Real Estate is dying? Investment-wise what is the next Asset Class Du Jour?

Re: 'The cost of hiring anyone to manage your property cuts into the profit margins making the investment a whole lot less desirable."

You would be suprised. 7% of $650 monthly rent is only 45 bucks.

As for the trailer parks being destroyed: you pay for that kind of protection it is called insurance. Trailer parks are not for everyone anyway.


If anyone is interested in finding rental properties that debt service (hotels, apartments, townhouses, rv parks, strip malls, office space, etc.) check out www.loopnet.com. This site is one of the biggest sites for commercial investment properties out there. There are thousands of duplex, quad, apartment communities, hotels, motels, inns, etc.

Simply calculate the NOI (net operating income) factor in a vacancy factor of 25% (very conservative) and if you can debt service and make a little bit at the end of the year it is a good deal.

It may be a pain for a little while but it sure will be nice to have a portfolio of rentals paid for by others in 15 or so years. Even if you do not get any cash flow for a while, other people are paying the mortgage on YOUR asset. It beats the hell out of 401k or social security. It involves work but nothing in life is free.

Try not to be so negative and open your mind, you might learn something new.
 
Quote from just21:

The problem with Finnish lakeside property is the mosquitoes!
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Oh well, sometimes yes. But you'll get used to them. You have to. :D
 
Yes there are REIT's that invest in trailor parks. I couldn't name any of the top of my head. Most parks are classified in different categories based on the quality of the park, size, etc. Recently the valuations of most of the best quality parks have spiked due to the number of REIT's specializing in such parks. It took awhile, but eventually they caught on that there was lots of money to be made.

-AE_trading
 
Take some money off the table at the tops.

I'm a homebuilder, second generation. I am 58.

I've seen at least one real estate slump or bubble in every decade since the 50s.

IMO, there are two drivers to a slump (both usually related to job income to a degree). So there are 2 types of slumps generally. I'm being very broad in this description so please, I know there are variables.

1. Builders are greedy like all businessmen. They will over build and create too much supply for the given demand. This creates a mild slump if macro economic factors stay static. This slump depends on region. It usually lasts about 2 yrs. This because it takes awhile to slow and awhile to restart thru the gov. red tape. Just supply and demand here.

2. Macro economic slumps. These are caused by greedy builders and speculators and a very strong influx of easy money (loose Gov. monetary policy). This creates a big bubble. Nothing mild here. This is a very nasty bubble that, when it pops, generally wipes out huge amounts of virtual real estate equity. How much loss? I've twice seen 66% to 75% loss in real estate value from top to bottom! Amazing to watch.

I have seen 300 unit developments virtually empty. Almost no people. Those people there appear kind of scared. Dead landscape. Stay out signs all over. Plywood covering windows and doors. No noise. An eery silence. It is like the twilight zone. I was there to buy foreclosures from the banks. Shorting the market. A great time to buy.

All homes are hammered in this kind of slump. It lasts about 5-7 yrs. There is so much inventory to absorb. People usually can't qualify to buy which makes it worse.

So I've seen the ups and downs several times. Personally, I'd sell at the top. Put the money aside and buy back in at the bottom. Do that 3 or 4 times and you are rich.

The signal to both types of slumps is: who is financing the purchase? If it is the builder thru the sale of bonds, then that is the top, unless the builder is a full-time lender too. You don't have much time (like immediately). If major banks are still making the loans at low, fixed rates, then you have not reached the top yet. Fudge on the side of safety.

If the market starts down, then you are probably going to ride it out. My wife was a realtor. I've been in the car with buyers in a downturn. They want to steal property and even then they are real skittish.

We are at this top now. I'm renting so none of my capital is tied up. I can't see holding RE thru a down cycle and not making use of my capital. I want my wealth to grow.

Landlords: you cannot depend on having renters. Been there and lost big. You need some luck.

LOL :)
 
Quote from Billbuild:


2. Macro economic slumps. These are caused by greedy builders and speculators and a very strong influx of easy money (loose Gov. monetary policy). This creates a big bubble. Nothing mild here. This is a very nasty bubble that, when it pops, generally wipes out huge amounts of virtual real estate equity. How much loss? I've twice seen 66% to 75% loss in real estate value from top to bottom! Amazing to watch.

I have seen 300 unit developments virtually empty. Almost no people. Those people there appear kind of scared. Dead landscape. Stay out signs all over. Plywood covering windows and doors. No noise. An eery silence. It is like the twilight zone. I was there to buy foreclosures from the banks. Shorting the market. A great time to buy.

All homes are hammered in this kind of slump. It lasts about 5-7 yrs. There is so much inventory to absorb. People usually can't qualify to buy which makes it worse.



LOL :)
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1990 wasn't that long ago but people, as they always do, forget bad times fairly quickly...."this time it's different". We may not be AT the top but I'll bet we're closer to the top than the bottom. The real reason we have these pops is that people are dumb and greedy. Human nature just never tames itself...it has to BE tamed...through market bloodbaths - whether it's stocks, real estate or tulips !
 
Quote from Billbuild:

Take some money off the table at the tops.

I'm a homebuilder, second generation. I am 58.

The signal to both types of slumps is: who is financing the purchase? If it is the builder thru the sale of bonds, then that is the top, unless the builder is a full-time lender too. You don't have much time (like immediately). If major banks are still making the loans at low, fixed rates, then you have not reached the top yet. Fudge on the side of safety.

If the market starts down, then you are probably going to ride it out. My wife was a realtor. I've been in the car with buyers in a downturn. They want to steal property and even then they are real skittish.

We are at this top now. I'm renting so none of my capital is tied up. I can't see holding RE thru a down cycle and not making use of my capital. I want my wealth to grow.

Landlords: you cannot depend on having renters. Been there and lost big. You need some luck.

LOL :)
More...

Build-dude,

Are developers now increasingly financing sales through bond offerings, as opposed to buyers securing their own? Why do you believe this is a sign of a top, other than historical evidence?

Btw, as an American in Asia for the past several years, I feel quite fortunate to have seen up close these bear-type markets of which you speak. Think Hong Kong after the 1997 handover, following which home prices plummeted as much as 75% before only recently beginning to recover. Singapore and Taiwan real estate are still falling since the Asian financial crises. Many are guessing/hoping these two markets have stabilized now, however it feels like a most tenuous respite. As a renter in Singapore, owner's pain is visceral as many of their units have lost 30-40% of their value and rents barely cover costs.

Blue
 
Quote from Billbuild:

Take some money off the table at the tops.......Landlords: you cannot depend on having renters. Been there and lost big. You need some luck.
More...

Billbuild,
Thanks for your excellent post.
 
Blue,

Building a track of homes is a long term endeavor. A builder must avoid getting stuck with inventory or they may go broke.

To avoid this they issue bonds and use the $ to finance the purchase of their homes. This is risky, but the risk is now shared with the new bond holders.

The Builder becomes a financing entity now. The Builder's goal is to get rid of inventory. Any number of shemes can now be used as the bond holders are the risk takers instead of more cautious banks and big lenders.

I see this as a huge red flag. The banks are scared and are increasing rates and qualification requirements. The Builder is stuck with a long term project and inventory. How does the Builder get out of this bind?

Create their own firesale with their own financing. The perks get tremendous. Qualification is easy. The newest safety requirements for lending, have been largely circumvented.

If the Builder can just sell the necessary number of houses to get out clean then they have won. They are safe and the new bond holders may be safe too. The downside is moving in buyers who should never have qualified. They are the first to go to foreclosure if a big slump does occur. If a big slump does occur, then there is a spiral downward that feeds on itself.

The Builder goes into a shell. The bond holders took their risk. The newest homeowners bought at the top. There are no guarantees here and I would say "look out below".

I called this the top because the banks have backed off. They think the risk is getting higher. At the same time the Builders are lowering requirements on lending. A disconnect. I consider it a scam on the Builders part.

And, this is not limited to Homebuilding. How about autos?

My Uncle was a big Homebuilder.
 
Quote from Billbuild:

Blue,

Building a track of homes is a long term endeavor. A builder must avoid getting stuck with inventory or they may go broke.

To avoid this they issue bonds and use the $ to finance the purchase of their homes. This is risky, but the risk is now shared with the new bond holders.

The Builder becomes a financing entity now. The Builder's goal is to get rid of inventory. Any number of shemes can now be used as the bond holders are the risk takers instead of more cautious banks and big lenders.

I see this as a huge red flag. The banks are scared and are increasing rates and qualification requirements. The Builder is stuck with a long term project and inventory. How does the Builder get out of this bind?

Create their own firesale with their own financing. The perks get tremendous. Qualification is easy. The newest safety requirements for lending, have been largely circumvented.

If the Builder can just sell the necessary number of houses to get out clean then they have won. They are safe and the new bond holders may be safe too. The downside is moving in buyers who should never have qualified. They are the first to go to foreclosure if a big slump does occur. If a big slump does occur, then there is a spiral downward that feeds on itself.

The Builder goes into a shell. The bond holders took their risk. The newest homeowners bought at the top. There are no guarantees here and I would say "look out below".

I called this the top because the banks have backed off. They think the risk is getting higher. At the same time the Builders are lowering requirements on lending. A disconnect. I consider it a scam on the Builders part.

And, this is not limited to Homebuilding. How about autos?

My Uncle was a big Homebuilder.
More...

There was a news out of one of the homebuilders in the Midwest requiring the home buyers to actually live in the home for a specified period of time to protect against flippers, speculators. Rates are low and I haven't seen anything saying banks are cautious in lending.

Never heard anything about auto's. I'm picking up some auto bonds next week.
 
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