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Is it a good time to buy Investment Property?

Discussion in 'Other Off Topic Forum' started by JimSchad, Nov 6, 2003.

  1. JimSchad

    JimSchad Guest

    Talking about multi plex and apartment complex units not SFR.

    Are values increasing, decreasing or flat now? I keep reading that a crash may be coming when all this refi money quits flowing. I see tons of properties for sale. Some are needing to sell due to circumstances while others I fear are trying to unload thier time bomb on me at inflated values. Hate to wait and rates climb, but also don't want to be left holding the over priced and bloated hot potato.

    I am in Dallas so if region matters.....
     
  2. KevinW

    KevinW Karting

    Nov 4, 2003
    106
    Phoenix, AZ
    Full Name:
    Kevin
    Region DOES matter. In certain parts of the country, real estate has gone down (not many, but there are some) and in others (like Los Angeles) they have risen by more than 24% in one year.

    I think overall, it's a hard question to answer because of many factors (region being a very big one). Real estate usually goes in cycles...what part of the cycle we are in currently nobody knows.

    I would say with the interest rates as low as they are, if you can find a good deal, definitely go for it. But I wouldn't personally "overpay" for a property just because of interest rates like most of the population is.

    Just my 2 cents.
     
  3. ILuv4Res

    ILuv4Res F1 Veteran
    Owner Lifetime Rossa

    Aug 8, 2002
    6,500
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    Fred
    Jim,

    As you know, my theory has always been "you make your money when you buy the property". In other words, a property is nothing more than an investment. If you buy it right, you will make $. If you buy it wrong, you'll only 'possibly' make $ and possibly loose $.

    Look for returns!! I will only buy properties that have a positive cash flow that, in essence, pay me for my management of the property. I NEVER buy properties that do not cash flow. If the RE values go up, down or sideways I still get my return knowing that the probability of the property being worth more in 10-15 years is high. But waiting until then must be profitable too. I see too many investors buying into the "greater fool" theory like the people who quit their jobs to be 'day traders' when the stock market was roaring.

    That said, if you find something with potential that makes $, buy it. If it's just a speculative 'hope it goes up more by next year' without the fundamentals, pass on it. That goes for ANY geographic region.
     
  4. JimSchad

    JimSchad Guest

    Everything I am looking at cashflows with about a 15% cash on cash return over the term of the loan. that is with about 20% down and that does not include equity buildup or profits from increased value at sale time. So they do make money on paper.

    Vacancy rates in Dallas now are about 10.5% which is up from about 7% or less. I think I will be fine unless values just tank, but if I can still rent it for proper rate I should be able to cover the mort even if value is decreased and thus survive the dip.

    Would you advise on buying a larger unit complex to spread the risk or concentrate on duplexes or 4plexes? In Dallas duplexes can be nice, any 4 plex to 10 plex is old and junky then it jumps up to 25 to 50 units which are decent, but start getting pretty pricy....$2MM+ then it shoots up to 100+ units for $5MM to $30MM which is out of my league.
     
  5. ILuv4Res

    ILuv4Res F1 Veteran
    Owner Lifetime Rossa

    Aug 8, 2002
    6,500
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    Fred
    Assuming it is a true 15% cash on cash return (factoring in vacancy, expenses, pmts, etc...), that's pretty darn good. In addition to what you mentioned, you also have the tax break on the depreciation. At 15%, it sounds like a pretty good rental market despite the 10%+ vacancy levels.

    Buy whatever looks most 'rentable' and within your financial comfort level. Obviously, the more units together, the easier it is to manage that # of units. (10 unit building vs. 5 duplexes in various locations). However, if the duplexes are more rentable, go with those until you can get into the larger units. By 'junky', does that describe the neighborhood or the general condition of the buildings or both? I have done well with the lower-economic areas since I feel those are more resistant to recessions. Everyone needs a place to live, not everyone needs an expensive place to live. Additionally, since I am handy and can fix almost anything, I prefer fix-er-uppers. However, as I am sure you are aware from your trailer park rental experiences, sometimes the lower end rentals are more babysitting work.

    Bottom line, buy whatever is the most rentable with the best returns.
     
  6. JimSchad

    JimSchad Guest

    what it is is that most of the small unit deals like 4 plexes were I think originally decent homes built in the 20's and were sectioned up into 4plexes, 3plexes etc so they are old and dilapidated and thus in older areas which tend to be lower economic class.

    The newer duplexes in the burbs are nicer, but also more expensive and so you gotta rent them for darn near a real house payment. Seems only a family in transition or a divorcee would be looking at those???

    Considering buying a whole trailer park as the returns are really good, but you pay a price with the quality of tenant. Who knows. I really don't know much about owning an entire park. With a large apt complex I can get property mgt for abotu 3% of gross rents and remain pretty passive.

    I just know another guy who made a killing in the 80's on real estate and he his holding out thinking values are positioned to fall. He is in california though so diff market. Just don't want to not buy from chicken little fear of sky falling. If I wait til perfect I will never buy!

    Thanks!!!!
     
  7. davem

    davem F1 Veteran
    Silver Subscribed

    Jan 21, 2002
    5,903
    Stepford, Connecticut
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    dave m
    Jim as long as the numbers work, go for it. Here in Ct. like most places im guessing its tougher to find deals. No one is selling after Wall st. tanked. Also some commercial loans now can be fixed for say the first 10 yrs of a 20 yr. note. Nice to lock in now when who knows what rates might be in say 4 yrs.
     
  8. F328 BobD

    F328 BobD Formula 3

    Mar 17, 2001
    2,327
    Southlake, TX
    Full Name:
    BobD
    If Wall Street roars back (or even continues to come back moderately), it will be interesting to see what happens to the real estate values (especially California). You'd think investors might sell off their profits and put their $$$ back into the securities market causing a downturn in real estate. Property or securities right now... who knows?
     

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