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Bob, thanks for the reply. What city if you don't mind me asking?
You aren't going to get a lot of appreciation (like pretty much zero) in most of the area's that have the higher returns. But if the shit hits the fan there isn't going to be any real downside either. I was invested in the RIo Grande valley (another previous home) in 2007 and the properties didn't lose any value in the crash.Didn't gain much in 10 years I owned either. But the returns were very good.
Bob, I like a lot of the opinions you have contributed about real estate, but from a pure investment point of view, I am a little bit confused why someone would prefer Zero appreciation with high rental returns, vs high appreciation rates and lower rental returns? I would think, the latter provides better overall returns over time.
I could be biased as OC where all my rentals are, generally provides high appreciation with lower rental returns.
I ask this question to all.
I looked up the OC numbers. OC prices 2017 are at $2 sq foot rents and right at 300 aq foot to buy. I'm buying at 40 a sq ft (actually slightly less but I don't have my calculator) and renting at .8. So for a 2k sq foot house you would be paying 600k and getting 4000 a month 48,000 a year. For 600k I can get 12 houses renting at 800 or 9600 a month 115,200 a year. That 66,000 a year difference. The expenses will work out differently but are houses in oc actually appreciating 60k a year each and every year long term? If so great of for you, but there are very very few markets that is true for and tying up half a mil plus for one house on that gamble doesn't turn me on at all.
My old house, worth almost $800K rents for $3,300. The condos worth around $500K rents for $2,800 per month, with a $1,000 per month in expenses for association, property taxes, mello roose taxes. Still a 3.5% to 4% cap rate, which is still very high in OC compared to the past.
Also keep in mind the management headaches you would have with a dozen properties, and constant cost of fixing them up. $50K properties, anywhere, cannot be in great shape.
You dodged my question. What is the long term ROI? What was the original price, what is the price now, what is rent paid over what time period? You keep telling me appreciation works better, but you aren't laying out much of a case why. You also can't reinvest appreciation until you sell the house and then you pay 7% closing on it. I can keep reinvesting the higher rents relative to purchase price in an ongoing basis to create additional revenue.
$50k purchase $800/m is war zone territory. Vacancy will be at least 30% and maintenance will be through the roof as tenants will cook meth turn tricks and trash the house before leaving.
6mo later with increasing volatility, I’d like to bump this back to the top to see how people’s strategies are changing
How much is left over now?
with increasing volatility,
Really, that's a plan?
Pay absolutely every debt that you have. Pay down/off mortgage.
And believe it or not, I believe we are in a recession at this time given the insane bargains on things like home improvement, travel and entertainment
Malcolm saysPay absolutely every debt that you have. Pay down/off mortgage.
@Malcolm I absolutely agree. Simply not paying interest is usually a good investment.
Paying debt is the safest investment you can make.
When everyone’s defaulting you will be golden.
It is way easier to not have to spend money in the future than to save and plan for it.
That depends.
If you can make a higher return putting that money to work than what your interest rate is, do it. Plus, it's better to stay more liquid than having your money tied up in equity, which can be difficult to extract, if needed.
6mo later with increasing volatility, I’d like to bump this back to the top to see how people’s strategies are changing and if any stocks stand out in your portfolio moving forward?
Not always. When I make major purchases, I play the zero percent game, and use other people's money and hang on to my cash. I'll take that type of debt every day of the week.
Bobs numbers are way exaggerated.
$50k purchase $800/m is war zone territory. Vacancy will be at least 30% and maintenance will be through the roof as tenants will cook meth turn tricks and trash the house before leaving.
Funny thing, just skimming other posts, not one person suggests starting a small business.
To be fair, that was not the question. Starting a small business is not an investment, it is a change of job. The statement "Say you have $100K-150K cash to invest today. Let's say the investment period is 5+yrs" strongly implies someone keeping their job and looking for what to do with invest-able cash.
I stand corrected; not one person suggested investing in a small business.
If you have passive income, like rentals, you could also invest that way.
buy low sell high.
I actually tried to do that in my area. I was looking for a place to park some money and diversify, kinda like a "Shark Tank" approach with a local business.
Couldn't find anything respectable. Lots of crazies looking for me to invest in some wacked out idea they had, but no legitimate business that could use the help/money.
Bobs numbers are way exaggerated.
$50k purchase $800/m is war zone territory. Vacancy will be at least 30% and maintenance will be through the roof as tenants will cook meth turn tricks and trash the house before leaving.
Unless you are religious about going to the gym, id invest some in good execercise equipment
Unless you are religious about going to the gym, id invest some in good execercise equipment
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Say you have $100K-150K cash to invest today. Let's say the investment period is 5+yrs.
Real estate and the stock market equities are bloated at historical highs.
Where would you put your money today?
#investing