Comments on: Interview with Patrick Killelea of Patrick.Net: “It’s a fantastic time to be a renter”

By: William

William — Fri, 23 Oct 2009 02:02:02 +0000

Wow, Patrick can very clearly communicate. He has summarized the real situation so even a layman can understand. If I was supreme ruler of the universe I would make every RE Agent give a print out of this interview to any prospective buyers.

We spent this summer in the USA looking for investment opportunities and have come to the same conclusion – the very low end is now a great investment. The best were areas that the banks would not finance so one has to purchased with cash – they were much cheaper and the net return (based on today’s lower rents) was well over 15%. And if one wanted to get near the ’slum lord’ market the returns are near 50%. IF I were the handy man type I would quit my corporate job, move to the USA and get into rentals.
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By: Aron Rotklein

Aron Rotklein — Thu, 22 Oct 2009 21:55:59 +0000

What if you buy a place that has the same mortgage payment as a comparable place would charge for rent. Then you live in the place for ten years. If we see a conservative 3% inflation (and rent increase) per year during that time, then wouldn’t you be able to rent it out for a good amount more than the mortgage (with the low 5% apr that you locked in ten years prior). By continuing to pay off the house with pre-inflation dollars at such a low rate, it seems as though you could really make out over a 40 year period by renting it out…even if we see a 15% slide over the next 3-4 years. Any thoughts?

By: Renter

Renter — Thu, 22 Oct 2009 17:55:30 +0000

The other issue that was not addressed in this interview is the rate of inflation. The more inflation there is, the less burdensome any debt becomes over time. None other than Warren Buffett himself has publicly predicted that inflation will be much higher in the future than it is right now, because of current monetary policy.

If one assumes that inflation will shrink your debts, it may make sense to borrow to buy a house. Rents will tend to go up with inflation, but your fixed rate mortgage payment of course will stay the same. The other factor to remember is that the government understates the true rate of inflation. A five percent rate of inflation over a period of years would really tilt that math in favor of borrowing to buy a house. I am convinced that the unstated goal of our current monetary policy is to inflate until nominal house prices stabilize (even if real prices are falling), and then declare victory.

By: Beau

Beau — Thu, 22 Oct 2009 15:59:05 +0000

The rent vs buy calculator on mortgagecalculator.org lacks some important details. As a renter, I invest the extra dollars every month that would otherwise go to mortgage, interest and home maintenance. As a matter of fact, my down payment (that I never spent) is alive and well appreciated.

Thanks to Patrick.

By: Eric

Eric — Thu, 22 Oct 2009 12:35:01 +0000

Patrick was a rare voice of reason during the height of the bubble when people who should have known better were still pretending or rationalizing the belief that prices would forever stay higher relative to real incomes.

By: Yelena

Yelena — Thu, 22 Oct 2009 06:05:00 +0000

I love Patrick’s web site Housing Bubble and read all parts of it a few times. I am keeping eye on current independent articles represented in his blog. I am engineer and can do my math in order to understand where and how I could and could not be benefited from the buying property. I hate bidding war and truly believe they are created by realtors in order to sell property and get a commission. I absolutely agree that if every bid would be validated by a bank, and published in the papers or in other words would be transparent, it would be much more honest deal to sellers and buyers.

I found Patrick’s web site some time in year 2005. I may say his web site saved our family from losing money in buying property in 2005 on the pick of housing prices.

Thank you, Patrick very much for being honest, professional and not indifferent to people who do not have such knowledge in real estate. Thank you for saving people from bankruptcy, foreclosure and other things that come after buying property with no understanding of what they can afford and what is right thing to do.

Yelena

By: DesiLurker

DesiLurker — Thu, 22 Oct 2009 05:00:09 +0000

great direct answers patrick. Its amazing how little of common sense makes it to the media these days. Just imagine if people like patrick have had more exposure in ‘hay-days’ how much of this catastrophe could have been avoided.

I have been a reader of his blog for sometime and really appreciate him being the independent voice of reason that he is.