So is now a good time to invest in real estate?

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Billy Pilgrim
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Joined: Sat Aug 02, 2008 2:53 pm

So is now a good time to invest in real estate?

Post by Billy Pilgrim »

I Was reading this morning.
http://online.wsj.com/article/SB1000142 ... op_emailed

Waiting to pick up my lunch when some guy was talking up that this was the time to invest in real estate. As he put it there were going to be some real deals out there because of deflation.

Personally, I would not get anywhere near investing in real estate because lenders are not as generous as they are two or three years ago.

What do you all think?
exigent
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Post by exigent »

To me, the question is not whether or not lenders are being generous, but whether or not the market has bottomed (or nearly so). Unfortunately, I don't know the answer to that.
Stonebr
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Location: Maine

Post by Stonebr »

Old rule of thumb: The time to invest in real estate is when price you pay is no greater than 100 times gross monthly rent that you can earn now.
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paddyshack
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Re: So is now a good time to invest in real estate?

Post by paddyshack »

Billy Pilgrim wrote: As he put it there were going to be some real deals out there because of deflation.
Wouldn't buying now with deflation make it a bad time to buy now? With deflation, making the same payment amount becomes more difficult moving foward. On the other hand, if significant inflaction were to happen, having a lot of leveraged debt would be a nice position to be in (assuming your cash flow moved with inflation).

That said, there are 'very good deals' out there compared to buying 3 years ago. Of couse, almost everything bought 3 years ago ended up being a terrible deal - so buying now might just be a 'not as bad' deal. Historically these have been the kind of times that the bold have made hay - but it wasn't just the timing or boldness that was required.
inspired investor
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Post by inspired investor »

I would love to pick up a piece of investment real estate in my town simply because our family is filled w/ contractors and electricians that can do maintenance on any rentals. Do you really want to be a landlord, and/or do you have sufficient funds to hire a property management company?
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Ruprecht
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Post by Ruprecht »

Unfortunately most current homeowners are reluctant to sell for less than the outrageously overpriced amounts they foolishly paid during the bubble.

I think it may be cheaper to buy a newly constructed house from a builder, who is more likely to know what the houses are actually worth.

I'm amazed at how many houses are sitting unsold due to owners asking ridiculously high prices. Apparently lots of people don't mind paying monthly mortgages on houses they don't live in. My neighborhood is full of empty houses with rotating 'for sale' signs. Based on what they're asking, the houses must have gold pipes and diamond-encrusted kitchen equipment.
Valuethinker
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Re: So is now a good time to invest in real estate?

Post by Valuethinker »

Billy Pilgrim wrote:I Was reading this morning.
http://online.wsj.com/article/SB1000142 ... op_emailed

Waiting to pick up my lunch when some guy was talking up that this was the time to invest in real estate. As he put it there were going to be some real deals out there because of deflation.

Personally, I would not get anywhere near investing in real estate because lenders are not as generous as they are two or three years ago.

What do you all think?
You need to realize this is not an 'investment' this is a business decision. You need to view real estate investment and management as a business, that you will have to put significant time and effort into (just like any small business).

Commercial or residential?

Commercial you want a cap rate of probably 7-8% (depends on quality of building, location, tenant). Poster YDNAL here is an expert in the field.

Residential there are 20 million empty homes in the USA on one estimate I saw. Prices and rents are going to be depressed for some time.

But if the cap rate is high enough that probably compensates.

As ever, location, location and location.
allancoleman
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Joined: Tue Sep 11, 2007 9:00 pm
Location: Alaska & Hawaii

Post by allancoleman »

With real estate valuations down in most locations , it depends on your planned use for the property whether you should buy or not . If you expect to flip the property for a quick profit or build and speculate on a quick sale , there is probably never a good time to buy . However if you have a longer term outlook and a planned use for the property as a possible second home for use later in retirement , there are some excellent opportunities available in most locations now .

I have personally seen several real estate booms ... and busts in the past . And have never regretted buying at the bottom in the past . Howver due to the fact that I'm a bit longer in the tooth now and already have real estate that I bought at rock bottom prices in the past that I am still well above water on and still trying to sell at a profit at this time , I'm going to have to pass up on this real estate buying opportunity . :) . However , for those younger investors with a longer horizon and a interest in personally owning real estate for the longer term , now is an excellent buying opportunity in most areas of the country . And my personal advice to serious real estate investors is that although its O.K. to go into debt to buy in the begining , make sure your longer term business model is to own all of your real estate , including your own home , completely debt free . :!: . That strategy has worked very well for myself to be able to weather the downturns that will definitely happen again in the future cause the bible is correct about the old saying that the debtor is definitely a slave to lender . :)
james22
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Post by james22 »

James Saccacio, the CEO of RealtyTrac observed a week ago, "The roller coaster pattern of foreclosure activity over the past 12 months demonstrates that while the foreclosure problem is being managed on the surface, a massive number of distressed properties and underwater loans continues to sit just below the surface, threatening the fragile stability of the housing market."

On Sunday's edition of Meet the Press, Alan Greenspan remarked that there is a huge number of homes that would go "underwater" if home prices were to slip by another 5-7%, and that such an event could potentially trigger a large wave of additional foreclosures.

http://www.hussman.net/wmc/wmc100802.htm
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