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Real Estate is dying? Investment-wise what is the next Asset Class Du Jour?
- Thread starter lrm21
- Start date
Rumor has it that China is prompting its' citizens to hold 10%, of their personal wealth, in gold.
Clinton is rumored to have sold the USG stockpile of silver in the 90s. We have been getting by on production only. Silver premiums reflect this shortage.
And then there is alt. energy. The time to move on this is early when you can buy a bushel of good ideas for under $5.00 each.
Start up oil companies are hard to find, but I use a scanner to find about 1 every 2 weeks.
Clinton is rumored to have sold the USG stockpile of silver in the 90s. We have been getting by on production only. Silver premiums reflect this shortage.
And then there is alt. energy. The time to move on this is early when you can buy a bushel of good ideas for under $5.00 each.
Start up oil companies are hard to find, but I use a scanner to find about 1 every 2 weeks.
Thanks to everyone for their kind comments about my post. Special thanks to Billbuild for the builder bond idea. I'm in a different segment of real estate, and have other indicators, but I will add this to my list. Very astute.
My hope is that some of the more gung ho real estate investors will be made to think twice when they understand that two experienced real estate people on this site are going to cash.
In the properties I own, both my rents and occupancies are going down, and my expenses are going up, which means that my equity is dropping like a stone. The middle class in this country is being economically hollowed out, and they can afford less and less for what I have to offer them. The trends are ominous, both for them, our country, and for real estate investors. I think we're coming in for a dramatic decline in real estate values, and my advice is to stay away, and raise cash. That is what I have been doing for the last three years.
My hope is that some of the more gung ho real estate investors will be made to think twice when they understand that two experienced real estate people on this site are going to cash.
In the properties I own, both my rents and occupancies are going down, and my expenses are going up, which means that my equity is dropping like a stone. The middle class in this country is being economically hollowed out, and they can afford less and less for what I have to offer them. The trends are ominous, both for them, our country, and for real estate investors. I think we're coming in for a dramatic decline in real estate values, and my advice is to stay away, and raise cash. That is what I have been doing for the last three years.
I am always amused that people classify all real estate as the same. HOMES are basic shelter. It is needed!!! Sure there will be some "panic sellers" because of personal problems, divorce, transfer, loss of job etc. But, people need a place to go home at nite.
Commercial real estate is different with different needs and uses.
A retail operation NEEDS a good location in order to do business. The location is going to directly effect their business. Walgreens on a back street with poor access is not going to survive.
Industrial has it's own special needs, rail frontage, port, etc.
Office WANTS (but does not need) a good location. I live in Houston and we have a very natural ceiling on rents. As soon as rents get too high, builders build new office buildings.
WE HAVE TOO MUCH AVAILABLE LAND. I am seeing rents in office buildings that we were paying as tenants in 1984!!!
So long and short term viability of real estate is very sensitive to location, type, and timing.
SteveD
Commercial real estate is different with different needs and uses.
A retail operation NEEDS a good location in order to do business. The location is going to directly effect their business. Walgreens on a back street with poor access is not going to survive.
Industrial has it's own special needs, rail frontage, port, etc.
Office WANTS (but does not need) a good location. I live in Houston and we have a very natural ceiling on rents. As soon as rents get too high, builders build new office buildings.
WE HAVE TOO MUCH AVAILABLE LAND. I am seeing rents in office buildings that we were paying as tenants in 1984!!!
So long and short term viability of real estate is very sensitive to location, type, and timing.
SteveD
Friend of mine who is heavily into real estate just bragged to me the other day about making mid six figures selling two condo units.
I was happy for his profit and his good fortune. But what is he doing with the profits?
Buying TEN units!
Don't you see, its because the market is going up... there's only a limited amount of housing... the baby boomers are going to retire... interest rates are still low...
1) Dude, you gotta buy CMGI. Its going to like, 600.
2) Gold is cheap at 800. Its the only hard store of assets left!
3) Sir, may I interest you in some shares of the brooklyn bridge?
I was happy for his profit and his good fortune. But what is he doing with the profits?
Buying TEN units!
Don't you see, its because the market is going up... there's only a limited amount of housing... the baby boomers are going to retire... interest rates are still low...
1) Dude, you gotta buy CMGI. Its going to like, 600.
2) Gold is cheap at 800. Its the only hard store of assets left!
3) Sir, may I interest you in some shares of the brooklyn bridge?
Drsteph,
I'm not sure what you mean, but the RE sellers sure need buyers. I hope they don't dry up too soon.
We are in a 10-20 yr bull market for commodities. Don't leave it at gold only. Silver should reach its all-time high too.
RE ran too hard, way overbought. Not much room left above, but lots below.
RE has had its run. It will cool off as inflation takes over. Then we should get deflation. Inflation and a sluggish to sick economy will take out many investments. New ones will take their place. Those who see the cycle changing will profit from the new plays.
I'm not sure what you mean, but the RE sellers sure need buyers. I hope they don't dry up too soon.
We are in a 10-20 yr bull market for commodities. Don't leave it at gold only. Silver should reach its all-time high too.
RE ran too hard, way overbought. Not much room left above, but lots below.
RE has had its run. It will cool off as inflation takes over. Then we should get deflation. Inflation and a sluggish to sick economy will take out many investments. New ones will take their place. Those who see the cycle changing will profit from the new plays.
Buyers are all around. Just a matter of price. Inflation basically good for real estate. It will ebb and flow but always there.
Don't see how anyone can project out 10-20 years on commodities???? Maybe 1 or 2 years. Not aware of any smart people projecting oil at over $50 bbl 18 months ago?
Non foreseeable events move commodities to a great extent.
Some people get lucky but no one ever talks about the other wrong predictions.
Garzarelli a good case. Jim Rogers also.
SteveD
Don't see how anyone can project out 10-20 years on commodities???? Maybe 1 or 2 years. Not aware of any smart people projecting oil at over $50 bbl 18 months ago?
Non foreseeable events move commodities to a great extent.
Some people get lucky but no one ever talks about the other wrong predictions.
Garzarelli a good case. Jim Rogers also.
SteveD
Steve, I'm projecting the commodity bull based on long-term demand from China and India and a falling dollar in the US.
Rapid inflation is not good for RE, IMO. It scares folks because it comes with rising int. rates, a slowing economy and job loss. Leading to deflation. You can already see all of that. It is like a train moving toward you and you're on the tracks. At the very least you'd want to step aside.
But, I will admit that most people will stand right there and get mowed down like the dot.com collapse.
http://www.washingtonpost.com/ac2/wp-dyn/A43402-2004Oct18?language=print
When the Wash Post prints it, the big money has already moved. This is an alert for the smaller fish.
Rapid inflation is not good for RE, IMO. It scares folks because it comes with rising int. rates, a slowing economy and job loss. Leading to deflation. You can already see all of that. It is like a train moving toward you and you're on the tracks. At the very least you'd want to step aside.
But, I will admit that most people will stand right there and get mowed down like the dot.com collapse.
http://www.washingtonpost.com/ac2/wp-dyn/A43402-2004Oct18?language=print
When the Wash Post prints it, the big money has already moved. This is an alert for the smaller fish.
Billbuild,
Here is where I have a bit of an issue with the current mania in California, primarily Orange County.
A 2 bd 1.25 ba 1000 square foot townhouse/condo in Aliso Viejo sells for about 380-390K. This is a STARTER home in the area. Figure a generous down of 5% and 6.5% 30yr jumbo fixed no points loan because they don't have the cash for a traditional down, paying points is out of the question.
Loan PI 2341 0 down moves to 2465
Taxes 405 not including potential Mello Roos
Insur 125
HOA 275
Total 3146
I can rent the same place for $1,400-1,500!!! Why in the heck would you even want to buy. Someone may be able to squeeze a lender a bit, that PI was from a local bank charging .5 points. Even tax benefits don't make up for the disparity IMHO.
The kicker is that prices for these units haven't moved much in the last 6-9 months. If the tree isn't growing from the bottom the top can't continue to grow/broaden.
I'm looking to move to the La Quinta/Palm Desert area and the situation is much the same. Trying to figure out if I want to buy a lot and build a home due to the $/sq ft being charged.
I always enjoy your comments and post to the board.
Later,
Cracked
Here is where I have a bit of an issue with the current mania in California, primarily Orange County.
A 2 bd 1.25 ba 1000 square foot townhouse/condo in Aliso Viejo sells for about 380-390K. This is a STARTER home in the area. Figure a generous down of 5% and 6.5% 30yr jumbo fixed no points loan because they don't have the cash for a traditional down, paying points is out of the question.
Loan PI 2341 0 down moves to 2465
Taxes 405 not including potential Mello Roos
Insur 125
HOA 275
Total 3146
I can rent the same place for $1,400-1,500!!! Why in the heck would you even want to buy. Someone may be able to squeeze a lender a bit, that PI was from a local bank charging .5 points. Even tax benefits don't make up for the disparity IMHO.
The kicker is that prices for these units haven't moved much in the last 6-9 months. If the tree isn't growing from the bottom the top can't continue to grow/broaden.
I'm looking to move to the La Quinta/Palm Desert area and the situation is much the same. Trying to figure out if I want to buy a lot and build a home due to the $/sq ft being charged.
I always enjoy your comments and post to the board.
Later,
Cracked
Quote from SteveD:
Buyers are all around. Just a matter of price. Inflation basically good for real estate. It will ebb and flow but always there.
Don't see how anyone can project out 10-20 years on commodities???? Maybe 1 or 2 years. Not aware of any smart people projecting oil at over $50 bbl 18 months ago?
Non foreseeable events move commodities to a great extent.
Some people get lucky but no one ever talks about the other wrong predictions.
Garzarelli a good case. Jim Rogers also.
SteveD
i would like to hear jim roger's wrong predictions