Real Estate will not meet the same fate as Tech.

Quote from ElCubano:

Ive been buying lots in central florida....i have accumulated 8 lots so far and they are up about 30-40% according to what ive seen sold lately...they are paid for...i was thinking long very long term...should i sell???
More...

Lots are a very poor investment. You pay continuous taxes on them, and they produce no income nor do they even provide a write off. Take the money and run!!!!!
 
Quote from gr8trader:

Lots are a very poor investment. You pay continuous taxes on them, and they produce no income nor do they even provide a write off. Take the money and run!!!!!
More...

while they dont produce income YET they have been going up in value making me wealthier at least on paper...Im thinking sometime down the road a developer will be knocking on me door...cross ur fingers...the taxes are peanuts ..they dont even factor into the equation...but im very tempted on hitting the bid...but i did set out for this to be long term as in 5-10 years...thanks for the advice
 
Quote from gr8trader:

Lots are a very poor investment. You pay continuous taxes on them, and they produce no income nor do they even provide a write off. Take the money and run!!!!!
More...

I fully agree!
 
Quote from ElCubano:

while they dont produce income YET they have been going up in value making me wealthier at least on paper...Im thinking sometime down the road a developer will be knocking on me door...cross ur fingers...the taxes are peanuts ..they dont even factor into the equation...but im very tempted on hitting the bid...but i did set out for this to be long term as in 5-10 years...thanks for the advice
More...

When the market goes in a downturn. With a home you're still going to be able to find people to rent. Morgage interest and home improvements are tax deductible. And if interest rates rise, the demand for rental properties will also start to increase. Right now it's cheaper to buy than rent, so rents have remained weak.

On the other hand, land lots are pure speculation. They will be the hardest hit if the housing market falls. And they will not generatre revenue for you in times of an economic downturn.
 
Quote from The Kin:

When the market goes in a downturn. With a home you're still going to be able to find people to rent. Morgage interest and home improvements are tax deductible. And if interest rates rise, the demand for rental properties will also start to increase. Right now it's cheaper to buy than rent, so rents have remained weak.

On the other hand, land lots are pure speculation. They will be the hardest hit if the housing market falls. And they will not generatre revenue for you in times of an economic downturn.
More...

the taxes on the properties are between 20-60 bucks the properties are near a lake..i pay no insurance and can easily build a home on each lot...im going to have to disagree with you on this one..I think in 5 10 years the value will be much much higher than what i paid..so far like 30-40%...thanks for the advice
 
Quote from Sparohok:

Oh, I agree. Most, but not all.

Opportunity cost is included in discounted present value by definition. That is what discounted means. The discount rate is the time value, or opportunity cost, of money.

In my neighborhood, the intrinsic value of virtually all houses is negative. That's why I think there's a bubble.

A quick run through of the numbers. A $750,000 house I looked recently at earns $2300/month in rent and pays $100/month association fees and $7000/year in property taxes. I'll ignore transaction costs and use 5 year treasuries (4.13%) as the risk free rate. The house earns $19,400/year, but the money used to buy it costs $30,975/year. That's a case study in negative intrinsic value.

Martin
More...

There's many current examples of that type of apparent "mis-price" around. HOWEVER rents have always been cheap to purchases. I once told a relative in the mid 1980's to not buy a condo because she could rent it much cheaper. She bought it anyway and has quadrupled her money. My bad.

Weirdly what I'm seeing in Chicago is rents catching up! We all see the same arb: rents cheap to resale. We may be wrong thinking that implies over valued resale. It could be that rents are moving up as well.
 
Quote from dougcs:

Mike,

I'm not a RE speculator but I do own a condo in Fl that in the past 3 years went from 135 to 400k in value based on sales of similar units. It seems to me there is a bubble there but each time I review the RE sales in the area (Palm Beach County, property is on the ICW), the prices go up.

My question is you state the price is not based on supply/demand but rather on perception, isn't that pretty much the same thing? I'm assuming by "perception", you mean perception of supply demand.

Also, you say buy based on "value" not "perception". How do you go about determining value?

TIA,
DS
More...

Hi Doug,

It is my belief that at this point (and I could be very wrong), that the current demand is artificial and is being percieved as real for the sake of rationalization. IMO, the price increases are due to ease of entry, not increased demand. An interest only ARM with a 1% teaser rate combined with a no-doc loan allows anyone to bid up any price artificially. Not because it a "place to live" or in a "desireable area" but because the artificial margin as provided by the lender is allowing for excess.

I think people are using the "higher demand" argument to justify paying more than the place is worth so they can feel comfortable getting into a risky speculative position.

In terms of value: make a cost summary that does not include any appreciation and assumes a fixed rate. If you are netting at least 8-10% a year off your original investment after all expenses, then you are doing very well. This is long term value and does not constitute speculation.

Mike
 
Quote from ElCubano:

the taxes on the properties are between 20-60 bucks the properties are near a lake..i pay no insurance and can easily build a home on each lot...im going to have to disagree with you on this one..I think in 5 10 years the value will be much much higher than what i paid..so far like 30-40%...thanks for the advice
More...

No problem. We're a discussion board and we share opinions. I admit I get a little excited sometimes, but I do wish you good luck on whayever you decide to do with your money.
 
You must log in or register to reply here.
Back
Top