Discussion in 'Finance, Investing & Economy' started by zombiers, Mar 21, 2009.
In the US, is it easy to earn money with Real Estate?
If you have a Delorian, enough plutonium to get up to 88 MPH and the red clock set to 2005, then yes it most certainly is. Just sell by 2007 and you've got it made!
Just make sure that you don't leave your copy of Gray's Sports Almanac behind or AIG may fail!
as they say, real estate is medium risk, and medium return, and that is more or less true.
Price of real estate is determined by what they call cap rates (reciprocal of PE ratio in stocks) determined by similar "comparables" nearby. Which means, with everything being equal, the house (or office) you live in is determined by the sales price of your neighbor.
E.g. If your neighbor's house is similar to yours (but is twice the size) rents for $10,000/year, and sell for $100,000, the cap rate is 10%. Using the same caprate, if your hosue rents for $5,000/year, appraisal company will say your house is worth $50,000 using the same 10% cap rate. Since your house price is more or less determined by appraisal company, and lenders and purchaser and everybody else looks at this appraisal price, any investors will likely yield around 10% on their real estate purchase of your home.
(of course i simplified everything starting from location, years built, and school district, but you get the jist)
So relatively speaking, it is easy to make money in real estate on "normal" rate of return compared to stocks. Real estate will also yield higher than bonds even at 100% equity.
If you want to play real estate like stocks, REITs are a good way to go. My global REIT fund is earning like 12% annually on monthly dividends and there are plenty of REITs that yield higher. The real risk here, is the leverage level of the REITs and if REITs will be able to survive the downturn until the next rent increase.
The way I look at real estate, my basic motto is try to pick a good time, and assume the worst will happen... In other words, can you see yourself being forced to sit on this house for 5-10 years in order for teh market to rebound?
Also, do you plan on renting it? using it as a vacation home? Take into account the downside, so if you are forced into that situation, its not a total debacle..
Alot of that is also paying a large cash downpayment so you dont get hosed with huge mortgage payments, and god forbid multiple mortgage payments on vacant houses...
I would like to stay away from the leverage game personally, and only plan to invest in a 2nd or 3rd property in an area I am intersted in visiting in/living in off and on, and can pay cash straight up for most of the selling price..
I have always wanted a condo/house near Miami so I am eyeing that market for a winter/fall home.
$27.5mill, cash only and closed in 10 days!
one pretty good real estate deal in NJ:
25 counties expected to lose the biggest percentage of potential value increase once tax reform is enacted, according to research from Moody's Analytics.
Only six are located outside of New Jersey or New York:
You can earn a lot of money if you are working in the real estate field. But if you want to get really big money you need to spend a lot. Some of my friends have successfully started their business in real estate but they have taken a loan to start it. I can recommend you to visit one source and learn about online payday loans instant approval and how to get them to start your business. It can be useful for you. Or try to get some investments.