Finally hitting bottom
tokyogai
2/28/2012 4:06:13 PM
I think the recent numbers are an indiaction that we are either hitting or have hit bottom. I think the play will be rentals for a while, as credit is still pretty tight. I do not forsee a rapid growth in housing prices this year at all.
This 15X ruls is indeed fantastic and simple enough for average people to follow.
Looks like lots of people are ready to invest into housing market now (or soon). Which investment method would you guys pick?
1. Buy a house?
2. Invest into REIT?
3. Invest into real estate ETF or mutual funds?
4. Pick a or several real estate stock?
@Phonix
The far east is a whole different kettle of fish. Real estate in China, in particular, seems over-priced and too many local investors have the attitude that it will 'always' go up because it has always gone up.
They will learn differently. I don't know how soon.
Re: Great!
Phoenix
2/28/2012 12:02:49 PM
This is really interesting. I've always wanted to invest in more property and your rule of buying when the cost is 15X or less of the annual rent is a good one. It does seem to be the right time to buy in the US market but else where things are different. Specially in the far east. Some properties are trading at 24 times the annual rent.So this is not a good time to buy properties from there as opposed to the Amerian market.
Merchandise Mart is a really cool building. Love Chicago architecture. I think it recently changed hands...
minvestor,
Agreed... this is really for long-term buyers. And my main point is that if you want a place to live in, you can't probably get much better bang for your buck by buying.
Of course there are still many challenges to the housing market... the major one is banking & finance. There is still not enough financing out there to enable buyers. And obviously the job market is a headwind.
Scott,
what a great post. some great info here and really interesting when you look at the current market.. the 15X rule is a great, simple rule that one can follow when looking to buy.
It's for long term
mInvestor
2/28/2012 9:55:01 AM
Thank Scott, for this timely piece.
Although some housing market may have a possible 20% further decline risk, the up potential will be 50% or even higher. So it's almost no brainer to get into hosuing market now.
However, this is good only for long term. Most analysts predict the recovery will be a long and slow process. So if you need your money back in 5 years, I'd caution you getting into market now. There are big uncertainties looming around the corner, like EU debt, slow down in China, high unemployment etc.
It's good for long term.
You can't overlook the facts that 1) there is a finite amount of buildable property; 2) people need places to live; and 3) the population is growing. If you can buy now and just hold on, you'll win.
You don't have to look any farther than Joe Kennedy:
If there's one thing we can learn from old Joe Kennedy it's that real estate is a fine place to build wealth in both the old Depression and the new one. The key is to look for value (that means properties that are undervalued relative to the market). Kennedy did so as owner of the Old Colony Realty Associates, Inc., which specialized in distressed real estate (there happens to be some of that lying around today if you have any capital). Real estate is where Kennedy chose to invest his money after he sold his stocks right before the 1929 market crash.
Kennedy's big score came from the purchase of Merchandise Mart, which was the largest building in the world when it opened in Chicago in 1930. He paid $12.5 million for it in 1945, but in a few years he was collecting more than that in annual rent.
Will you make as much on a house? Of course not. But you'll make something in the long run -- and have a place to live to boot.
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