Real Estate

[--GQ--]

For those who waited for so long, I think the time has come. Real Estate sales dropped 22% here in orange County and 17% in Long beach according to Bloomberg. And ofcourse home prices also took a dive. In some cases up to 20% less than it was at the beginning of the year. Not quite a "bust" but there are money to be made.

Example, a 6 units Apartment building listed at $750k. Down from 975K. 3-4 months ago. This is truly an investor wish. Potential rent on such investment is roughly $8,000 a month on a $5,000 mortgage/insurance.

My gut instinct tells me to jump on this property I've been eyeballing for awhile, but the real estate guru (brother) suggested it is only the beginning of a downward trend and I should wait. Talking about greedy.

How is the rest of the country? Everyone experiencing similar situation?

 

[RubberFrog]

Re: Real Estate

Doesn't work out as easy you would like it to. When property values fall, rent follows within a year.
I bought a condo in Garden Grove in the early 90's right after the bottom fell out in OC. Guess what happened within a year? Rental prices started dropping as well.

 

[rottenray6402]

Re: Real Estate

RF is right on with the rent dropping thing. Also with rentals you have high maintence costs (no body will treat it like their own) the taxes, insurance is much higher on commercial stuff.

 

[treedancer]

Re: Real Estate

Quote GQ

Example, a 6 units Apartment building listed at $750k. Down from 975K. 3-4 months ago. This is truly an investor wish. Potential rent on such investment is roughly $8,000 a month on a $5,000 mortgage/insurance.


Rents not bad but,think I would set on the side for a bit and see where it is going, especially on either coast. Park the money in a index fund for a bit.

 

[technostingray]

Re: Real Estate

No fair, no fair, you guys are encouraging a continueing dip in overpriced real estate. Please, before you comment think of my retirement. WAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAHAAAAAAAAAAAAAAA

 

[--GQ--]

Re: Real Estate

Not quite fellas. Rental market here is rather stable and predictable. Irrelevant to the Real Estate market for the most part. Very similar to the "cost of living" factor. It goes up but never down. For as long as I can remember, this has always been the case. Granted i have only been in the business for 5 years, but I was a renter myself many years ago so I know this first hand having to pay an extra $50 every year.

Case and point; one of my units was rented for $750 when I purchased the property roughly 5 years ago. Now it is $1,250. Surprisingly, even at this price, i get so many inquiries. Surely the time is even more favorable.

Rubber, I don't recall rent values ever dropped. Can you imagine your landlord knocking on your door to inform you, the rent will be $100 less due to Real Estate down fall. I don't think so.

The issue now is how long does one have to wait. I was told anywhere from a year to the end of Bush presidency. I hope home prices will drop low enough to justify the rent loss by waiting.

I think the renting business here in S. Cal is unique and a bit extreme, but I'm willing to bet the rest of the country is experiencing the same deal on a smaller scale. Unless I am told otherwise.

 

[studlymandingo]

Re: Real Estate

When the housing market makes such a marked change, it is probably due to the increasing interest rate. More people will be unable to afford a home purchase, and rental property will be in greater demand. I have already had a marked increase in inquiries on rentals that we recently put on the market.

 

[RubberFrog]

Re: Real Estate

Not quite fellas. Rental market here is rather stable and predictable. Irrelevant to the Real Estate market ...

Oh, OK. That's not my experience.

Rubber, I don't recall rent values ever dropped. Can you imagine your landlord knocking on your door to inform you, the rent will be $100 less due to Real Estate down fall...

Well of course not. What happens when the renter moves out though?

The issue now is how long does one have to wait.

Rental property is generally considered a long term investment. That means longer than a presidency.

I think the renting business here in S. Cal is unique ....

SoCal is pretty comparable to most major markets.

With all that being said, I think now is a good time to buy. I think a year from now will be an even better time to buy. I don't think you'll make a cent on a rental prop for several years but that's just how it works. I guess that's why it's an investment and not a get-rich-quick scheme.

Property is a great investment. Perhaps the best. You know the old saying- they're not making anymore of it. Like I said previously, it's an investment, not a lottery ticket. Every so often you can get rich "flipping" a property but for the most part you have to do like the Fonz said and sit on it.

As an aside, don't mistake my less than serious attitude on the forum for some lack of competence or ability. I'm really not the super dummy that old man thinks I am. I manage a very large portfolio of stock, real estate and insurance.
Peace.

 

[technostingray]

Re: Real Estate

Latex, you are such a hero. := := := :=

 

[roscoe]

Re: Real Estate

I've never seen rents drop either. Seen them stabilize/freeze, for 3 years, but never drop.

 

[aspeck]

Re: Real Estate

The rent in my rentals rise and fall with each new tenant. It depends on the supply and demand of the time, and the tenant themselves. Just rented one of my units for $50 less per month than I had previously rented it, but that was because of the tenant. She has repainted the entire place - ceilings and walls (her expense - didn't like the decor), replaced MY refrig (didn't like the old one), professionally shampooed the carpets (she wanted to have it done after the painting), replaced the flooring in the kitchen and bathroom (to suit her liking), and made a few other cosmetic changes that are attached to the unit and will stay if/when she leaves. A landlords dream! I gave her a month to do all this at no rent and dropped her rent $50 a month for the first year. I just love tenants like that. However, they are VERY hard to find!

 

[--GQ--]

Re: Real Estate

C'mon Rubber, you are too serious. JB never said you were a dummy. It was in the context of your action that you appeared a dummy. An action in which he disagreed with. It does not imply that you are a dummy. Face it, everyone is a dummy at some point or another based on our action of the moment. Even Albert Einstein was seen as dummy for not excepting Quantum Mechanic theory. At least in the eyes of the Science Communities he was.

In addition, first hand experience tells me you are not a dummy. Remember when we were kids, I made you do my homework. I took your lunch money. I gave you the "wedgie" in front of Little Sue. The girl you had the biggest crush on. Well I did it because i was jealous. You were smarter than I was. Our 4th grade teacher, Ms. Caraba liked you because you were smart. You can't imagine how jealous I was. She was my biggest crush 8)

Regarding Real Estate, I think right now is a good time to buy if you're looking for a retirement home because the interest rates is relatively low. But i do believe if you wait a bit longer, you will have more choices. Granted the interest rates will go up but the drop in sale price will more than offset that. The key here is SELECTION.

The prediction so far, at the end of Bush's presidency, home prices will be at an all time low. If you can wait that long. Guess I will keep my piggy Bank in a safe place for at least for another 6 months.

 

[Kiwi Phil]

Re: Real Estate

As you are aware, I have always been critical of investment properties, and found investing in my own business, holding Blue Chip Shares, and Fixed term deposits much more profitable.
Well things took a bit of a change a few months back.
My dearly beloved has pestered me for some time to purchase a 2nd home, at todays prices, to rent out, for us to retire too when we sell the farm.
Told her I wasn't interested but as she is a 50/50 partner, if she thought it important, then do it.
After months of looking at properties she comes up with one she wants me to look at. I'm not interested...if you like it, buy it...dosn't worry me.
Anyway, you all know how they work, so 2 hrs later, here am I looking over this house.
She asks my opinion.
I ask if she can make this a nice family home for us...
Yes...
ok buy it...
no you negotiate the price....
ok...(this is a quick way out.).

Price starts at $299K.
Seller is broke and wants to rent back.
I offer $260K......they come back $295K...I tell them "last offer, cash purchase at $265K and I drop rent to $250 week for 2 yrs.
Well, had 2 fags, ate most of the free minties on the counter, and they came back "yes".

Now for a market the Real Estate people tell you is "doing well" that is one hefty drop.
This place is in a sought after village where prices are above surrounding suburbs, and the place is 2yr old, 4 br, ensuite around 1,600sq feet.
I put a quantity surveyor through it and cost was $298K and replacement $351K.
So back to the origonal post.....
rising interest rates here have slowed up sales and reduced genuine buyers
= deminishing values
= well priced properties...
if you go in hard and don't tolerate the B/S.
Then again, maybe everyone is overloaded with debt and have everything today costs.

Another interesting fact. As it was a cash job, sellers solicitor asked for bank cheques for 9 different organisations/people, and the seller was lucky to get out with anything.

If it is a bargain, do it.
Cheers
Phillip

 

[KRS]

Re: Real Estate

A trend is established by three points along a line (years to a banker).

If you can make money at 70% occupancy with at-market or just-under-market rents, than sure... it is probably a good deal.

Does managing an investment and paying the mortgage for the next 20 years fit your investment strategy? Do you need cash flow now or are you looking toward the future, such as selling it outright or collecting all the rents for yourself?

And, lastly, can you sell it tomorrow for what you have in it if an emergency arose?

 

[aspeck]

Re: Real Estate

KRS does bring up some good points. Rental Real Estate is not for everyone. When all is going well, it is good, but it can turn ugly quickly with a bad tenant or an unexpected problem. I know of a few people that got into rental real estate because it would pay the mortgage and they would build capital. That was great till an emergency or a major repair/remodel was needed. Then they were strapped for cash. One friend had to sell at depressed price because the unit was in so much need of repair and he had not been able to put any money aside for that - it all went for mortgage. Lost was about 5 years of work and worry.

 

[Kiwi Phil]

Re: Real Estate

Good points KRS.
That 70% is an interesting figure.
I will tuck all that info away.

Tell you what the trend is here.
It is called negative gearing.
In other words, your costs exceed your rental income, and the loss can be written off against your day job, supposedly reducing your personal tax.
And when you sell, you will make this massive capital growth/profit because the house has increased in value.

When you are in business, Negative Gearing is another name for Trading at a Loss, and as we know, that ain't real hard to do, and the results are always that....a loss.

But.........all the well educated PC people with real jobs think it is the intellegent thing to do.

I think this thing the wifes bought will return us about 3% net, and we don't have a mortgage. Actually that is a guess...I don't want to know what it is returning!!
Thanks for those points.
Cheers
Phillip

 

[JB]

Re: Real Estate

Hmmm. Maybe overpriced offerings are coming down in some places and rents may be also.

Not here.

All three of the outfits that want The Hideout raised their offers last week. I still said no.

 

[tommays]

Re: Real Estate

I live in a crazy priced area with about the highest taxes and electric there is and the reality is prices have reached a point were even two large incomes can no longer keep up with the price increases on a basic new or pre owned home

The saddest thing is a nice place like Sag Harbor were somebody has retired in a modest two hundred thousand dollar house that is suddenly valued and taxed at 2 million dollars 10 years latter and there still trying to live on a retirement income


Tommays

 

[eeboater]

Re: Real Estate

Hmmm. Maybe overpriced offerings are coming down in some places and rents may be also.

Not here.

All three of the outfits that want The Hideout raised their offers last week. I still said no.

Careful there JB -- if they want it bad enough, that whole Imminent Domain garbage could potentially come into play.

 

[imported_Curmudgeon]

Cindy Sheethead

Cindy Sheethead

I see where ole Cindy bought 5 acres close to GW's Crawford ranch. Must be going to erect a shrine to herself .. she's long since disgraced her dead son! Can't see where her hunger strike did much damage to her bulbous butt, either. Must have been one of those symbolic strikes where you skip desert once a week ... :$