Housing P/E (Rent/price ratio)

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international001
Posts: 1933
Joined: Thu Feb 15, 2018 7:31 pm

Housing P/E (Rent/price ratio)

Post by international001 »

Hi,

Usually, P/E is higher for lower P (in the same area). My thought was that it had more overhead, plus there was some more risk involved (lower income people)

I was looking at some properties in some areas in Europe and I see this trend can be exaggerated (x2.5 P/E for a lower P house). Is this any indication of anything? Should I expect prices to go down in general?
Vanguard Fan 1367
Posts: 2016
Joined: Wed Feb 08, 2017 3:09 pm

Re: Housing P/E (Rent/price ratio)

Post by Vanguard Fan 1367 »

In a real life example I know of an appraised price of a commercial rental of 600K. The annual rent is 75k. What would you call the rent/price ratio of those numbers?
John Bogle: "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
Topic Author
international001
Posts: 1933
Joined: Thu Feb 15, 2018 7:31 pm

Re: Housing P/E (Rent/price ratio)

Post by international001 »

600/75= 8 (before any other costs). That looks attractive to buy

In Europe I'm seeing low P/E of 23 what is very low for buying

I'm talking residential. I'm not sure if commercial rentals are different.
Kmzizzle
Posts: 8
Joined: Sat Jan 19, 2019 3:40 pm

Re: Housing P/E (Rent/price ratio)

Post by Kmzizzle »

Vanguard Fan 1367 wrote: Wed Jul 03, 2019 6:06 pm In a real life example I know of an appraised price of a commercial rental of 600K. The annual rent is 75k. What would you call the rent/price ratio of those numbers?
A 12.5% cap rate is awesome... I would take that in a heartbeat. And that 12.5% will lever up even higher with debt
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