- This topic has 20 replies, 9 voices, and was last updated 6 years, 6 months ago by
HLS.
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October 16, 2017 at 12:19 PM #808181October 16, 2017 at 1:31 PM #808186
HLS
ParticipantI have been involved in this for many years.
My general advice to anyone considering it is to look at areas that are growing (vs areas that are stagnating/shrinking)
and IF possible look at areas that are reasonable commuting distance from either an airport, major medical center OR college/technical school etc. These 3 rarely close down.There are many parts of the country that property isn’t worth much more than it was 10 years ago, (and there was no bubble)
The trade-off is that the cash flow & depreciation should be much better than an area with appreciation (on paper) but poor cash flow.From a So Cal perspective, it’s hard to grasp that a property hasn’t gone up in 10 years, but there are plenty of areas that it’s true. Rents don’t rise quickly.
Nobody knows if property values will continue to rise anywhere, although most people expect it to.
In the long run, the expected benefit of alternate areas should be cash flow/income VS. equity increase, although both can happen.
I’ve had some very astute investors tell me that in hindsight they may have done better on paper with appreciation, however they have had a very nice stream of cash income and that you can’t spend appreciation. No regrets.
Different strokes for different folks.
Going back to OP, I would not consider an $825K property with $800 a month property taxes + HOA ($ ??) that would only rent for $3000-$3500 a month after down payment. Huge negative every month, hoping/praying/wishing/dreaming for appreciation;
but in the long run it might work out! Who knows.October 24, 2017 at 2:22 PM #808233CA renter
ParticipantI know that this is an unpopular sentiment right now, but having a “friend” recommend that a person with ~$135K annual income buy an “investment” condo for $825K sounds an awful lot like a bubble to me.
Just my 2 cents, but I would not be jumping into any new “investments” at this point in time. If you want to focus on genuinely safe stocks, etc., that’s pretty reasonable, but I think that we are in an even bigger credit bubble today than we were in 2008, thanks to central banks around the world.
A bubble doesn’t require NINJA loans. All you need is loose credit (which is what happens when rates are held at artificial lows/ZIRP for an extended amount of time), and speculation. There is plenty of both right now, and I don’t see how this will end in a benign way.
October 24, 2017 at 3:16 PM #808234ParticipantGeneral statements are confusing.
Saying one shouldn’t buy at $825K because income is $135K has nothing to do with whether it is worth buying.
…… If it were worth $1M+ you should do whatever you can to buy it and flip it or keep it…. (It DOES happen)I don’t think there are ANY ‘genuinely safe stocks’
There are fortunes to be made in the right “new investments”We ARE in a huge credit bubble, but there is more wealth around today than ever before with many people chasing yield.
Interest creates even more wealth. This bubble could last 50 years, or just a few more months. Rates could be kep artificially low for decades.
Carry trade keeps markets in check.The average Joe’s & Jane’s that contribute to a 401K
on a regular basis are part of a potential problem, not a solution.You can be right in the short term and wrong in the long run.
You can be wrong in the short term and right in the long run.Back to the OP, it doesn’t make sense to me because the numbers don’t work out. It has nothing to do with what his income is nor the fact that a ‘friend’ recommended it.
One needs to understand the risks associated with any investment and how to analyze them, as well as carrying costs associated with real estate that don’t exist with stocks.
Most people get hurt when the market falls, a small group will make a fortune.
October 24, 2017 at 11:14 PM #808255ParticipantYou are correct, HLS, of course. But I think that a $825K condo in Irvine being marketed to those making $135K (assuming this is their target market) is indicative of a bubble. I was also going along with the assumption that there are precious few bargains to be found in Orange County right now. Speculators are combing over every piece of property that gets listed, and people are throwing cash around as though it has no value. I would have more confidence in the market it we didn’t have so many speculators (with many coming from overseas) just looking for a place to park their money because they’re unable to get any kind of a yield in any “safe” investments.
Though it looks like today’s buyers are highly qualified, we don’t know where all this cash is coming from. There are too many stories of people using leverage in order to speculate in all of these markets — it’s in the form of non-traditional lending, so it’s not visible to those who just track mortgages. How much of this is laundered money? We’re seeing stories where people from Russia, China, and Mexico are stashing money in expensive real estate in large, gateway cities around the world.
It’s true that this can go on for many decades, in theory, but there are many signs that we’re smack in the middle of another credit-driven speculative bubble. It’s just a matter of how far it will go, and how long it will last. Admittedly, I’m almost always early in calling bubbles, but this is getting scary, IMHO.
October 27, 2017 at 11:34 PM #808295ParticipantPocatello Idaho- College town.
$1.375,000 listing price
$ 18,000 monthly gross renthttps://www.realtor.com/realestateandhomes-detail/2125-S-4th-Ave_Pocatello_ID_83201_M15008-71820
if expenses are 40% of the income, you still get almost 9.5% cap rate
+ probably $35-40K a year depreciation
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Many of today’s residential buyers are NOT ‘highly qualified’
they are just qualified.
In many cases one can go up to a 50% debt ratio with a 1% down payment. Many people only bring home 70% of their gross income.Easy lending does not make housing affordable, it actually makes it unaffordable to many with high prices.
if mortgage rates rise too much, payment amounts will be out of reach for many people. Prices are artificially high because rates are low but rates could stay low for a very long time
Kim Kardashian could be a grandmother and Oprah could be pitching reverse mortgages to supplement her income by then.
Are we in a bubble OR is it just the ‘new normal’ ??
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