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Taking Out Equity Now?
Free Republic ^ | 2/28/11 | self

Posted on 02/28/2011 10:58:00 AM PST by STD

Dear FReepers,

I'm looking for advice about taking the equity out of my vacation home. As I watch real estate plummet, is it time to cash out of that house while I can still get value out? After applying for a home mortgage; 30 years at 4.3% they are willing to give me 650K. Taking that money and putting it into commodities, I think I can grow my out of this economy. What do the rest of you guys think about this idea? I would also appreciate advice on where to invest this 650K? Thank You FReepers, my valuble brain trust

(Excerpt) Read more at freerepublic.com ...


TOPICS: Society
KEYWORDS: finance; help; money; vanity
Thank you all in advance!
1 posted on 02/28/2011 10:58:04 AM PST by STD
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To: STD
is it time to cash out of that house while I can still get value out?

Huh? Where is your house...Fifth Avenue?

2 posted on 02/28/2011 11:00:12 AM PST by SonOfDarkSkies ('And what rough beast, its hour come round at last, slouches towards Bethlehem to be born?' Yeats)
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To: STD

why not!
its only moeny
maybe you can get a bailout if it fails

(siver and copper look good)


3 posted on 02/28/2011 11:00:19 AM PST by Mr. K (Job #1 is to DEFUND THE LEFT~!!!!)
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To: STD

Do you rent out your vacation home, and if so, what kind of ROI do you get? If it is anything over 4% YOY(year over year) in this market, that is good money and as safe as one can get right now.


4 posted on 02/28/2011 11:02:32 AM PST by Fred (Suspend All Immigration Until Unemployment is Reduced to 5%)
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To: STD

take the cash, but sit on it for a few months till this mkt sorts itself out.

“investing” in commodities on borrowed money doesnt sound prudent to me.

Remember what commodities did in 2009...they can go down.


5 posted on 02/28/2011 11:02:58 AM PST by Former MSM Viewer
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To: STD
Depends on your individual time line and circumstances. The old adage "Buy low, sell high" penalizes you when you buy high and sell low.

I myself, sold some assets even though I knew i would take a loss because I was nowhere near prepared for a total economic collapse-I put that at about a 2-5% chance of happening. Did I take a loss? Yes. Did I mind? Nope. I'll be fat, warm, and well protected for a good 6 months.

6 posted on 02/28/2011 11:03:05 AM PST by MattinNJ (Will a hero rise in 2012? Yes. Col. Allen West was here all along.)
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To: STD

Do you really think that commodities are going to continue to rise if everything else falls to pieces?

I sure hope that your vacation home isn’t on Long Island. But thinking of Long Island, that could be an investment opportunity for someone, setting up a holding company that holds the deeds to big vacation properties for out of state owners so that they can escape the New York state income tax.


7 posted on 02/28/2011 11:03:26 AM PST by Eva
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To: STD

If your job is at risk, you might survive renting your primary residence and living in your vacation residence. Or vice versa.


8 posted on 02/28/2011 11:06:28 AM PST by marron
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To: STD

I think you should take $375K of your money and buy my vacation house. LOL


9 posted on 02/28/2011 11:06:39 AM PST by Tuscaloosa Goldfinch ( T.G., global warming denier.)
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To: STD

Where is the home? Do you still plan to use it? What is the rental income potential? What’s the balance you owe? How far into the loan are you? What would the sales costs be in commissions, repairs, etc? Do you need the money right now? What are comparable sales vs your original costs?

Personally, I believe the best time to buy anything is when its price is depressed and that ain’t the stock market right now. You’d be buying at a peak, not a trough.

No market stays depressed forever. If it isn’t costing you too much to keep it, maybe hanging on to it would have a better upside potential.

If you make money on the sale you’ll face capital gains since it isn’t your primary residence so that will be on top of real estate commissions, surveys, repairs etc.


10 posted on 02/28/2011 11:07:21 AM PST by Repulican Donkey
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To: STD

Unless you have figured out the Nostradamus code and can predict the future, borrowing money to invest in “commodities” - with high commissions going in and coming back out - seems very foolish

Read Harry Dent’s book “The Great Depression Ahead” and watch his videos. He makes a strong case for demography being destiny, even with natural and manmade disasters aside

Investing in being self-sufficient and insulated from social upheaval would be my choice, whatever it takes


11 posted on 02/28/2011 11:10:21 AM PST by silverleaf (All that is necessary for evil to succeed, is that good men do nothing)
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To: STD
I think I would take the equity now. But I'd be careful of what I was investing in.

I think real estate prices will stabilize in the next couple of years. Partly because a lot of foreclosures will have been taken care of and partly because we've been under-building nationwide for the past couple of years. Demand should drive prices higher.

12 posted on 02/28/2011 11:11:17 AM PST by youngidiot (Don't let the name fool ya, toots.)
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To: STD

Unless you know what you are doing in commodities or even commodity ETFs the answer is no.


13 posted on 02/28/2011 11:12:34 AM PST by Frantzie (HD TV - Total Brain-washing now in High Def. 3-D Coming soon)
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To: STD

Do you have experience trading commodities? If not stay the hell away from that market, it’s not for beginners. Not everyone can be like Hillary C. and turn a $1000 investment into $100,000 on cattle futures. Most people get their butts handed to them.


14 posted on 02/28/2011 11:12:38 AM PST by jjr153 (Never Forget 9/11)
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To: STD

One more thought. Commodities are where the big boys play and they have a bunch more money to burn than most of us. Remember, the last time oil went way up it crashed and burned in a week. If BHO tries to buy votes by releasing strategic oil reserves, or if things settle down in the middle east or if the Saudis really do start pumping like there’s no tomorrow a lot of latecomers in the market will get creamed!


15 posted on 02/28/2011 11:13:04 AM PST by Repulican Donkey
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To: STD

hmmm. lemme think. the commodities market would have to rise 4.3% per year just to break even. add the taxes the taxes you incur each year, plus the cost of the risk, and you’ll see what return you’d need to make this plan work. off the top of my head, I’d say 9% or greater just for you to break even.

my bet is that this is a losing proposition. assuming your vaca home is paid for, you have it’s value in a market that will not stay this depressed for the amount of your mortgage. and you’ll have a lien on your property. if the commodities fails to yield the return you need, then not only do you lose your money, but also your house.

bird in the hand versus one in the bush...

just my thoughts.


16 posted on 02/28/2011 11:16:31 AM PST by camle (keep an open mind and someone will fill it full of something for you)
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To: STD

Don’t remortgage. Sell the place. $650,000 (or whatever you can get for a place that nice) buys a lot of hotel rooms for your future travels. Spread the money around to various conservative investments, and relax with the peace of mind that comes with a nice cushion like that.


17 posted on 02/28/2011 11:17:42 AM PST by Minn
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To: STD

This is leverage, and it cuts both ways. Suppose both house prices and commodity prices go down? You will still owe the money, but you will not have the assets that you pledged to borrow it. Don’t think that can happen? It can.


18 posted on 02/28/2011 11:18:38 AM PST by proxy_user
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To: STD

Take the $650K, buy 26,000 shares of Altria (MO) and generate about $40K per yr in dividends. And reinvest the divs of course.


19 posted on 02/28/2011 11:19:17 AM PST by petercooper (Purge the RINO's.)
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To: STD

I’m no financial expert, but if I had substantial cash available right now I’d be looking at good quality rental properties, i.e. apartment buildings. I’m a little nervous about commercial (mostly because I don’t know the market), but all these folks bailing out of their underwater homes have to move somewhere.


20 posted on 02/28/2011 11:26:30 AM PST by 6ppc (It's torch and pitchfork time)
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To: Minn

Sell. I second that. Then keep X in cash, X in that etc.


21 posted on 02/28/2011 11:26:34 AM PST by Lumper20
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To: petercooper
Take the $650K, buy 26,000 shares of Altria (MO) and generate about $40K per yr in dividends. And reinvest the divs of course..

How does he pay the P+I on the 650K like that, I gueuss around 4000 / monthe before real estate property taxes.

22 posted on 02/28/2011 11:27:22 AM PST by central_va (I won't be reconstructed, and I do not give a damn.)
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To: Minn; STD

I agree with Minn, I have owned a couple of vacation homes.
Newer really used them enought to justify the cost, sold them and cruise now. I can cruise at least twice a year and haven’t come near to using up the money from the sale.


23 posted on 02/28/2011 11:28:05 AM PST by razorback-bert (Some days it's not worth chewing through the straps.)
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To: STD

I would take the equity.

As bad as this sounds, should values continue their decline (which seems extremely likely), you might never have this opportunity again.

As to where to invest, just be careful, as we are in a period where even conservative investments can quickly go bad.


24 posted on 02/28/2011 11:31:45 AM PST by Rational Thought
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To: STD

Helicopter Ben is running the printing presses.
The cash you take out will be depreciating
immediately and accruing an interest penalty.
Do you really believe you can make more than
the liability accruing with interest + inflation on
that equity?


25 posted on 02/28/2011 11:33:59 AM PST by Myrddin
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To: STD
I'm looking for advice about taking the equity out of my vacation home. As I watch real estate plummet, is it time to cash out of that house while I can still get value out? After applying for a home mortgage; 30 years at 4.3% they are willing to give me 650K. Taking that money and putting it into commodities, I think I can grow my out of this economy. What do the rest of you guys think about this idea?

You are essentially borrowing 650K and then gambling that borrowed money on the commodities market that can either go up or down. So, let's analyze the possibilities in the outcome flow chart:

If the commodities investment does great, you will look like a genius and have the money to prove it.

What if the commodities market takes a hit?

Are you prepared to pay off that 650K mortgage over the next 30 years or will you be forced to either default on the loan or develop a taste for Purina Cat Chow?

If you can afford to pay off the loan if the commodities investment tanks, roll the dice if you feel lucky.

If you cannot afford to repay that loan if your commodities investment tanks, you will then lose the vacation house, and your money and your credit rating.

If you cannot pay off the loan if the commodities investment tanks, it is deja vu all over again.

Isn't that how this financial disaster came about?

With people gambling borrowed money they could not afford to repay if the markets went South?

Gambling with borrowed money you cannot afford to repay if Lady Luck turns against you is nothing more than playing Russian Roulette with your finances and your future.

If you are so afraid of the housing market crashing any further, sell the house and recover money that actually belongs to you and not to the bank. Then, if you can afford to lose that money, risk it in any way you want.

26 posted on 02/28/2011 11:48:08 AM PST by Polybius
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To: STD

I’d stand pat. I think commodoties are in a far over-extended bubble (blame professional speculators for running them up). All bubbles eventually pop.


27 posted on 02/28/2011 11:51:38 AM PST by Matchett-PI ("Freedom's Just Another Word For Nothing Left to Tax " ~ Gagdad Bob)
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To: STD

30 yr money at 4.5% for a second home sounds like a very good deal - we’ll probably not see that again for a very long time.

I’m pretty confident we have begun a big inflationary cycle. What is interesting to me, is that real estate historically hasn’t done that well in that type of environment. Check out this analysis - might get much worse before it gets much better.

http://gonzalolira.blogspot.com/2011/02/inflation-hyperinflation-and-real.html

Equities and in particular commodity based equities are a good hedge. I’m reading a great book now called “When Money Dies” - its about the hyperinflation of the Weimar Republic. It was first printed in the 70’s and was reprinted this past year given the similarities that we are facing. Anyway, the German Stock market tripled from 1922 to 1924 and did a decent job of protecting purchasing power.


28 posted on 02/28/2011 11:54:32 AM PST by grayhog
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To: Mr. K

Don’t overlook mid-2013 calls on guillotine manufacturers.
We’re going to need lots of them.


29 posted on 02/28/2011 11:55:15 AM PST by Dick Bachert
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To: STD

This is a week old:
http://www.tradingmarkets.com/stocks/commentary/inflection-point-for-mr-market-1457054.html


30 posted on 02/28/2011 11:57:19 AM PST by Matchett-PI ("Freedom's Just Another Word For Nothing Left to Tax " ~ Gagdad Bob)
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To: STD; Former MSM Viewer

I’m inclined to agree with Former MSM Viewer in this instance.

If you look at the stock market, many of the “principals” of most firms are cashing out of their investments. Insider activity on most companies show a decided trend of these folks to take their money now.

Where they are putting it, I do not know. But it is going somewhere. I cannot recommend commodities as I think that many are overpriced in a heated market. Too many people are seeking stability in commodities which has them over priced.

Right now I am buying Real Estate in selected places at rock bottom prices. Finger Lakes in NY, Northern Mich, Lake of the Ozarks. Waterfront only.


31 posted on 02/28/2011 11:59:18 AM PST by Ouderkirk (Democrats...the party of Slavery, Segregation, Sodomy, and Sedition)
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To: central_va

Yes I guess you would need to pay the mortgage...


32 posted on 02/28/2011 12:07:16 PM PST by petercooper (Purge the RINO's.)
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To: STD

We took some of our money out of the country, though it was a hassle. freepmail me about it. Some real estate plays may be worth it, even in this economy. Everything is risky, even commodities.


33 posted on 02/28/2011 12:45:12 PM PST by DaxtonBrown (HARRY: Money Mob & Influence (See my Expose on Reid on amazon.com written by me!))
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Comment #34 Removed by Moderator

To: razorback-bert
The wife and I have this conversation all the time. She wants a second house, I say why? Whenever you're in house one house two will be on your mind and vice versa.

So, she changed it to let's keep the house on LI and but a snow-bird house down south for when we retire. I say when that day comes let's sell all the property on LI (we are landlords), buy the house we want where we want and come back to visit a few weeks a year. We could easily rent a condo here for a month at a time...or go to London instead, or Buenos Aires or Spain or Asia...

Nothing ties you down like a vacation home.

35 posted on 02/28/2011 2:22:57 PM PST by wtc911 ("How you gonna get down that hill?")
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To: wtc911

Roger, thank you


36 posted on 02/28/2011 2:43:16 PM PST by STD (Love Your God, Love Your Neighbor!)
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To: STD

I’m assuming the house is located where prices are still declining (IOW, anywhere but DC of late).

Honestly, in that situation, I’d sell the thing in an effort to max out my capital gain. I have little confidence that we will see rising prices anytime in the foreseeable future.


37 posted on 02/28/2011 9:09:20 PM PST by freespirited (Truth is the new hate speech. -- Pamela Geller)
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