Ponzi scheme...Commercial real estate

Discussion in 'ETFs' started by Cabin111, Nov 11, 2020.

  1. Cabin111


    I came across this video about NYC commercial real estate. But, I also believe it applies to many types of property (commercial, industrial, intercity residential). This has become a house of cards that will fall very soon (even with a vaccine for Covid).

    I watched this twice to glean all the info.

    The last few minutes are a waste of time. But the loan packaging of commercial property looks a lot like 2007-2008 residential. I still don't know how to profit from this mess. I am thinking of just holding cash and buy quality commercial in good locations for pennies on the dollar.

    Have a view and tell me what you think...

    comagnum, virtusa, danielc1 and 3 others like this.
  2. Nobert


    Bit off topic :
    (sorry for that)
    That's a good channel overall.
    Guy is making quality content on re, tech & psychology.
  3. %%
    Close enough/plenty of problems today with fake news that couldn't care less if its truth or error.
    BUT sounds like simply one of the tops. top of the RE cycle rather than a house of cards.
    NYC is known for overly high taxes also\ plenty of people move with their feet.
    Not a prediction, but Dave REALTOR Ramsey mentioned NY market. Noted rents coming down first\ then property values coming down, eventually………..
    Nobert likes this.
  4. Nobert


    Amen on that. Always was and always will be.
    I have no experence with re bubbles, yet ;
    he has tons of reviews about some garbage RE apartmens in NYC.
    Those houses looks like from Sillent Hill,
    & to pay $7 figures for it...

    It's like, instead, one could go long in something like FRT / SPG / DEI, catch 30% in few months or keep collecting the dividends and live ever happily after in some Thailand with 20 y.o girls, next to his side :rolleyes:

    In comparison, what you can get for €500k here : https://m.aruodas.lt/namai-kaune-ro...-puikiai-irengtas-2-1051675/?photos=1&index=0
    Last edited: Nov 11, 2020
    cesfx, Snuskpelle and murray t turtle like this.
  5. Hahaha oh wow, really liked the video. While less extreme where I live in Swe (obviously) it kind of summarizes what I "feel" (without any rationality/knowledge involved) about the housing market and why I insist to keep my money elsewhere. Even here we are approaching the point of people committing themselves to loans that will take them 100 years to pay off for sufficiently well located garbage.
    Nobert likes this.
  6. JSOP


    MBS!! The crap that got us into trouble back in 2008 is at it again. I hope nobody creates derivatives out of these again otherwise we are going to be f***ed again. Can't believe it's so badly managed due to conflicting motives that they would rather not collect anything instead of collecting something. This clause of not allowing to reduce rent should be removed since it only affects the banks but the banks wash their hands of these deals by selling them or should become void or non-applicable once the banks have sold the mortgages. And then at the time of the sale to the CMBS's, there should be a modification of the terms to allow for the reduction of rent to a certain % of the original rent and the sale should be conditional upon an agreement. If there is no agreement among all the potential buyers of the mortgage regarding the floor of the rent, then there should be no sale. So that way there would be some guarantee of income in all situations instead of just letting these properties sitting vacant.

    To me, honestly if I am a buyer of these MBS, I wouldn't want to touch them if there is a clause there that would not allow me to modify terms and I would have to depend on others who put in less equity than me who has less claim than me to decide how my investment is to be managed.
  7. JSOP


    The only thing that I would keep is the fireplace in that room with the yellow paint. The rest is all bulldoze. I would completely bulldoze the whole thing and rebuild a house on the lot. The location is not too bad so I would only pay for an empty lot + location - demolition fee. There, that's how much this property should worth, definitely not $800K though.
    Nobert likes this.
  8. Overnight


    Oh, don't be so dramatic. Remember the Margin Call rumination.

    jys78 likes this.
  9. JSOP


    I wasn't being dramatic. I was offering solutions to restore it to what it should be. God, Jeremy Irons is good at playing a$$holes.
    Nobert likes this.
  10. Cabin111


    Now banks are being sued!! Picked this one off from Wells Fargo. A BIG MESS!!

    According to the Complaint, the Company made false and misleading statements to the market. Wells Fargo failed to maintain appropriate underwriting standards and accepted due diligence practices in offering billions of dollars' worth of commercial loans. The Company made a high proportion of its loans to customers with poor credit and a higher risk of default than it disclosed to the market. The Company failed to write down commercial loans that suffered impairments in a timely manner. The Company understated the reserves it required to balance expected losses in its portfolios. The Company inflated the net income and expected cash flows of its commercial clients in loan and securitization documents related to CLOs and CMBS. Based on these facts, the Company's public statements were false and materially misleading throughout the class period. When the market learned the truth about Wells Fargo, investors suffered damages.
    #10     Nov 12, 2020