Rising Rates And Property Value
With rising intrest rates what precautions can we take when pricing our Sub2 purchases on L/O or CFD?
If prices stagnate or go down how can our buyers expect to refi and will we be even able to move these properties?
Thanks
Bri
Deflating value of any asset is a possibility, but if you look at historical perfomance you've got a pretty sure thing.
Are you in a bubbled market?
If the option price is higher than the proerpty is worth, you can always take back a second to make it work.
Brill - in my opinion you are asking a sophisticated and right on question. Moodys is asking the same question. Interest rates and cap rates are at 40 year lows. When they go up, property values will go down or else rents must go up to hold same value, but the incresase in interest rates will squeeze people and business. It took 30 years and a world war to recover from a similar situation in the early 1930's. I wouldn't be surprised if you sold****Must Reach Senior Investor status before posting URL's***s in 1998.
I see their software edits what it thinks is an attempt on my part to identify a web site, which is not what I was doing. I used a two word description applied to all the companies - most of whom went belly up - that were linked to the internet boom. The first word is equivalent to "period" the second word is a category term consisting of the first three letters of the word commercial. I playfully speculated that you sold these when other people should have.
alubeck I am not sure about deflate, but I feel strongly that if nothing else houses built and sold which have skyrocketed in value with the dropping of intrest rates will stagnate as the rates recover leaving us little margin for equity growth
Bri
When prices go down. That is when you put all of your knowledge together with your transaction skills and you get rich a lot faster. Why cause you become the only player. Why? I really do not know.
What happens then? You work a lot with the existing mortgages or Trust Deeds in position. You take back seconds on sale and if you need money you set up those seconds to discount to the idle rich who are always among us. You become the super paper manipulator. The last time we had a really nice dip. I bought a income property and utilized five second trust deeds as the downpayment. Cash was so short I did the escrow myself and as I could not afford a Title report I did an Abstract myself (an opinion of title not a insurance policy) funny thing. The nice man that got the five Trust Deeds as the downpayment ran short of cash about six months latter and had to sell the five trust deeds. Guess What I bought them and raised the money from the bank who came up with a rediscounted amount and the only condition they made was that they got to do the collections on the note. Whats wrong with that? Construction deals, buy land or lots. Nothing down seller takes back a mortgage (trust deed) with subordination. That allows me to go into the bank and borrow the money to do the building. It is a first trust deed the seller because of the subordination slides to second www.place.Talk about keeping three balls in the air. It was fun. Will it happen again. Of course when, damned if I know god knows I am trying to find out. Population pressures versus available land, considerations of how much vacant housing in what price ranges etc. I go by my feelings here in greater Los Angeles. depends on the election. Federal immigration game plan. Federal government corrections. IE: National Health Plan. Soc Sec. corrections, etc. etc. I say about two to three years assuming the continuing skill levels of our legislatures. Cheers Lucius
Lufos thanks for the insight though I have to admit you are talking a bit over my head. I will reread your post a few times and maybe it will gel..=O)
Thx
Bri
I think what Lufos is saying is that in a falling market you can make money via short sales. Which is true.
Even today, the short sale market is hot. Not because house values are falling, but because so many houses are in foreclosure with little, no, or negative equity.
If housing prices drop, and debt levels stay constant (or grow), the short sale market will become even hotter Check the SHORT SALE FORUM for more info.
thanks for clarifying. that is much easier to digest ..
Bri
What Lufos is saying is that when interest rates rise to extreme levels then the creative financier wins big time. Because the run of the mill buyer, seller and RE Agent doesn't know how to manipulate the paper. Seller's have a hard time in that market.
More deals to be had just a different manner in getting them.
I hope that no matter the market conditions we all perservere and meet our finacial goals. but I can see the point..
Bri