Galveston Topics: comments on prices

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	Name:	MotorMan -
	Subject:	comments on prices
	Date:	4/6/2007 4:09:14 PM

boataholic -
Subject: comments on prices
Date: 4/6/2007 2:03:36 PM

"Very interesting idea on the 3x and 10x theory........." edited for brevity.

The 3x was no theory. If your house did not make it, you did not qualify for a sellable mortgage. Most lenders sell their "paper" to Freedie Mac or whatever and make about 75 basis points on the deal (0.75%). Other investors then buy these loans and get the interest + principal. Many income tax advantages and disadvantages.

Now the Bank of Dadeville will loan on Lake Martin. They may think a lot is worth $300,000 and the 30 year old house, depreciated, worth 200,000 and loan $400,000. These are what are "In house loans". They cannot be sold to the usual places. But ask them about interest !! Maybe 1.5% above the resale market. They are also a Bank that will make a loan when there is no mortgage. An APC lease is still owned by Southern Company (SO). A good stock pick in my opinion.

Here's the 10x in action. My wife bought a lot at a tax auction for $100 plus back "sewer and water dues" of $1200. She used it for dog sleding. A place to camp or whatever. She is trying to sell it and got an offer of $3000. The buyer wanted to put up a $100,000 house.

Now this would have the height of foolishness. The city of Iron Belt, WI is almost a ghost town. If he needed to sell, or died, the house might have gotten $40,000 for it because there are plenty of houses for $20,000. No work for 20 miles.

He would have murdered the 10x rule of thumb. If he wanted to build a new house, he should have picked the County Seat of nearby Hurley. Plenty of land for $10,000 a lot and it will always be the County Seat.