- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Investing in real estate - concerns?
Posted on 3/4/19 at 3:09 pm
Posted on 3/4/19 at 3:09 pm
Does anyone have any growing concerns of investing in real estate in expensive "hot" cities (e.g., Austin, Nashville, Charleston, Denver)? I've found that buying a home in in a desirable, trendy neighborhood will easily cost $500,000+. Many times, these homes in desirable and trendy neighborhoods are smaller as they were previously inner-city homes (3/2, 1,700 sq ft). Basically, you are paying strictly for location as the houses themselves aren't worth half that.
Given today's younger generations, I've found that salaries haven't increased to correlate with the rising housing costs. Combine that with the fact that a lot are saddled with student debt, do you have any growing concerns with investing in real estate in these trendy areas/neighborhoods?
Given today's younger generations, I've found that salaries haven't increased to correlate with the rising housing costs. Combine that with the fact that a lot are saddled with student debt, do you have any growing concerns with investing in real estate in these trendy areas/neighborhoods?
This post was edited on 3/4/19 at 3:36 pm
8
Posted on 3/4/19 at 4:14 pm to LSUbase13
I live in Austin(just outside) and am looking for an method of diversification and REI is an obvious method. My concerns are the same as yours about the "areas" you're referring to and although I feel almost certain values will continue to tick upward due to the massive exodus of CA companies and people I'm very risk averse and hate spending a small fortune on a property that i think has a worthless POS house on it.
I think i just don't have the balls yet to be REI. I also don't have anywhere near the time with how demanding my job is.
Regarding this statement:
I think with CA companies and people come CA voters, policies and the overall economic trouble that CA is experiencing now. I hope I'm wrong but I have little doubt in my mind that Austin will get to the same point 10-20 years down the road where 100k is considered low income due to the over bloating of cost of living forcing people who want to live in the city to rent for the rest of their lives or get a $1MM mortgage.
I think i just don't have the balls yet to be REI. I also don't have anywhere near the time with how demanding my job is.
Regarding this statement:
quote:
Given today's younger generations, I've found that salaries haven't increased to correlate with the rising housing costs. Combine that with the fact that a lot are saddled with student debt, do you have any growing concerns with investing in real estate in these trendy areas/neighborhoods?
I think with CA companies and people come CA voters, policies and the overall economic trouble that CA is experiencing now. I hope I'm wrong but I have little doubt in my mind that Austin will get to the same point 10-20 years down the road where 100k is considered low income due to the over bloating of cost of living forcing people who want to live in the city to rent for the rest of their lives or get a $1MM mortgage.
Posted on 3/4/19 at 4:21 pm to LSUbase13
quote:
Does anyone have any growing concerns of investing in real estate in expensive "hot" cities (e.g., Austin, Nashville, Charleston, Denver)? I've found that buying a home in in a desirable, trendy neighborhood will easily cost $500,000+. Many times, these homes in desirable and trendy neighborhoods are smaller as they were previously inner-city homes (3/2, 1,700 sq ft). Basically, you are paying strictly for location as the houses themselves aren't worth half that.
I'm less worried about Austin, because there is just a space constraint. Currently looking for an investment property there now.
Posted on 3/4/19 at 4:38 pm to LSUbase13
Buying based on cash flow or actual improvement of a property is INVESTING.
Buying based on potential appreciation is SPECULATION.
Buying based on potential appreciation is SPECULATION.
This post was edited on 3/5/19 at 10:40 am
Posted on 3/4/19 at 5:25 pm to jimbeam
quote:
Buying based on cash flow or actual improvement of a pretty is INVESTING. Buying based on potential appreciation is SPECULATION.
Couldn't have said it better. My #1 metric is cash on cash return. If i'm getting $500 per door, I don't worry too much about appreciation. If it happens, then it happens. However, that is basically impossible to reach in primary markets like ATX, which is why I prefer secondary markets.
Posted on 3/4/19 at 7:26 pm to LSUbase13
I’m confused. Are you talking about strictly investing in real estate for income or purchasing a home to live in for resale value?
Bc if it’s just for income producing, you don’t need to buy a $500,000 house. You can invest in rental properties at a much lower cost or simply land. Like empty lots. Other options also available like flipping homes. None of these require a $500,000 investment.
Bc if it’s just for income producing, you don’t need to buy a $500,000 house. You can invest in rental properties at a much lower cost or simply land. Like empty lots. Other options also available like flipping homes. None of these require a $500,000 investment.
Posted on 3/4/19 at 10:06 pm to nugget
quote:
My #1 metric is cash on cash return.
COC and PCF
quote:
I don't worry too much about appreciation.
like the old saying goes
quote:
It's the cash flow, stupid
Posted on 3/4/19 at 11:07 pm to LSUbase13
Charleston doesn’t belong in your hot cities list. Sure it’s a great and charming place to visit, but you can’t compare it with Austin, Nashville and Denver. Those are all metro areas with well over one million people. Charleston metro isn’t even 800k.
Posted on 3/5/19 at 3:47 am to LSUbase13
Yes I think there is a decent chance we are in another bubble. Interest rates need to tick up to take some heat off of real estate.
Posted on 3/5/19 at 8:32 am to CivilTiger83
all good points especially the cash flow importance and not needing to buy 500k house for REI.
my problem is, i've developed a calculator and i can't find a single property that results in COC even when considering 100-200k properties. maybe my calculator is too conservative? maybe i'm looking in the wrong areas? not sure..
my problem is, i've developed a calculator and i can't find a single property that results in COC even when considering 100-200k properties. maybe my calculator is too conservative? maybe i'm looking in the wrong areas? not sure..
Posted on 3/5/19 at 10:24 am to TexasTiger34
quote:
my problem is, i've developed a calculator and i can't find a single property that results in COC even when considering 100-200k properties. maybe my calculator is too conservative? maybe i'm looking in the wrong areas? not sure..
Can you not get 1% of the purchase price as monthly rent? It's usually pretty easy to get positive cash flow if that's the case. Have you tried looking at 3-5 units places? They have some of the best CoC returns. What about in Round Rock or Georgetown?
Posted on 3/5/19 at 2:04 pm to Paul Allen
quote:
Charleston doesn’t belong in your hot cities list. Sure it’s a great and charming place to visit, but you can’t compare it with Austin, Nashville and Denver. Those are all metro areas with well over one million people. Charleston metro isn’t even 800k.
20 years ago it was 250k.
Chart it.
= Hot
Posted on 3/5/19 at 2:06 pm to deeprig9
Additionally, with Charleston having a very large military industrial economic base, with a very solid tourism industry, it is more insulated from recession than many other "hot" areas.
Posted on 3/5/19 at 2:43 pm to Paul Allen
Yeah Charleston is full,
Please stay away
Please stay away
Posted on 3/5/19 at 3:20 pm to deeprig9
But it’s not apples to apples with Denver and Nashville. Sorry.
Posted on 3/5/19 at 3:41 pm to TexasTiger34
quote:
my problem is, i've developed a calculator and i can't find a single property that results in COC even when considering 100-200k properties. maybe my calculator is too conservative? maybe i'm looking in the wrong areas? not sure..
Where are you getting your prices from? The MLS? Most big real estate investors aren't shopping the MLS for properties. That's likely part of your problem. You gotta get them wholesale, foreclosures, pre-foreclosures, etc. Get in bed with some real estate agents that sell a lot of foreclosures and get the hot deals. Tax sales, etc.
The market is also high right now. Deals can be found, but they are not aplenty. I'm not looking much lately but I see generally 10-15 deals a year in a 100 mile radius that I'd buy. Then from there I walk the property and make offers.
Real estate is Location, Location, Location. Generally speaking, things like Rivers, Interstates, downtown areas, etc. don't move. Middle class areas change, upper class areas rarely do.
The big money is usually made investing in the lower income areas that are "up and coming" middle class areas.
Posted on 3/5/19 at 4:32 pm to baldona
So a quick hijack but I am looking into buying some multi family real estate and have a question concerning loans. So I know I can use a a FHA or similar loan if I was going to live in the property for one yr however if that is not the case I am assuming I would have to use a conventional loan and put 20% down?
Posted on 3/5/19 at 4:51 pm to nugget
quote:
My #1 metric is cash on cash return. If i'm getting $500 per door, I don't worry too much about appreciation.
Wut? I certainly hope you mean as a percentage and not pure cash flow. This whole idea of Cash flow is laughable if that's all you mean is cash leftover after expenses. Its all a percentage game.
I'd rather be making $150/ month on a $100k house then $200/ month on a $200k house.
Only looking to cash flow is a rookie mistake and how people go bankrupt when the market turns.
ETA: Additionally, your cash flow needs to keep in mind your risk. If this is a D rated house you don't want to be cash flowing the same percentage as an A rated house. At some point, D rated houses and neighborhoods have issues that's why they are rated poorly.
For example, an A rated house getting cash flow of 1.1%/ month is likely great. But a C or D rated house 1.1% is not that great
This post was edited on 3/5/19 at 4:54 pm
Posted on 3/5/19 at 7:59 pm to baldona
quote:
I'd rather be making $150/ month on a $100k house then $200/ month on a $200k house.
Which is why I said I look at CoC as my #1, which by definition is a %. Not sure how that was difficult to understand. I usually also try to net $500 per door
quote:
But a C or D rated house 1.1% is not that great
That wasn't in question. But even a 70k door leveraged sould cash flow positive at 700 per month.
This post was edited on 3/5/19 at 8:02 pm
Posted on 3/6/19 at 7:36 am to nugget
quote:
Which is why I said I look at CoC as my #1, which by definition is a %. Not sure how that was difficult to understand. I usually also try to net $500 per door
Because the way you say this makes it sound like you aren’t using a percent. I’m assuming what you are saying is that you want a $500/ profit a month per door plus a good COC. In the circles with other big RE investors I think that is fine said like that, but on a general investing forum I see way too many amateur RE investors happy with just a positive net cash flow monthly with out the COC percentage used.
I can’t tell you the amount of times I’ve seen someone say ‘I’m cash flowing $200 is this a good investment”.
Page 1 of 2
Back to top
Follow TigerDroppings for LSU Football News