Tell that to the people of Port Royal, Jamaica. An earthquake hit in 1692 and part of the city fell into the sea. That real estate went to zero! Three gorges dam. 1.2 million people had their real estate go to zero when the water came in. Ok if you want something a little closer to home. I will just say one word....Detroit. Plenty of homes there that are worth zero. Anything can go to zero.
I know the condos you are talking about in orlando (I did some RE work and lived on lake eola). Some of those Homeowners associations are BK, so be careful. Im not even sure what the full consequences of a BK HOA are but its got to be baked into those prices. I watched a metropolitan studio go from 97k to 200 and now 30. Ridiculous. Could be a steal long term tho, as long as the rental market doesnt crater.
Even if the property price "only" drops 30% one can lose 100% of the principal investment if one employs any significant amount of financing/leverage. IMO, (if leveraged) real estate is by nature not any safer/more risky than any other leveraged investment.
Thanks for the post and yeah, the condo association fees are something I had been looking into as some are kicking out bowel wrenching special assessments to cover for the 50% or more that are not paying it anymore. If you live(d) on Lake Eola, you would know the Waverly, which are the ones that were $500k which are now $125k (even saw one listed for $95k but they could be bid up, who knows and the HOA on those is like $600 and with a sizeable amount of owners in arears, who knows if that won't double for a while and make it that much more difficult to sell any more to help those in the properties). My $30k condos are in the nicer parts of Seminole County and the ones I am looking at are only the ones that have solid HOAs or in the case of the conversions, have at least resold most of them at these new low prices (watched one complex turn over 70%+ of their properties through short sales and REOs at an average 25 cents on the bubble high dollar). These are showing to be rentable right now (leary of downtown with the low condo/apartment occupancy rate) at prices that would more than cover the fees, property tax and would be mortgage if you could actually get a loan and I am on a 10 year time frame so it should work out. I am thinking diversification and to me, the risk to reward is there(which is why I am sticking with amounts I can afford to lose. Thanks again for the post and have a great week trading!!
Yeah, I meant Home Owners Association and/or the dues. BK is bankrupt. I knew the condo market there REALLY well downtown for a few years working at a residential real estate cosulting job, but I rented at Post Parkside. If I had my pick, not that Ive checked prices recently, I would love to own at Paramount long term. Although I heard they were switching to leasing and havent been inside, that location on the lake with the publix underneath is magic. I did some commercial work and a Publix anchor is gold. Plus due to some weird issue I forget, the parking garage will survive armageddon due to havng to be super reinforced. However, these are just my 4 year old half baked opinions, do your DD. DD is due diligence haha.
One advantage is that real estate doesn't have margin calls, which makes it less risky in one important respect. Lots of homeowners have gone into negative equity, and then made hundreds of thousands or even millions on their home in later years, just by staying put and continuing to pay the mortgage each month. You can't do that with a stock. Real estate prices are also less volatile when comparing with stocks.
When he says 75 cents on the dollar, he means 25% below comparables. Not 25% below the bubble peak. E.g. if 2 bed condos sold for 500k at the peak, and are 200k now, the investor would bid 150k minus any required refurb costs.