Real Estate is dying? Investment-wise what is the next Asset Class Du Jour?

Discussion in 'Economics' started by lrm21, Jul 21, 2004.

  1. lrm21

    lrm21

    Let's assume and I am not convinced that Real Estate is tanking. Stocks are probably done also, with the raising rates and at best we can expect so so returns.

    Anyone shifting funds into new areas and what are they?
     
  2. crizan

    crizan Guest

    I am curious if most people around here have any real estate investments that they rent out or are they just investing in their primary place of residence with the expectation that prices will go up.

    Over the past 5 years the first category have had a hard time keeping their rentals full because most people would rather own especially if housing is going to appreciate at 15% per year but I wonder if this trend is quietly reversing.

    If prices stagnate then there is no rush to buy since rents are so much cheaper right now.

    70% of people are already homeowners and I am assuming that the remaining 30%, if they do decide to buy, it will not be now and it certainly wont be in the higher price ranges.

    If so, it may be a good time to pick up a few investment, multi-family real estate if you can find it for less than 10x revenue in a transitioning neighborhood with a positive cash-flow.

    You can guarantee yourself an excellent long term interest rate and a good chance for increases revenues (rents) in the upcoming years.

    Anyone has any comments?
     
  3. multi-family real estate if you can find it for less than 10x revenue in a transitioning neighborhood with a positive cash-flow.

    hard to find rental real estate that will cash flow at least in my area.
     
  4. Eastern European real estate. Convergence play with W European countries now that they are part of the EU, cheap relative and absolute prices, very high yields in places (10-15% on prime location brand new apartments), rapidly growing incomes, and interest rates will eventually come down to Eurozone levels once they join the Euro.

    IMO property there will go the same way that Ireland, Spain, and other fringe countries in the mid-late 90s i.e. up a lot.
     
  5. VOLUME

    VOLUME

    It's impossible to buy today and have positive cash flow where I live. Home prices have almost tripled in the last six years.
     
  6. MR.NBBO

    MR.NBBO

    This type of scenario is probably the easiest way to tell a RE "bubble" in local areas. If it wont positive cash flow, or the replacement cost is much less than what it currently sells for.....then you've got a good bit of downside risk.

    Properties above 10x cash flow are really banking on the appreciation potential, ie. speculation.

    My rentals have appreciated at about 8% avg./yr and trade at 6.5-8.00 cash flow currently (they still make sense). Other area rentals in TX sell in the 7-8x cash flow range. We don't appreciate like CA.....but we don't tank like 'em either.
     
  7. lrm21

    lrm21

    6.5 - 8x cashflow!! Are you talking about Operating Income or Gross Income. My Condo (which I debated renting) is priced at 25 times net operating income. 14 times Gross (rental) income for an annual gross yield of 7% before expenses. definitely no positive cashflow after debt service even though I have 30% equity in it.

    Ive decided to sell it and put my money elsewhere.
     
  8. To park my excess cash...:)
    Traditional renting may be problematic but rehabbing and speculating is still the KING. Look at for example to Mobile Home PArks. That is selling/ renting dirt with little risk and overhead. There are some parks with positive cash flow of 5-10k/MONTH(!) and sold for ~500,000 now that is not bad.
     
  9. Midas

    Midas

    RV Parks are very good as well. Park owners need to put in a pad and sewer/electrical connection, some rec. area and thats about it.

    Margins are very good, and if the land is in a good area (close to water, resort area, etc) the land values can appreciate nicely.
     
  10. Midas

    Midas

    RV Parks are very good as well. Park owners need to put in a pad and sewer/electrical connection, some rec. area and thats about it.

    Margins are very good, and if the land is in a good area (close to water, resort area, etc) the land values can appreciate nicely.
     
    #10     Jul 23, 2004