not have dropped in the first place?
 
<blockquote>There is a lot of smart money that is buying assets right now. Look at WellsFargo buying Wachovia today for more than CitiBank was going to pay to the FDIC. Or Warren Buffet buying a big chunk of GE. An academic discussion of "what is the bottom" focuses more on being right in the short-term than making money. There are buying opportunities for distressed assets that will not be available when all of the dust settles. Strategically everyone needs to make a decision for the allocation of their assets (if they have any). The underlying position on this board seems to be "equivalent rents are our only asset" therefore a worldview that says "real estate is only worth what equivalent rents can buy" is one that gets a lot of support.</blockquote>


Umm...Warren Buffet + WellsFargo as you have mentioned are different than the average person last I checked.



Maybe I can walk up to Goldman with 10 grand, and demand I get the option to buy another 10K worth of GS over next 5 years at $115/share and a dividend of 10% just like Buffet did. Come on now be realistic.



<blockquote>Now is another opportunity to do it again. Smart money can make a profit in any type of cycle. If you buy now and the deal makes sense using models like cap rate and such that investors use (even if it's intended to be a primary residence for you) and the market continues to go down... so what? Your purchase wasn't based on appreciation. But if this is close or near to a bottom then any appreciation that you get will be a bonus.</blockquote>


Trillions of dollars were flooded in the market to support the fradulant levels of home prices. The fact that you say buy at or near the bottom to capture appreciation is so far from reality it's not even funny. People lost an unreal amount of cash due to this bubble burst and they will continue to do so. Pople can't just "reload" 500-600K and keep prices inflated. It's over my friend. Over. Real-estate will continue to go down and will re-main flat for a decade after prices stabilize and perhaps only keep up with inflation. The notion of appreciation anytime before a decade is something I wouldn't count on besides keeping up with inflation. And honestly based on our economy, job losses and personal income declines...I would bet it won't even keep up with inflation.



If you need a home and want one so be it. Personally, I'm not afraid of being priced out or afraid of possible appreciation I might miss out on ANYTIME SOON. If prices are declining or <strong>staying flat for a long time</strong>(this is the key for me more so than declining of prices) aren't I better off renting, saving money and allowing my personal income to continue to grow and balance out with the right home/income ratio? I think so.
 
[quote author="no_vaseline" date=1222927234][quote author="irvine_home_owner" date=1222926422] It just seems like a big drop to me and it would seem like taking a brand new house that sold for 1.2 in 2006 to $600k by 2011 will put almost the entire neighborhood of Woodbury underwater. I don't live in Woodbury... but I almost bought there so this has me very curious.</blockquote>


You can see that right now in the Villages of Columbus. They're off 30% right now, and I expect them to go another 30% because it's the worst housing stock in the city.



To answer your question, yes, I wholly expect to see that situaiton you descrbe happen. Which is exactly why I didn't buy during the bubble. I was a nutter then, now everybody just hates my guts.</blockquote>


Since I was in town for the OCtri I picked up some current price sheets on my way back?



Camden R1 $546k down to $449k? that?s 18%

Cambridge lane R5 $484k down to $436k? that?s 10%

Verandas R3 $759k down to $689k? that?s 9%

Meriwether R3 $687 down to $570k? that?s 17%

The Gables R4 $1399k down to $1279k? that?s 10%



That?s an average of 13%



One can argue about incentives given now in comparison to when they first started selling, but generally speaking incentives are not applied to the purchase price anyway? on top of that I don?t have any info about incentives from earlier phases?



Not sure where no_vaseline is getting his 30% from, but I?m sure he?s right be cause he is?.. NO-VASELINE, yeah baby !



Maybe if I get bored visiting my old lady in Irvine I?ll collect some current price sheets around some of the new homes there and see what the drops are ?
 
[quote author="flmgrip" date=1223091419][quote author="no_vaseline" date=1222927234][quote author="irvine_home_owner" date=1222926422] It just seems like a big drop to me and it would seem like taking a brand new house that sold for 1.2 in 2006 to $600k by 2011 will put almost the entire neighborhood of Woodbury underwater. I don't live in Woodbury... but I almost bought there so this has me very curious.</blockquote>


You can see that right now in the Villages of Columbus. They're off 30% right now, and I expect them to go another 30% because it's the worst housing stock in the city.



To answer your question, yes, I wholly expect to see that situaiton you descrbe happen. Which is exactly why I didn't buy during the bubble. I was a nutter then, now everybody just hates my guts.</blockquote>


Since I was in town for the OCtri I picked up some current price sheets on my way back?



Camden R1 $546k down to $449k? that?s 18%

Cambridge lane R5 $484k down to $436k? that?s 10%

Verandas R3 $759k down to $689k? that?s 9%

Meriwether R3 $687 down to $570k? that?s 17%

The Gables R4 $1399k down to $1279k? that?s 10%



That?s an average of 13%



One can argue about incentives given now in comparison to when they first started selling, but generally speaking incentives are not applied to the purchase price anyway? on top of that I don?t have any info about incentives from earlier phases?



Not sure where no_vaseline is getting his 30% from, but I?m sure he?s right be cause he is?.. NO-VASELINE, yeah baby !



Maybe if I get bored visiting my old lady in Irvine I?ll collect some current price sheets around some of the new homes there and see what the drops are ?</blockquote>


Cambridge lane R5 $484k down to $436k? that?s 10%



11/2007: R5 was 436k. so in reality they did not drop the price at all. they raise the price and then dropped it back down to the same price they had it last year. I bet you can get the best deal around mid November. I think they do this with all the new development.
 
[quote author="jbatzmaru" date=1223092145][quote author="flmgrip" date=1223091419][quote author="no_vaseline" date=1222927234][quote author="irvine_home_owner" date=1222926422] It just seems like a big drop to me and it would seem like taking a brand new house that sold for 1.2 in 2006 to $600k by 2011 will put almost the entire neighborhood of Woodbury underwater. I don't live in Woodbury... but I almost bought there so this has me very curious.</blockquote>


You can see that right now in the Villages of Columbus. They're off 30% right now, and I expect them to go another 30% because it's the worst housing stock in the city.



To answer your question, yes, I wholly expect to see that situaiton you descrbe happen. Which is exactly why I didn't buy during the bubble. I was a nutter then, now everybody just hates my guts.</blockquote>


Since I was in town for the OCtri I picked up some current price sheets on my way back?



Camden R1 $546k down to $449k? that?s 18%

Cambridge lane R5 $484k down to $436k? that?s 10%

Verandas R3 $759k down to $689k? that?s 9%

Meriwether R3 $687 down to $570k? that?s 17%

The Gables R4 $1399k down to $1279k? that?s 10%



That?s an average of 13%



One can argue about incentives given now in comparison to when they first started selling, but generally speaking incentives are not applied to the purchase price anyway? on top of that I don?t have any info about incentives from earlier phases?



Not sure where no_vaseline is getting his 30% from, but I?m sure he?s right be cause he is?.. NO-VASELINE, yeah baby !



Maybe if I get bored visiting my old lady in Irvine I?ll collect some current price sheets around some of the new homes there and see what the drops are ?</blockquote>


Cambridge lane R5 $484k down to $436k? that?s 10%



11/2007: R5 was 436k. so in reality they did not drop the price at all. they raise the price and then dropped it back down to the same price they had it last year. I bet you can get the best deal around mid November. I think they do this with all the new development.</blockquote>


The best deal would be not to buy in the $hithole of Columbus Square...
 
[quote author="blackvault" date=1223076494][quote author="flmgrip" date=1223068238][quote author="columbussquare.com" date=1223035749][quote author="IrvineRenter" date=1222944205]This is going to be very problematic to the local economy and California's economy in general. It took years for us to recover from the bubble of the late 80s. We had the same inefficient allocation of resources, and many people saw most of their high wages going to burdensome house payments due to the insanely high DTIs used. The economy in California from 1991-1996 is what we will see from 2008-2013, perhaps a little worse.</blockquote>


Today I had lunch with another investor. He stated that the current economic environment is, "the worst I've seen in my lifetime" and he predicted that it will take another two years to work itself out. The biggest impact on housing right now is due to deleveraging not a return to value as expressed on this site. Despite all this when asked about the cap rates for apartments he stated that 5.5% is viable. Additionally, when asked if buying a SFR property with 30-yr financing at 5.875% based on a 30% drop from the peak he agreed that this will be a good investment long-term. It might drop in the next 24 months but since there is no guarantee of financing at current levels he would still consider now a buying opportunity. This viewpoint is for both SFR & Residential Income (Apartments)</blockquote>


you had some good points up to here. but now you are loosing me.



real estate hasn't been a great investment in the past (except for some short term flippers), but even in the long run my 1990 property even though i could sell it right now for 3x what i paid for is not a great investment, especially considering taxes and broker fees. i see it as more off "i don't want to have all my eggs in one basket (stock market) )



that property rented out right now gives me about 6-8 % return on my total money invested



real estate especially in todays market should never be looked at an investment, it's a place to live and if the math works out between rental prices and cost of mortgage/taxes/hoa fees then go ahead, but don't plan on making money off it anytime soon, that means at least in the next 10 years</blockquote>


I agree with you that overall real estate will be dead for a atleast a decade. It will take a few years just for banks to fully recover and after that value of homes will rise enough to keep up with inflation if you are lucky. Nothing more than a flat line for a long time. As far as real estate making money? I also agree. Ever since we can measure rate of return on homes its been a fat zero. Sure there are real estate pockets that you can make a great return, but overall its not. It is simply a luxury item.



Stocks will probably follow the same situation as housing to an extent. They will continue to come down in value and then slowly trickle back up to the value we had a couple years ago where dow was around 13-14K. I am actually anticipating the DOW to be at 14K by 2014-2015. If we have a complete collapse...then add 10 extra years to recover.



If you have cash sitting around, it wouldn't be bad to start forming a shopping list of things you want to buy as you can profit a pretty penny in the next 5-6 years. Unlike housing, stocks will rebound to the levels they were before.



If you took a beating the past couple of years you will simply make back your money by 2014-2015...actually...throw in inflation and you will lose a bit.



However, there are always greater opportunities in emerging industries so keep your eyes open and do your homework.</blockquote>


Peter Lynch said back in 2001/2002 that it would take the Nasdaq 10 years to get back to the peak and it has been 6-7 years and we are not even near 2/3 of the peak(and that is before the melt down).
 
[quote author="ipoplaya" date=1222861945][quote author="flmgrip" date=1222846209][quote author="no_vaseline" date=1222826419]AMT starts to affect filers at around 75K-100K. What you posted is true, but is moot under AMT which accelerates the phase out consideration.



There are several CPA's and EA's on this forum and none dispute what I've written.</blockquote>
they have better things to do than to argue with you... your opinion is final anyway and is always right... amen



your certainly had one to many of those bong hits... you win... i have better things to do with my time than to keep you fighting on your strong (and partially wrong) believes...



AMT is a very complicated tax and is affected by many things, however mortgages generally speaking are except from the AMT hit. meaning you can write off mortgage interest with and without AMT, however property tax and other things might not be allowed with AMT.



consult your tax advisor...



the end</blockquote>


Actually, AMT is a very simple tax structure. It's that simplicity that pisses everyone off because they have become conditioned to managing the deductibility of many expenses...



Evidently there is AMT relief in the Senate version of the bailout bill. I don't want the bailout, but I sure as heck want my AMT fix for 2008. If there was permanent AMT reform included, I just might have to say yes to the bailout bill!</blockquote>


AMT is a very simple tax structure? Huh? I must be really stupid and work with some other really stupid Enrolled Agents. To a person we will all tell you that AMT is the most complicated, convaluted POS ever coded.
 
[quote author="ipoplaya" date=1222862056][quote author="awgee" date=1222855814][quote author="xsocal land merchant" date=1222854581]Hey No-Vas



Back in your cage.



You are great for getting right to the bottom of issues.



You may want to join the "Straight Talk Express" (IHB style)



How about an update on automotive projects.



Enjoy!!</blockquote>


Hey xsocal, Have you ever seen an Autobianchi Eden Roc?

And there is no way anybody in here can discuss AMT intelligently, including myself.</blockquote>


Shucks awgee, I have been waiting for our resident tax expert to chime in on AMT... I'm quite sure you can discuss it intelligently. No time to be modest.</blockquote>


Ipop - I avoid discussions about AMT like the plague because it just shows how ignorant I am. I absolutely hate it when a client asks me how a certain factor affects their "eligibility" for AMT and by what amount, because the only way I know how to show them is to completely redo their return. The most knowledgable EAs I know do not claim to completely understand AMT, (even though I suspect they do), but they are smart enough to keep their mouths shut and be thought fools than to discuss AMT and remove all doubt.
 
[quote author="no_vaseline" date=1222869336][quote author="awgee" date=1222855814][quote author="xsocal land merchant" date=1222854581]Hey No-Vas



Back in your cage.



You are great for getting right to the bottom of issues.



You may want to join the "Straight Talk Express" (IHB style)



How about an update on automotive projects.



Enjoy!!</blockquote>


Hey xsocal, Have you ever seen an Autobianchi Eden Roc?

And there is no way anybody in here can discuss AMT intelligently, including myself.</blockquote>


Frankly, if somebody was going to park me because I was showing my ass, I figured it would be you. If I deserve to be tossed in front of the bus, lemmie have it.</blockquote>


If I start showing how little you know about AMT, I will end up also showing how little I know. I will tell you that it is my experience that messing with deductions to avoid AMT is a waste of time.
 
Just read this whole thread. Wow! Can't say I understand it all though.

<p>






But, I would like to add my two cents worth. Tax savings for ownership vs. renting are a fallacy. All tax savings are discounted into the price of real estate and into comparable rents. And depreciation is recaptured in the year of sale, even on inherited property.
 
[quote author="awgee" date=1223115681]AMT is a very simple tax structure? Huh? I must be really stupid and work with some other really stupid Enrolled Agents. To a person we will all tell you that AMT is the most complicated, convaluted POS ever coded.</blockquote>


Isn't AMT essentially a flat tax structure with many fewer modifications allowed to derive the taxable base?



I agree that it is quite counter-intuitive with regards to our regular income tax structure, but work with me here for second. Close your eyes and pretend you had never done a tax return before and you needed to do one using AMT as a separate system, i.e. tax preferences don't get added back as these are the by-product of having to compare the two structures, you just have your income, the far fewer deductions and fewer credits that are allowed, and your exemption and potentially exemption phase-out. To me, it would seem to be so much more simple. Less phaseouts to consider, less weird credit eligibility criteria, fewer tests to meet, etc. How is it more complex, when viewed as a separate system, than our traditional structure?



I guess I look at it this way, if our tax system used only the AMT structure, not a two-structure system, I think it would be far easier for Average Joe to do their tax return. There are fewer variables, less flexibility, and fewer choices with AMT. Or maybe another way to consider it, if you were teaching both structures to students in college, separately of course without consideration of the other, which course would have more material to cover? Wouldn't it be the traditional structure?
 
[quote author="ipoplaya" date=1223120652][quote author="awgee" date=1223115681]AMT is a very simple tax structure? Huh? I must be really stupid and work with some other really stupid Enrolled Agents. To a person we will all tell you that AMT is the most complicated, convaluted POS ever coded.</blockquote>


Isn't AMT essentially a flat tax structure with many fewer modifications allowed to derive the taxable base?



I agree that it is quite counter-intuitive with regards to our regular income tax structure, but work with me here for second. Close your eyes and pretend you had never done a tax return before and you needed to do one using AMT as a separate system, i.e. tax preferences don't get added back as these are the by-product of having to compare the two structures, you just have your income, the far fewer deductions and fewer credits that are allowed, and your exemption and potentially exemption phase-out. To me, it would seem to be so much more simple. Less phaseouts to consider, less weird credit eligibility criteria, fewer tests to meet, etc. How is it more complex, when viewed as a separate system, than our traditional structure?



I guess I look at it this way, if our tax system used only the AMT structure, not a two-structure system, I think it would be far easier for Average Joe to do their tax return. There are fewer variables, less flexibility, and fewer choices with AMT. Or maybe another way to consider it, if you were teaching both structures to students in college, separately of course without consideration of the other, which course would have more material to cover? Wouldn't it be the traditional structure?</blockquote>


I am a CPA, but not a tax expert by any means, my professional career started on the audit side of a big 4 firm. My understanding of the AMT is similar to IPO's - i always thought it was simpler tax structure as well with a lot less deductions resulting in higher income taxes. From what i remember on our 2007 return, the difference between the regular tax liability on the return and the AMT method of calculating the tax liability for the year was about $250. Which means that the total interest from the mortgage deduction was completely allowed under the AMT calculation. Our income for 2007 was somewhere in the 240K-250K, so we were in full blown AMT world, our only itemized deductions were mortgage interest, CA taxes, and donations. Apparently all those three are allowed almost equally under both methods since the difference was only $250.
 
[quote author="qwerty" date=1223129461][quote author="ipoplaya" date=1223120652][quote author="awgee" date=1223115681]AMT is a very simple tax structure? Huh? I must be really stupid and work with some other really stupid Enrolled Agents. To a person we will all tell you that AMT is the most complicated, convaluted POS ever coded.</blockquote>


Isn't AMT essentially a flat tax structure with many fewer modifications allowed to derive the taxable base?



I agree that it is quite counter-intuitive with regards to our regular income tax structure, but work with me here for second. Close your eyes and pretend you had never done a tax return before and you needed to do one using AMT as a separate system, i.e. tax preferences don't get added back as these are the by-product of having to compare the two structures, you just have your income, the far fewer deductions and fewer credits that are allowed, and your exemption and potentially exemption phase-out. To me, it would seem to be so much more simple. Less phaseouts to consider, less weird credit eligibility criteria, fewer tests to meet, etc. How is it more complex, when viewed as a separate system, than our traditional structure?



I guess I look at it this way, if our tax system used only the AMT structure, not a two-structure system, I think it would be far easier for Average Joe to do their tax return. There are fewer variables, less flexibility, and fewer choices with AMT. Or maybe another way to consider it, if you were teaching both structures to students in college, separately of course without consideration of the other, which course would have more material to cover? Wouldn't it be the traditional structure?</blockquote>


I am a CPA, but not a tax expert by any means, my professional career started on the audit side of a big 4 firm. My understanding of the AMT is similar to IPO's - i always thought it was simpler tax structure as well with a lot less deductions resulting in higher income taxes. From what i remember on our 2007 return, the difference between the regular tax liability on the return and the AMT method of calculating the tax liability for the year was about $250. Which means that the total interest from the mortgage deduction was completely allowed under the AMT calculation. Our income for 2007 was somewhere in the 240K-250K, so we were in full blown AMT world, our only itemized deductions were mortgage interest, CA taxes, and donations. Apparently all those three are allowed almost equally under both methods since the difference was only $250.</blockquote>
Which firm did you work for? I worked at Pricewaterhouse in the audit department right before they merged with Coopers and left 2 years after the merger right before I was to be promoted to manager.
 
[quote author="usctrojanman29" date=1223129678][quote author="qwerty" date=1223129461][quote author="ipoplaya" date=1223120652][quote author="awgee" date=1223115681]AMT is a very simple tax structure? Huh? I must be really stupid and work with some other really stupid Enrolled Agents. To a person we will all tell you that AMT is the most complicated, convaluted POS ever coded.</blockquote>


Isn't AMT essentially a flat tax structure with many fewer modifications allowed to derive the taxable base?



I agree that it is quite counter-intuitive with regards to our regular income tax structure, but work with me here for second. Close your eyes and pretend you had never done a tax return before and you needed to do one using AMT as a separate system, i.e. tax preferences don't get added back as these are the by-product of having to compare the two structures, you just have your income, the far fewer deductions and fewer credits that are allowed, and your exemption and potentially exemption phase-out. To me, it would seem to be so much more simple. Less phaseouts to consider, less weird credit eligibility criteria, fewer tests to meet, etc. How is it more complex, when viewed as a separate system, than our traditional structure?



I guess I look at it this way, if our tax system used only the AMT structure, not a two-structure system, I think it would be far easier for Average Joe to do their tax return. There are fewer variables, less flexibility, and fewer choices with AMT. Or maybe another way to consider it, if you were teaching both structures to students in college, separately of course without consideration of the other, which course would have more material to cover? Wouldn't it be the traditional structure?</blockquote>


I am a CPA, but not a tax expert by any means, my professional career started on the audit side of a big 4 firm. My understanding of the AMT is similar to IPO's - i always thought it was simpler tax structure as well with a lot less deductions resulting in higher income taxes. From what i remember on our 2007 return, the difference between the regular tax liability on the return and the AMT method of calculating the tax liability for the year was about $250. Which means that the total interest from the mortgage deduction was completely allowed under the AMT calculation. Our income for 2007 was somewhere in the 240K-250K, so we were in full blown AMT world, our only itemized deductions were mortgage interest, CA taxes, and donations. Apparently all those three are allowed almost equally under both methods since the difference was only $250.</blockquote>
Which firm did you work for? I worked at Pricewaterhouse in the audit department right before they merged with Coopers and left 2 years after the merger right before I was to be promoted to manager.</blockquote>


I worked at Ernst & Young, i left as a manager - also an SC alum (better kick some duck ass tomorrow)
 
[quote author="flmgrip" date=1223091419]Since I was in town for the OCtri I picked up some current price sheets on my way back?



Camden R1 $546k down to $449k? that?s 18%

Cambridge lane R5 $484k down to $436k? that?s 10%

Verandas R3 $759k down to $689k? that?s 9%

Meriwether R3 $687 down to $570k? that?s 17%

The Gables R4 $1399k down to $1279k? that?s 10%



That?s an average of 13%



One can argue about incentives given now in comparison to when they first started selling, but generally speaking incentives are not applied to the purchase price anyway? on top of that I don?t have any info about incentives from earlier phases?



Not sure where no_vaseline is getting his 30% from, but I?m sure he?s right be cause he is?.. NO-VASELINE, yeah baby !</blockquote>


It's my guess, but the 30% likely came from me. In Camden, as an example, R1 is not the best one to compare since there are the fewest of those and they tend to either sell out or be in limited supply (thereby increasing the price). Recently they priced it at $443k for the R1. It would be better to use R2 or R3 (do you have those numbers?). When I calculated the 30% off I ignored design incentives because those services are overpriced anyways. But to compare it to existing homes in the area an adjustment needed to be made to account for below-market or special financing options. In Sept they were doing 5.875% Fixed (with a long-term Lock when rates were either 6.25% (early sept) or bouncing around like crazy (late sept)). They were also giving $5,000 for closing costs and a 2-1 buydown (worth about $15,000). In the beginning of Sept they didn't even have the model open for R1. Then some were available when they opened a new phase and they were asking the same price as R2 ($443k). If they're now asking $449k then the price went up between $6,000 - $12,000*



<strong>The point: When financing does impact price and when the financing is great (or even available) it will effect the price people are willing to pay. This is more important with new vs used since generally doesn't include these types of sales methods. </strong>



* Since rates have in general improved since Freddie & Fannie but Lennar/UAMC has not changed the financing offer. I now costs less for their mortgage dept to provide it (i.e. they pay about 1.5 discount points less at closing). IF ANYONE MIGHT BE BUY SOON... WAIT UNITL LATE MONDAY OR TUESDAY. RATES WILL IMPROVE AGAIN ONCE THE APPROVAL OF THE BAILOUT IS PRICED BACK IN. HOWEVER, THIS PRICING MIGHT BE SHORT-TERM (SINCE ANOTHER BALL COULD DROP NEXT WEEK PUSHING UP THE FINANCING COST).
 
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