Have I Missed The Market?
I am finally in a position to purchase some property. I am targeting mulit fam properties to hold and collect rent and sell further down the road. I have always subscribed to the buy low sell high theory (who doesn't right?) and after such huge growth over the last 5 years I am concerned that I may be buying high - possibly at the highest. I have also noted that market times are increasing and prices are begining to flatten. Have I waited too long? What are your opinions of what is the future? I know that in the long haul RE always goes up but how long would that end up being if this is this cycles peak?
Just looking to generate some discussion on what we face and hear some opinions. Thanks in advance.
You are right to be wary. I believe however, that muti units don't appreciate as wildly as bread and butter properties. They are harder to sell in bad times and easier in good times. What do I look for in this market? I am in the rural midwest, and what I have found and am buying is cashflow. I don't care if my properties appreciate. I believe they will, but that will be left to my heirs. I buy cashflow period.
I buy at 15 years, with 100% financed, at a positive cashflow. 20 units @ $200.00 per month positive cashflow is $4,000.00 they will be paid off in 15 years w/ a much larger cashflow and I will have the ability to retire. I am now at 32 units.
Good Luck,
Shawn(OH)
Quote:
On 2003-12-16 14:40, GlassJoe wrote:
I am finally in a position to purchase some property. I am targeting mulit fam properties to hold and collect rent and sell further down the road. I have always subscribed to the buy low sell high theory (who doesn't right?) and after such huge growth over the last 5 years I am concerned that I may be buying high - possibly at the highest. I have also noted that market times are increasing and prices are begining to flatten. Have I waited too long? What are your opinions of what is the future? I know that in the long haul RE always goes up but how long would that end up being if this is this cycles peak?
Just looking to generate some discussion on what we face and hear some opinions. Thanks in advance.
Your question can only fully be answered by using a crystal ball.
Each area of the country of course needs to be looked at to determine what has happened in the past to help you decide what you THINK will happen in the future.
Perhaps if you feel the prices are too high and wont appreciate much, you should not buy with the intention of holding.
How about looking for motivated sellers, ie those who are facing foreclosure. Give them a way out by buying their house below market price, which of course you will have already researched, and reselling.
Mike Plante[ Edited by MrMike on Date 12/16/2003 ]
I agree with loanwizard on buying for cash flow. With a cash flow acquisition strategy, the main role appreciation has is when you make trades. In hot markets you enjoy appreciation when times get tougher there are more buying opportunities. Either way you can do well.
Yup, you missed it,
It's gone. No more properties to be bought.
MrMike,
I wasn't looking for predictions. Simply opinions. I realize that nobody knows what is going to happen for sure.
As stated, I was looking to stimulate discussion and am interested in folks opinions.
Quote:
On 2003-12-16 16:57, nebulousd wrote:
Yup, you missed it,
It's gone. No more properties to be bought.
Ok can we cease with the smartass replies.
I am looking to dicuss with people what they see happening in the near to medium future. I recognize that there are numerous ways to do deals and make money in any market. I have briefly mentioned my intent and wanted to hear other opinions.
If you're not intersted in discussing then don't reply with a weak attempt to make yourself feel superior.
First off Joe,
Get a freakin grip. Take the stick out of....
nevermind. And your "superior" comment, if that's how you feel, see a therapist.
And before you blow some more smoke and get your blood pressure all up, click on the link below.
http://www.realestatetiming.com/housing_bubble.htm
Hey, now you're being helpful!
Thanks for the quality input neb.
GlassJoe,
I am in MA, and MA is different than most parts of the country. There are deals in every part of the country, but the last thing you should be investing in here is with the buy and hold long and hope it appreciates strategy.
You definitely did miss that opportunity in this state. If you are looking at nice properties for straight rentals, you are paying retail. Like folks here said, if it cash flows positively, then great.
You may need to switch gears in other areas of investing.
Start going to investors meetings, pronto. Next one is in January in Stoughton. Alan Kosinski is the guy in MA to listen to. He is brilliant, the Ron LeGrand if New England basically, or at least a creative, street smart, hard core investor
http://www.nereig.com
Good luck, Dave
by the way, you do NOT want to even think about landlording until you hear how Alan does it. He runs it like a business, not a charity operation. You can choose to run it the way you like, but this guy holds the bar to one end of the spectrum, for sure
You may be getting in at just the right time. With the high number of vacancies in many cities, there are some great deals available. I agree with Loanwizard that you should go for cashflow. I'm not sure what others are comfortable with, but in my niche(the lower end) I want to see a cashflow that could theoretically pay the property off in 5 years. The max I will pay for a property is 5 times gross annual rent but I try to stick with the 5 times annual cashflow or less. What you want to look for is a rental that has gone down hill. Then you can buy it cheap, fix it up nice, and still rent cheaper than your competition no matter what the market does.
5-6x annual rents is a valid target, as long as the property locale is growing, schools are desireable, other factors indicate a future. Landlording means positive cash flow...those who buy neg. cash flow long enough, with enough debt, and experience reduced rental markets face great risk...I grew up in MA and would prefer to rent currently in that area...<$1000 rentals face less exposure to any coming correction...100% financing, even with low-end product, increases risk...give me 80%, 30 yrs. fixed rate loans every time.
It is almost impossible to find a positive cash flow property in the Boston area. Triple Decker's in Roxbury and Chelsea are going for 500K+. You should try to find another area to invest in. Not to mention Massachusetts is one of the most tenant friendly states in the country.
Check out Florida. Prices are not in orbit yet, and all the baby boomers are coming down to buy, so prices should appreciate steadily in the future. You can find positive cash flow property's even if you plan on financing 100% LTV. They are out there, you just have to find them.
Plus as an added bonus, you can take tax deductible trips down to check on your investments when a Nor' Easter is on the way. Good Luck!!
don't remind us, we just got 2-5 feet of snow in New England from the past two NorEasters and it is not even officially Winter yet!!!!!!!!!
Yes, you have to know your tenant law up here, but again, our investor guru is a whiz.
I know it is just a reality, and people on this board mean well, but lots of posts are made with no understanding of state by state market conditions and laws.
You really do have to know state laws and market conditions to accurately comment on what someone should or should not do in a given market, even though folks have the best intentions.
But one thing is clear: there are deals EVERYWHERE, you just have to adjust your approach to fit your market. Not enough gurus teach that.
Best, Dave
When you buy rental property your looking for cash-flo.
You'll be looking for money left over after all the bills are paid(POSSITIVE CASH FLO).
Who cares what your renters paid for the building.( ITS A HUNDRED PERCENT PROFIT.)
Not to mention the fringe benifits like tax breaks, monthly profit ,after sell profit.
Great INVESTMENT I think.
ED
Re a rising market; I am a newbie on the Big Island of Hawaii where prices have been going up for a couple of years. Obviously it will take some searching to find deals here but my question is about investing on the mainland. Is this too difficult now(certainly it is at the begining stage)? Later on with more experience is it feasible? How close do I have to be in order to own an apartment complex for example?
Look at cashflow and break even points.
How far can rents drop until you get to your break even poing. Then ask yourself how likly it is. If they've over built or had a net outflux of people, then the market will need an adjustment.
If your rents can drop $100 per month per unit, and you think that it's improbable that they will go further than that, then go for it. 20% swings do occur though.
Keep in mind....you too are looking for distressed sellers and properties. The "pretty" properties will be (relativly) expensive in any market. You're looking for the diamonds. Get to know the market well enough so that you can spot a deal when it comes along. Until you know your market, it's just a guessing game.
I think you have the answer, mgraval. The baby boomers are getting ready to retire, and as far as I can tell, the majority of the heirs will not want to travel their foremothers/fathers investment paths; which will eventually create a wonderful playground for those of us who do!
"Buy from those who have to sell."[ Edited by jeannie64 on Date 12/17/2003 ]
The mass. market is definatly beginning to stablize. This means more foreclosures occuring, (i belive anyway) I don't know how much of a drop it would take, because if I knew that, I'd be a millionare in the stock market. I wouldn't say you've "missed" it, but its a little tougher, but the consistant and determined investors will be successful during this "drought"
It all depends where you are. Geography is so important when it comes to the "housing bubble". The economy has stunk the last few years and places hard hit by NAFTA and the loss of "American Jobs" (e.g. manufacturing) the housing market has slid. Here in NC prices have not appreciated that much at all. I don't mind because I'd rather accumulate at these prices and interest rates.
The American economy is retooling itself into science, tech, biotech, etc...once these spheres back fill the "rust belt" and other areas their housing markerts will sky-rocket.
Q
Remember God only made so much real estate. The population is growing steadily and people will always need places to sleep.
Q
Sorry.. this reply is a little bit regional.
But needless to say.. Newton is not where you're going to find the deals you want. I though I had it bad in Milton! ... Investment property around here is in tougher areas... i.e Boston ( Mattapan, Dorchester ), Brockton etc.
Prices have been going crazy .. but the right deals are still there. Dorchester, 02124 has been one of the highest appreciating areas in the country in the last few yrs. Couple of suggestions for you:
Boston a decent multie will cost you around $500K .. you'd maybe find 20-40% cash on cash return.
Brockton .. maybe $400K with 40-50% and say you would be willing to buy in Springfield.. you may get a 4 family for $130K with 50-100% cash return
cash on cash being money laid out divided by rental income - expenses ( mortgage, insurance, water, maintenance and vacancy ) PM me if you would like more info