surveyor’s ROI spreadsheet

[gn]

surveyor,

Thanks for the response.

Let’s say you have $300k to invest in real estate.
When the market reaches the bottom, which is a better option:

1. Buy a number of SFHs.
2. Buy multi-unit properties (i.e. 4-plexes).

It seems like the multi-unit properties generate better cash flow. But what about appreciation ? Do SFHs appreciate better than 4-plexes ?

[Anonymous]

It seems like the multi-unit properties generate better cash flow. But what about appreciation ? Do SFHs appreciate better than 4-plexes ?

I would go for something that cash flows better now, then depend on appreciation that may or may not happen. Each extra dollar you can use to pay down a mortgage is earning 6%-7% a year on less interest.

[Anonymous]

It seems like the multi-unit properties generate better cash flow. But what about appreciation ? Do SFHs appreciate better than 4-plexes ?

I would go for something that cash flows better now, then depend on appreciation that may or may not happen. Each extra dollar you can use to pay down a mortgage is earning 6%-7% a year on less interest.

[Anonymous]

It seems like the multi-unit properties generate better cash flow. But what about appreciation ? Do SFHs appreciate better than 4-plexes ?

I would go for something that cash flows better now, then depend on appreciation that may or may not happen. Each extra dollar you can use to pay down a mortgage is earning 6%-7% a year on less interest.

[Anonymous]

It seems like the multi-unit properties generate better cash flow. But what about appreciation ? Do SFHs appreciate better than 4-plexes ?

I would go for something that cash flows better now, then depend on appreciation that may or may not happen. Each extra dollar you can use to pay down a mortgage is earning 6%-7% a year on less interest.

[Anonymous]

It seems like the multi-unit properties generate better cash flow. But what about appreciation ? Do SFHs appreciate better than 4-plexes ?

I would go for something that cash flows better now, then depend on appreciation that may or may not happen. Each extra dollar you can use to pay down a mortgage is earning 6%-7% a year on less interest.

[Anonymous]

While I think this rent v. own calculator exercise is a useful one for cross-comparison of potential investment properties, it misses the obvious point of potential residential properties.

A long-held investment property in California, be it SFR or multi-unit, is blessed with low property taxes thanks to Prop. 13. This is but one factor helping to moderate rents when compared to expected PITI in a purchase scenario.

As a result, for any given neighborhood, you can almost always find a comparable property that is cheaper to rent than to own de novo.

This is most emphatically NOT the case in much of the country. In fact, in many areas, you pay a PREMIUM to rent. Your mortgage payment would probably be lower. Why? Don’t ask me, just accept that that is the case.

We just moved out of a very nice SFR in Marin County for which we paid 3100/month. It was listed for sale, staged, sold, and closed within 3 WEEKS for $1M even. (Listed at $1.029M). I can assure you that if you were to wait for 100X monthly rent pricing here in Southern Marin you would go to your grave without a purchase. That is too long for many. At some point in the real estate cycle, the multiplier will bottom, but it may not coincide with the bottom in the real estate market.

What’s the right multiplier? Who knows? I contend that where price appreciation historically is expected, the rent multiplier will be higher than in areas where price appreciation is spottier. Where prices are in decline, (see Detroit and its suburbs), that rent multiplier will be really low. Does that mean that Detroit real estate is a good buy now? It depends on more than a simple equation.
How do you account for expected depreciation? How low can real estate go? Obviously, it can go to near zero. In many neighborhoods of Detroit and Cleveland, you can find SFR houses for 10-20-30K easily. Easily. Pop a section 8 family in there at $800/month and it will cash flow NO PROBLEM. Is it a good buy? A rent multiplier will NOT yield that answer.

Your mileage may vary.

BTW, I think our former house was overpriced. But at 900K, we might have purchased. That would have been nearly 300X monthly rent, and it would have been a GOOD deal. You have to live somewhere my dad always said.

[Anonymous]

While I think this rent v. own calculator exercise is a useful one for cross-comparison of potential investment properties, it misses the obvious point of potential residential properties.

A long-held investment property in California, be it SFR or multi-unit, is blessed with low property taxes thanks to Prop. 13. This is but one factor helping to moderate rents when compared to expected PITI in a purchase scenario.

As a result, for any given neighborhood, you can almost always find a comparable property that is cheaper to rent than to own de novo.

This is most emphatically NOT the case in much of the country. In fact, in many areas, you pay a PREMIUM to rent. Your mortgage payment would probably be lower. Why? Don’t ask me, just accept that that is the case.

We just moved out of a very nice SFR in Marin County for which we paid 3100/month. It was listed for sale, staged, sold, and closed within 3 WEEKS for $1M even. (Listed at $1.029M). I can assure you that if you were to wait for 100X monthly rent pricing here in Southern Marin you would go to your grave without a purchase. That is too long for many. At some point in the real estate cycle, the multiplier will bottom, but it may not coincide with the bottom in the real estate market.

What’s the right multiplier? Who knows? I contend that where price appreciation historically is expected, the rent multiplier will be higher than in areas where price appreciation is spottier. Where prices are in decline, (see Detroit and its suburbs), that rent multiplier will be really low. Does that mean that Detroit real estate is a good buy now? It depends on more than a simple equation.
How do you account for expected depreciation? How low can real estate go? Obviously, it can go to near zero. In many neighborhoods of Detroit and Cleveland, you can find SFR houses for 10-20-30K easily. Easily. Pop a section 8 family in there at $800/month and it will cash flow NO PROBLEM. Is it a good buy? A rent multiplier will NOT yield that answer.

Your mileage may vary.

BTW, I think our former house was overpriced. But at 900K, we might have purchased. That would have been nearly 300X monthly rent, and it would have been a GOOD deal. You have to live somewhere my dad always said.

[Anonymous]

While I think this rent v. own calculator exercise is a useful one for cross-comparison of potential investment properties, it misses the obvious point of potential residential properties.

A long-held investment property in California, be it SFR or multi-unit, is blessed with low property taxes thanks to Prop. 13. This is but one factor helping to moderate rents when compared to expected PITI in a purchase scenario.

As a result, for any given neighborhood, you can almost always find a comparable property that is cheaper to rent than to own de novo.

This is most emphatically NOT the case in much of the country. In fact, in many areas, you pay a PREMIUM to rent. Your mortgage payment would probably be lower. Why? Don’t ask me, just accept that that is the case.

We just moved out of a very nice SFR in Marin County for which we paid 3100/month. It was listed for sale, staged, sold, and closed within 3 WEEKS for $1M even. (Listed at $1.029M). I can assure you that if you were to wait for 100X monthly rent pricing here in Southern Marin you would go to your grave without a purchase. That is too long for many. At some point in the real estate cycle, the multiplier will bottom, but it may not coincide with the bottom in the real estate market.

What’s the right multiplier? Who knows? I contend that where price appreciation historically is expected, the rent multiplier will be higher than in areas where price appreciation is spottier. Where prices are in decline, (see Detroit and its suburbs), that rent multiplier will be really low. Does that mean that Detroit real estate is a good buy now? It depends on more than a simple equation.
How do you account for expected depreciation? How low can real estate go? Obviously, it can go to near zero. In many neighborhoods of Detroit and Cleveland, you can find SFR houses for 10-20-30K easily. Easily. Pop a section 8 family in there at $800/month and it will cash flow NO PROBLEM. Is it a good buy? A rent multiplier will NOT yield that answer.

Your mileage may vary.

BTW, I think our former house was overpriced. But at 900K, we might have purchased. That would have been nearly 300X monthly rent, and it would have been a GOOD deal. You have to live somewhere my dad always said.

[Anonymous]

While I think this rent v. own calculator exercise is a useful one for cross-comparison of potential investment properties, it misses the obvious point of potential residential properties.

A long-held investment property in California, be it SFR or multi-unit, is blessed with low property taxes thanks to Prop. 13. This is but one factor helping to moderate rents when compared to expected PITI in a purchase scenario.

As a result, for any given neighborhood, you can almost always find a comparable property that is cheaper to rent than to own de novo.

This is most emphatically NOT the case in much of the country. In fact, in many areas, you pay a PREMIUM to rent. Your mortgage payment would probably be lower. Why? Don’t ask me, just accept that that is the case.

We just moved out of a very nice SFR in Marin County for which we paid 3100/month. It was listed for sale, staged, sold, and closed within 3 WEEKS for $1M even. (Listed at $1.029M). I can assure you that if you were to wait for 100X monthly rent pricing here in Southern Marin you would go to your grave without a purchase. That is too long for many. At some point in the real estate cycle, the multiplier will bottom, but it may not coincide with the bottom in the real estate market.

What’s the right multiplier? Who knows? I contend that where price appreciation historically is expected, the rent multiplier will be higher than in areas where price appreciation is spottier. Where prices are in decline, (see Detroit and its suburbs), that rent multiplier will be really low. Does that mean that Detroit real estate is a good buy now? It depends on more than a simple equation.
How do you account for expected depreciation? How low can real estate go? Obviously, it can go to near zero. In many neighborhoods of Detroit and Cleveland, you can find SFR houses for 10-20-30K easily. Easily. Pop a section 8 family in there at $800/month and it will cash flow NO PROBLEM. Is it a good buy? A rent multiplier will NOT yield that answer.

Your mileage may vary.

BTW, I think our former house was overpriced. But at 900K, we might have purchased. That would have been nearly 300X monthly rent, and it would have been a GOOD deal. You have to live somewhere my dad always said.

[Anonymous]

While I think this rent v. own calculator exercise is a useful one for cross-comparison of potential investment properties, it misses the obvious point of potential residential properties.

A long-held investment property in California, be it SFR or multi-unit, is blessed with low property taxes thanks to Prop. 13. This is but one factor helping to moderate rents when compared to expected PITI in a purchase scenario.

As a result, for any given neighborhood, you can almost always find a comparable property that is cheaper to rent than to own de novo.

This is most emphatically NOT the case in much of the country. In fact, in many areas, you pay a PREMIUM to rent. Your mortgage payment would probably be lower. Why? Don’t ask me, just accept that that is the case.

We just moved out of a very nice SFR in Marin County for which we paid 3100/month. It was listed for sale, staged, sold, and closed within 3 WEEKS for $1M even. (Listed at $1.029M). I can assure you that if you were to wait for 100X monthly rent pricing here in Southern Marin you would go to your grave without a purchase. That is too long for many. At some point in the real estate cycle, the multiplier will bottom, but it may not coincide with the bottom in the real estate market.

What’s the right multiplier? Who knows? I contend that where price appreciation historically is expected, the rent multiplier will be higher than in areas where price appreciation is spottier. Where prices are in decline, (see Detroit and its suburbs), that rent multiplier will be really low. Does that mean that Detroit real estate is a good buy now? It depends on more than a simple equation.
How do you account for expected depreciation? How low can real estate go? Obviously, it can go to near zero. In many neighborhoods of Detroit and Cleveland, you can find SFR houses for 10-20-30K easily. Easily. Pop a section 8 family in there at $800/month and it will cash flow NO PROBLEM. Is it a good buy? A rent multiplier will NOT yield that answer.

Your mileage may vary.

BTW, I think our former house was overpriced. But at 900K, we might have purchased. That would have been nearly 300X monthly rent, and it would have been a GOOD deal. You have to live somewhere my dad always said.

[CA renter]

Whenever the RE cycle bottoms, you will usually see PITI payments are lower than rents.

Why? Because the barrier to ownership used to be a good down payment and good credit with high qualifying standards. Once you got that DP, you could usually do better than renting, especially with the mortgage deduction.

As credit tightens, I believe we will see this again — even in the better areas, with a few exceptions.

[CA renter]

Whenever the RE cycle bottoms, you will usually see PITI payments are lower than rents.

Why? Because the barrier to ownership used to be a good down payment and good credit with high qualifying standards. Once you got that DP, you could usually do better than renting, especially with the mortgage deduction.

As credit tightens, I believe we will see this again — even in the better areas, with a few exceptions.

[CA renter]

Whenever the RE cycle bottoms, you will usually see PITI payments are lower than rents.

Why? Because the barrier to ownership used to be a good down payment and good credit with high qualifying standards. Once you got that DP, you could usually do better than renting, especially with the mortgage deduction.

As credit tightens, I believe we will see this again — even in the better areas, with a few exceptions.

[CA renter]

Whenever the RE cycle bottoms, you will usually see PITI payments are lower than rents.

Why? Because the barrier to ownership used to be a good down payment and good credit with high qualifying standards. Once you got that DP, you could usually do better than renting, especially with the mortgage deduction.

As credit tightens, I believe we will see this again — even in the better areas, with a few exceptions.

[Author]

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