Forum Replies Created
-
AuthorPosts
-
Bloat
Participanthaha, just checked, they are an LLC owned by the NAR, started in 2003. Just in time to take advantage of the bust.
ParticipantWow, No 5th amendment in MO !? No “just compensation”?
You can’t do much better than your ODMAX fund. I’ve got some money in high-flying funds, maybe 20%. I’ve become conservative in my mid-40’s. Now I’m happy to achieve a 10% average annual return.
ParticipantWow, No 5th amendment in MO !? No “just compensation”?
You can’t do much better than your ODMAX fund. I’ve got some money in high-flying funds, maybe 20%. I’ve become conservative in my mid-40’s. Now I’m happy to achieve a 10% average annual return.
ParticipantBang,
With 20% down the cashflow is likely zero. Rents cover debt service, maintenance, vacancy, management, travel, reserves, etc. It can take many years to get positive.
ROE drops because equity grows. The 1st year 4% appreciation on a $200k example is $8k against the $40k down making a 20% return. In the 2nd year the equity base becomes $48k and the 4% appreciation becomes $8320 giving 17% ROE. Year 3 would show about 15% ROE. The cagr (compound annual growth rate) is negative.
You can easily get derailed by a large expense, like a new roof or hvac, or it can go in your favor, like if appreciation jumps to 8%.
You could isolate your down payment and look at the return against it: ROI, Return On Investment. This does not represent your true asset (equity) return over time (but it looks good).
ParticipantBang,
With 20% down the cashflow is likely zero. Rents cover debt service, maintenance, vacancy, management, travel, reserves, etc. It can take many years to get positive.
ROE drops because equity grows. The 1st year 4% appreciation on a $200k example is $8k against the $40k down making a 20% return. In the 2nd year the equity base becomes $48k and the 4% appreciation becomes $8320 giving 17% ROE. Year 3 would show about 15% ROE. The cagr (compound annual growth rate) is negative.
You can easily get derailed by a large expense, like a new roof or hvac, or it can go in your favor, like if appreciation jumps to 8%.
You could isolate your down payment and look at the return against it: ROI, Return On Investment. This does not represent your true asset (equity) return over time (but it looks good).
ParticipantOn and On is fine, more to learn,
“I am still willing to say that my real estate investing will beat the S&P”
I don’t doubt it, probably a good return on the work involved.
$200k @ 4% compounded for 20 years is $440k.
I don’t think you can do too much refi’ng with 4% appreciation. A refi maybe every 5 years with that rate and added risk of leverage and the cost each time. A 24% cagr is just not sustainable unless you are a successful/flipper developer. Like that Real Deal guy, Richard Davis (also in one of the Carolina’s?), flipping a house a week & making big $$. But then it is a business.
I’ll admit I’m a little warm and fuzzy on the stock market right now, it’s been really good since ’03. I haven’t bought a house since ’98 and, even better, became a renter in ’05 saving $150k (and counting).
ParticipantOn and On is fine, more to learn,
“I am still willing to say that my real estate investing will beat the S&P”
I don’t doubt it, probably a good return on the work involved.
$200k @ 4% compounded for 20 years is $440k.
I don’t think you can do too much refi’ng with 4% appreciation. A refi maybe every 5 years with that rate and added risk of leverage and the cost each time. A 24% cagr is just not sustainable unless you are a successful/flipper developer. Like that Real Deal guy, Richard Davis (also in one of the Carolina’s?), flipping a house a week & making big $$. But then it is a business.
I’ll admit I’m a little warm and fuzzy on the stock market right now, it’s been really good since ’03. I haven’t bought a house since ’98 and, even better, became a renter in ’05 saving $150k (and counting).
ParticipantSurv,
I guess I did cause a SM/RE comparison, but I was really just addressing the negativity toward the stock market.
Your example is somewhat idyllic as out of state does produce the best early results with the smallest investment %, but it’s not for everyone (myself included). Your formula don’t work in SD with huge neg returns of late for those who tried. In SD it now might take 50% down or more to get a positive and let’s call appreciation zero for the next 5 years.
Your 24% model is not compounded and diminishes every year. Otherwise your $40k down would be worth $3.5M in 20yrs (or $1B in 40yrs). At year 10 your rate is something like 6%. (point- cashflow should become material by then, but still not much help). Also, you applied no leverage to the Index fund.
HLS,
The S&P has had a cagr of +10%/year for the last 100 years. Actully, I think it is 11.5% (not 7%). Much more than 900x with total return, before taxes, fees.
Agreed that more have made money in RE, particpation is greater, it is a place to live, has favored tax treatment and is more understood. Fewer buy stocks or understand them.
I say do both, be diversified, and if you can, do as Surveyor has and invest in a favorable state (currently not CA).
ParticipantSurv,
I guess I did cause a SM/RE comparison, but I was really just addressing the negativity toward the stock market.
Your example is somewhat idyllic as out of state does produce the best early results with the smallest investment %, but it’s not for everyone (myself included). Your formula don’t work in SD with huge neg returns of late for those who tried. In SD it now might take 50% down or more to get a positive and let’s call appreciation zero for the next 5 years.
Your 24% model is not compounded and diminishes every year. Otherwise your $40k down would be worth $3.5M in 20yrs (or $1B in 40yrs). At year 10 your rate is something like 6%. (point- cashflow should become material by then, but still not much help). Also, you applied no leverage to the Index fund.
HLS,
The S&P has had a cagr of +10%/year for the last 100 years. Actully, I think it is 11.5% (not 7%). Much more than 900x with total return, before taxes, fees.
Agreed that more have made money in RE, particpation is greater, it is a place to live, has favored tax treatment and is more understood. Fewer buy stocks or understand them.
I say do both, be diversified, and if you can, do as Surveyor has and invest in a favorable state (currently not CA).
ParticipantDefinately an anti-Stock Market bias here:
“The stock market is nothing more than gambling and a legalized pyramid scheme”
“the stock market is simply based on the greater fool theory”
Probably lost a good chunk during 2000-03 (as I did on paper). Still, neither of the above quotes are true about the “Stock Market”. For some companies and some market sectors, for sure. But, if you can avoid the “hype”, “the flavor of the day” and “not chase last years returns” it is fairly easy to do well in the market OVER TIME, by picking a good no load, low fee fund (as surveyor suggested), not trading it and reinvesting the distributions.
I read that RE as an asset has only beat inflation by 1-2% for the last 100 years, but the S&P has done +7%. True, RE has the advantage of greater leverage and potentially better cashflow (which adds it’s own risks). The S&P PE is now around 17 which is the historical mean. The PE of SD RE is what?, maybe 20 or 25? And on a rent growth rate of only 3% versus corp earnings growth of 10%. I say how can you not buy shares of solid companies?
Investing in stocks (funds) is buying a piece of paper, but so is the deed to a house (and a dollar bill, or a bank statement, for that matter) it’s all representative paper, pick your poison.
BTW: my favorite funds, buying since 1994 are DODGX and RPMGX. I have no plans to ever sell them.
ParticipantDefinately an anti-Stock Market bias here:
“The stock market is nothing more than gambling and a legalized pyramid scheme”
“the stock market is simply based on the greater fool theory”
Probably lost a good chunk during 2000-03 (as I did on paper). Still, neither of the above quotes are true about the “Stock Market”. For some companies and some market sectors, for sure. But, if you can avoid the “hype”, “the flavor of the day” and “not chase last years returns” it is fairly easy to do well in the market OVER TIME, by picking a good no load, low fee fund (as surveyor suggested), not trading it and reinvesting the distributions.
I read that RE as an asset has only beat inflation by 1-2% for the last 100 years, but the S&P has done +7%. True, RE has the advantage of greater leverage and potentially better cashflow (which adds it’s own risks). The S&P PE is now around 17 which is the historical mean. The PE of SD RE is what?, maybe 20 or 25? And on a rent growth rate of only 3% versus corp earnings growth of 10%. I say how can you not buy shares of solid companies?
Investing in stocks (funds) is buying a piece of paper, but so is the deed to a house (and a dollar bill, or a bank statement, for that matter) it’s all representative paper, pick your poison.
BTW: my favorite funds, buying since 1994 are DODGX and RPMGX. I have no plans to ever sell them.
ParticipantArrays,
You’ve got a way with words,
Agreed regarding the Dems & Oil. I am slightly Republican because I want to be taxed less and I don’t want my taxes to pay for a national healthcare boondoggle or illegal immigrant benefits. Maybe a Repub admin not rooted in oil is what is needed.To bring this back to the housing market, in the future, when 1kw cost 30 cents, I see a housing value component based on a roof’s solar orientation and if it has solar already. This is a goal for my next house.
ParticipantPup,
I agree with much of what you say, but:
1929 was much different and was a cause for much real change that ensured future prosperity (along with being an undamaged WW2 victor). The current stock market is not historically excessivley volatile. The crashing houseing market and credit crisis have yet to play out.
I recall the Carter admin as the gloomiest: something like 10% unemployment, 16% mortgages, gas lines, crime, Iran hostage, etc. It turned out to be the bottom, the beginning of a great bull market in both stocks and RE. Not a parallel to today, just an observation.
For China, they have 300M of their population that have acheived some degree of prosperity mostly dependent on a strong US economy. This segment exerts extreme pressure on their polical leaders for continuation.
I agree with your comment: “the real pain will come to the indulgent, self-entitled, complacent American who has never experienced real pain, suffering, shortages or severe unemployment . . .” (much like 1979).
I slightly favor a Republican administration, but from either side don’t underestimate the power of a charismatic president/admin. I’m not sure who that would be now (maybe Guilianni) but Bush just is not it(amoung other things). Regan, Clinton, Kennedy had it, compare to those who didn’t.
On the dollar, check out: http://eh.net/hmit/exchangerates/ for a long term historical perspective. The relatively controlled (so-far) decline of the dollar is a good thing from my perspective. No country wants to see a collapsed dollar. A weaker dollar is great for our manufacturing, exports, jobs and why other countries build their products here (autos, etc). It is bad for China.
JWM – definately agree with you regarding the polically hamstrung military. Also, the Iraq war is a relatively cheap war to date in terms of our budget and gdp.
The gloom: Historically, all great dynasties have declined or collapsed, so ours is inevitable but when and how bad. Ours is based on capitalism and energy (oil). I say a real plan away from oil to nuke/solar/wind/geo/etc could delay our fate.
ParticipantGreat reading here. A good amount of doom and gloom though. I hope the future isn’t all bad. These things run in cycles and history repeats itself:
* In the late 80’s the total market value of Japan’s RE was double that of US RE. Their stock market value was fully half the world’s value. Much worse than our current bubble. “Japan’s economy would rule the world”.
* For the last 100 years the basis of the US Economy (and other’s) has been a conversion of cheap oil into wealth. The next 100 years?
* Major established currencies run long cycles, just 5 years ago the dollar was “too” strong and ok to let it drop (Greenspan). All else equal a currency getting weaker is a cause for it to get stronger and vice versa.
* The Euro is still a new currency and has looming problems with member counties not meeting reserves and running deficient spending beyond their charter.
* China will need to face a currency adjustment, when and how ugly (for them and us). Probably worse for them.
Ok, I jumped around alot,
Past doom and gloom periods: The Soviet threat, Vietnam, Oil Embargos, Jimmy Carter, S&L/RTC, DotCom, Iraq, RE Bubble, etc. Is now really worse than then, or does it just seem so. The next administration has an opportunity for great change (Republican I hope). Maybe a couple of recessions here and there, but hopefully no depression (or will history repeat the ’30s for us too?).
-
AuthorPosts