How to play a multi-year real estate bull market

[dac8555]

great posts here. i am young, and have only had 2 homes...one was inherited. so i am no expert....BUT

There is a pretty huge supply of homes on the market right now...single family. It would be risky to do the fixer upper. that market is REALLY flooded. but it has been good the last 10 years.

Rents are very low. I think safer money would be in a small apartment complex over the next 5 -10 years.

good luck

 

[Cutten]

Quote from vhehn:

isnt it a little late? if anything the real estate bull market seems to be ending.

Only if you think no real estate exists outside the USA

 

[jem]

Well if you are looking outside the U.S.

The first thing you have to look for is an opposition party that is not likely to nationalize the best properties and screw the foreigners. Sort of the opposite of what Mexico did in the past.

The minute some socialist gets in and times become hard. Boom there goes the foreigners holdings.

Costa Rican coastal properties have been bought by Souther Cal people since the early 90s. I wonder how much more upside there is?

This may be a bit late, but I would look for places accessible from airports with amazing surf breaks. I would by up all the land for miles and I would then build up a surf camp. Keep it very cheap at first almost run it at a loss. Sell some of the land to surfers. Then let the locals set up service businesses. Then in 40 years you could be like that McCoy guy and sell part of mammoth mountain for a billion dollars.

 

[Banjo]

There is a burgeoning ex-pat gringo communiity in Panama. Sort of the new Costa Rica.

 

[Smart Money]

Quote from dac8555:

great posts here. i am young, and have only had 2 homes...one was inherited. so i am no expert....BUT

There is a pretty huge supply of homes on the market right now...single family. It would be risky to do the fixer upper. that market is REALLY flooded. but it has been good the last 10 years.

Rents are very low. I think safer money would be in a small apartment complex over the next 5 -10 years.

good luck

If I was in a position to get a small apartment complex, I would do so in a heartbeat, my friend. Every bit of analysis I've done indicates to me that its the right move. The timing might not be perfect because some of them are still priced as if the buyers will do condo conversions...depends on where you're at. I'm arranging things so that when my youngest kid goes to school, we'll buy one, and my wife will run it, thereby collecting the ex-manager's wage. Can't wait.

Remember, if you control $1,000,000 in property, in about 14 years on average, you will have $1,000,000 in equity. Not the fast money you supertraders are used to, but a GREAT fallback position.

SM

 

[prt_systems]

Quote from Banjo:

......

NEVER get involved in a deal structured in a manner that doesn't immediately provide positive cash flow, it is simply uneccesarry to do so.

Don't limit your investment portfoilio to just one market, i.e. residential rental or commercial.We even have a truck stop.

Know the area, the demographics are always morphing, ask yourself what is under way in terms of population shifts, there is always something and the change can accelerate faster than you may think. Questions like who wants to live /work here and why., the same questions you would ask yourself if you were the renter/buyer.

Develope a solid relationship with a banker who understands the biz, they will provide you better financing and even find some opportunities as they are in the flow of information. Twenty years ago my banker ask me if I wanted an almond/ olive orchoard/ vinyard in Napa. I said , what am I a farmer, another 15 million left on the table.

Don't be afraid to create/ structure unusual deals. Maybe you know a contractor who can put up an industrial park with his banks financing but can't afford the property purchase, you put up the property, lease it back for 25 yrs or form a partnership, think outside the usual box.

All of this depends on your ability to read the mkt. An example: They passed a law eliminating metal plating without millions in cost to the platers. After talking to platers we built a facility, industrial park, 40 mi away in another county with less egregious laws, they leased , moved their equipt in and kept present locations for store fronts.

All in, the idea is to be aggressive and keep the ball rolling , think of it as farming , you are continuously planting and harvesting.

People have been calling tops in the R E mkts since the first owner claimed a piece was his and decided to defend it.

This is a great post and probably the first one I have seen here that provides any value on what you actually need to do to make money in real estate.

... And there is really never any "Top" in real estate because there are always areas/sectors that can still cash flow or that have longer term hold potential.

Like farming, you need to know when the crops are ready to harvest - that is when a property has run its course according to your plan and its time to transact it ....

 

[Bitstream]

maintenance costs and repairs are the biggest problems u have to deal with when u own and manage a lot of proprieties; central heating malfunctions, broken pipes, insulation, drainage, fixtures and roof repairs can put an enormous strain on your finance if u don't have cash flow and took full advantage of leverage: during the first few years u'll be lucky to breakeven.
Don't buy spaces u won't be able to afford to maintain and repair because every year u will be overwhelmed by faults that seem to come out of the blue and that are not going to go away: delays in sorting out these problems cause your tenants to fly away and your proprieties to decay at a point u'll have to get rid of them because u won't be able to afford to restructure anymore.

 

[Kicking]

Quote from Cutten:

Only if you think no real estate exists outside the USA

When RE tops out in the US, it will be over everywhere IMO for quite a while. I don't think looking for foreign markets to appreciate and "catch up" is a good idea.
This seems to me like a simplistic assumption. RE has gone up because of the Fed irresponsible policy, that forced other central banks to adopt the same policies. When the accommodative environment is gone in the US, there is no reason to expect it will remain elsewhere.

Anyway I believe one should have some RE in their portfolio, your own residence, a second one and one or two rental properties if you can. But speculating in residential RE or renting as a business with the aim of maximizing returns by raising rents is morally WRONG. Some of you talking about raising rent every year to maximize returns should be ashamed of themselves, greedy m*f*ckers. Rents shoudl not be raised much more than inflation. How can you look at yourself in the mirror and be proud of yourself when you make your money by squeezing the working class.

 

[prt_systems]

Quote from Kicking:

..... Some of you talking about raising rent every year to maximize returns should be ashamed of themselves, greedy m*f*ckers. Rents shoudl not be raised much more than inflation. How can you look at yourself in the mirror and be proud of yourself when you make your money by squeezing the working class.

well, I know it sounds heartless to raise rents but the whole rental equation is based on the ability to increase rents to keep a steady profit or increase your profits....

And, I'm not sure you are really squeezing anyone .... if you raise rents too much people will move, or in the environment we had recently , simply buy. Nobody has the goal to be a renter forever. Eventually most people get some type of home here in the US. .....

I know that in the areas where where I have lived or worked over the last five years rents actually decreased and basically stayed flat .. only now are they just starting to rise (over the last year).

 

[Banjo]

Quote from Smart Money:

If I was in a position to get a small apartment complex, I would do so in a heartbeat, my friend. Every bit of analysis I've done indicates to me that its the right move. The timing might not be perfect because some of them are still priced as if the buyers will do condo conversions...depends on where you're at. I'm arranging things so that when my youngest kid goes to school, we'll buy one, and my wife will run it, thereby collecting the ex-manager's wage. Can't wait.

Remember, if you control $1,000,000 in property, in about 14 years on average, you will have $1,000,000 in equity. Not the fast money you supertraders are used to, but a GREAT fallback position.

SM

To people thinking about getting into the biz (poster smart money already knows this) I would make a couple of points.

Aquire a degree of knowledge, like the mkts, this is a game of information. Junior colleges and places like the learning annex have classes usually taught by local brokers who are hoping to pick up some biz. This is important because there are formulas used by buyers and sellers to establish value. You have to know what they are. Use to be anything below 7 units was a mom and pop deal and never looked at by the next tier of investors, no idea what the #'s are now or in your particular community.

Leverage your skillset, if you don't have one, learn some. This is just common stick construction. Places like Home depot can teach these simple skills on weekends, in the begining being able to understand proper painting , changing faucets, do some tile work,change a garbage diposal can save a lot of money. Later on it when you pay somebody else, you will know whats involved, how much it should cost and be able to properly inspect the job .