Can you hedge real estate?

[destriero]

You're in a conversion at a loss (synthetic trades over cash).

There is no insurance or hedge for the property investment. All you've done is lock in a loss on the conversion.

 

[semperfrosty]

I visit a few agriculture/farming forums and I found an interesting question last week. The quote below is from a guy who is looking for a way to hedge land value against a commercial real estate market crash. The event he wants to hedge against is very unlikely but has happened in the past. It was the worst consequence of the farm crisis in the early 80’s. His grandpa probably had lots of neighbors that lost their farms because of a sharp quick equity drop that triggered the acceleration clause in their mortgages.

How would you use futures and options to hedge against a real estate crisis? You could buy out of the money puts on the SPX, but would it be correlated enough to do the job?

The full thread I’m referencing is here: https://newagtalk.com/forums/thread-view.asp?tid=1139290&DisplayType=nested&setCookie=1

“I’m considering a land purchase that is on the edge of town so developers have the appraisal pretty high. I can afford the payment easily with my current income but I’m concerned about a drop in real estate values. The current interest rates make a downward adjustment of land value a real possibility and could change that appraisal figure substantially. If the lands appraised value was to drop by 50% a lender would likely ask that the principal be paid down to get the balance below the new valuation. This would pull the brakes on my other ventures pretty hard and I don’t know if I could stomach it. Is there a way to hedge land value after a purchase? An insurance policy? Some financial market option I’m not aware of?”

50% in real estate is a black swan IMO.

You would find hungry buyers at 20%,let alone 25/35/45%.

Commercial property needs to be invested in in the appropriate way,as part of a business plan.

If they hit their business/production etc targets year over year then it will pay for itself.The targets should be identified before purchase.The hedge in my opinion is in the realism of the targets and keeping them conservative/worst case whilst evaluating.

 

[destriero]

50% in real estate is a black swan IMO.

You would find hungry buyers at 20%,let alone 25/35/45%.

Commercial property needs to be invested in in the appropriate way,as part of a business plan.

If they hit their business/production etc targets year over year then it will pay for itself.The targets should be identified before purchase.The hedge in my opinion is in the realism of the targets and keeping them conservative/worst case whilst evaluating.

DTLA commercial properties taking a 50% haircut in 13 years. Union Bank Plaza sold for 208 in 2010 and sold for 104 this year. AON prop took a 45% haircut in 9Y.

 

[destriero]

I'm not going to have value add deleted due to a 3X banned loser (Q-tip) posting an edge loss in a conversion arb on listed-shares as a "hedge" against a property investment.

The ownership should stick to their knitting. This ain't it.

Bye all.

 

[Quanto]

Blocked as well...not even sure why.

I block everybody who is with the well known spammers here, liking their spam postings etc.
Let me know if you want to be unblocked.

 

[murray t turtle]

50% in real estate is a black swan IMO.

You would find hungry buyers at 20%,let alone 25/35/45%.

Commercial property needs to be invested in in the appropriate way,as part of a business plan.

If they hit their business/production etc targets year over year then it will pay for itself.The targets should be identified before purchase.The hedge in my opinion is in the realism of the targets and keeping them conservative/worst case whilst evaluating.

%%
BUT that sellers[lenders one sided contract] of all the loan balance due if values drop\ sounds like a super buyers rip off, even more so with 100% RE gains already.[And the lender may, depending on contract, sue you for the balance if foreclosed]
Also , some should consider learning about as much as a certified appraiser, but that's a long tern goal.....

 

[semperfrosty]

I block everybody who is with the well known spammers here, liking their spam postings etc.
Let me know if you want to be unblocked.

Damn!

I've just had 30 T-shirts made.

I'll have to pass...it would be disingenuous.

 

[semperfrosty]

DTLA commercial properties taking a 50% haircut in 13 years. Union Bank Plaza sold for 208 in 2010 and sold for 104 this year. AON prop took a 45% haircut in 9Y.

Yes I did notice your comments on the tower in earlier posts.Not sure what has transpired there.

 

[murray t turtle]

Yes I did notice your comments on the tower in earlier posts.Not sure what has transpired there.

%%
Some had to sell @ that price{-50%-45%};
so buyers market.
Location may have changed over the years, too many crimes ,CA taxes, +regs, +buyers exodus, most likely??

 

[MarkBrown]

Blocked as well...not even sure why.

Badge of honour by the sounds of it!

Sending everyone a t-shirt: "If youre not blocked by Quanto,youre sitting at the wrong table."

this is so funny cause i summed him up about a week ago and completely blocked his whining little bitch ass.