Page 1 of 2 12 LastLast
Results 1 to 25 of 26

Thread: A House as an Investment - Caveat Emptor

  1. #1
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default A House as an Investment - Caveat Emptor

    This is purely thrown out there for discussion. I take no position as to whether or not to buy a house as an investment. I did some bottom fishing myself in SoFla after the bubble burst.

    There is a lively debate as to whether buying a house is a good investment. According to the latest Fannie Mae National Housing Survey when asked what investment amounted to a " safe investment with a lot of potential " the most popular answer was "buying a home ". Leaving aside the recent bust in housing prices how does buying a home stack up as an investment over the long term ? Robert Shiller , winner of the 2013 Nobel Prize in Economics and frequent guest on Kudlow says that historically housing has only increased 0.3 % in value; annually adjusting for inflation over the last 100 years. In contrast the S & P 500 has gone up 6.5% on an annual basis. Please take note that Shiller's data is based on nationwide housing. Collapses in Vegas , parts of California , the Rust Belt and Upstate N.Y. have to be factored in with hot spots like SoFla , the D.C. metro area, parts of the Carolinas etc. Proving the old adage that the "three most important things in real estate are location , Location and LOCATION ".

    Other factors to consider are that housing deteriorates over time ; property taxes plus water and sewer charges have to be paid; it costs money to maintain a property ; some houses go out of style and a whole bunch of other stuff that affect long term value. A good look at local flood patterns would be a GREAT idea!

    When comparing what a house cost when it was new to its current value , Shiller says to be careful. A LOT of the increase in a LOT of areas is nothing more than a lot of inflation.

    I am staying as far from anything "political " as possible so I will avoid any discussion of the deduction for home mortgage interest and the current state of Fannie Mae and Freddie Mac. ( You can do a search for current Senate legislation winding down BOTH .)

    The bottom line is that BEFORE buying it would be a good idea to decide WHY you want to buy vs. rent ? To live in ? To rent out ? As an investment ?

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A House as an Investment - Caveat Emptor

    the only response I dare make regarding location, Location, LOCATION is this ...





    ... noting that 'speculators' and 'hedge fund investors' are able to pay cash ... but are also likely to sell in a hurry if a better return on investment can be found in a different sector ( stocks, bonds, commodities etc. )

  3. #3
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: A House as an Investment - Caveat Emptor

    Home prices have been going up recently thanks to high demand , low supply and higher mortgage rates.

    Going back to the "location" issue , the ten fastest growing counties in the U.S. are :1. Williamson County , Texas ; 2. Loudon County , Virginia ;3. Hays County , Texas ; 4.Orleans Parish, Louisiana ; 5. Fort Bend County , Texas ; 6. Midland County , Texas ; 7. Forsyth County, Georgia ; 8. Prince William County , Virginia ; 9. Montgomery County , Texas and 10. Osceola County , Florida.

    On a related note there is a major "brain drain " going on in Long Island. Young college grads are moving out in droves and the number one reason is lack of affordable housing.

  4. #4
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A House as an Investment - Caveat Emptor

    Home prices have been going up recently thanks to high demand
    Again it's important to distinguish between a high long term demand for housing, which is the result of 'conventional' mortgage financed individual purchases ... versus high short term demand for housing, which is the result of hedge funds and high roller investors rotating out of stocks, bonds, commodities etc. and into 'corporate landlord' rental properties as one of the few remaining investments that still promises a high yield.

    from


    (snip)The majority of home purchases are now being done by cash buyers: Destroying the myth that cash buyers are a small portion of the market. 60 percent of homes sold in 2013 came from the all cash crowd.

    There was an odd sort of myth floating around the market that the cash buyer crowd was somehow a tiny portion of the market, like a drop of water in the vast ocean of home buying. This delusional dream played into the fantasy that this housing market was naturally rising because of overall household demand when in reality, it is being driven by investors leveraging the artificial low rates created by the Fed. The flood of money from Wall Street has been large. Even anecdotally, it was apparent that cash buyers were driving the market given that housing is a margin driven market. That is, at any given time only a small portion of all homes are on the market for sale. However, an analysis by non-other than Goldman Sachs shows that 60 percent of all 2013 home sales are being driven by cash buyers. That is, the middle class is largely being pushed out of this game and has become the minority in this real estate market."(snip)


    The obvious take-away is that in locations where cash buyers comprise a very high percentage of recent real estate purchases, the resulting recent increases in property values could quickly turn into property value declines if even a few of those same cash buyers decide to sell their 'investment' properties and move back into other types of investments. Such an eventuality, and the resulting decline in local property values, could inflict major losses on 'conventional' mortgage financed home buyers in the same locality. Thus CAVEAT EMPTOR indeed.
    Last edited by Melonie; 04-25-2014 at 09:10 AM.

  5. #5
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: A House as an Investment - Caveat Emptor

    Funny you said that : As I've previously posted I snapped up a couple of very nice condos in SoFla at VERY attractive prices in 2009 and sold them less than two years later to Brazilians flush with cash. I don't know about now cuz I'm not following SoFla real estate too closely but a couple years ago Russians and Brazilians were snapping up choice properties right and left and all for C A S H ! I am not the only one who did some bottom fishing and turned a very tidy profit indeed. I was lucky. I had the cash at the time and didn't have to worry about getting a mortgage.

    That is NOT what we are really discussing. That was speculation. I raised the question as to whether buying a house was a sensible long term investment as compared to other things like stocks and bonds.

  6. #6
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A House as an Investment - Caveat Emptor

    I raised the question as to whether buying a house was a sensible long term investment as compared to other things like stocks and bonds.
    And I responded that, like other investment types, it's critical to try and identify the 'downside risk' associated with real estate market value levels in a given location over a long term. Lots of market pundits are pointing out that the changes in the real estate market post 2009, i.e. a much higher percentage of 'speculative' short term real estate investors versus 'conventional' long term real estate buyers, was in fact the driving force behind recent real estate value increases. The same pundits are pointing out that this has also significantly increased 'downside risk' ... something which has arguably not been fully recognized by 'conventional' mortgage financed real estate buyers.

    As to the SoFla real estate market today, my NY acquaintances tell me that SoFla is now the focus of banking, investment, and hedge fund firms centered in the NY area expanding / relocating operations ( thus employees ) to low tax Florida. High earning bankers, brokers and hedgies can actually make the mortgage payment on a new Florida home via their NY state income tax savings alone. However, as you point out, this is a somewhat unique situation.

    Circling back on topic, there's no substitute for doing your research ... in real estate as well as any other type of investment. Nuff Sed.
    Last edited by Melonie; 04-25-2014 at 09:36 AM. Reason: fir

  7. #7
    Moderator
    Joined
    Jun 2013
    Posts
    901
    Thanks
    635
    Thanked 1,519 Times in 585 Posts

    Default Re: A House as an Investment - Caveat Emptor

    The only time you lose money in real estate is when you have to sell

    Buying real estate contains your costs, when you rent, you are subject to ever increasing costs, that are completely out of your control

    The real problem is that people are not treating their homes as the investments that they are . They are not piggy banks

    If you buy a house, not at a stupid market peak, do not engage in trendy renovations, invest in minimum upkeep, do not refinance with cash out and extend the term, maybe even get a 15 year loan if you can afford it, pay off that mortgage, retire, pay the taxes and leave it to your kids as a transfer of wealth to the next generation you have done well

    Here is what people are doing instead:

    Overpaying
    refinancing[endlessly pushing the end date out]
    pulling cash out for boats, vacations, college tuition
    renovating with borrowed money

    then when they can no longer afford their lavish lifestyle and their health is failing, reverse mortgage it, so the bank gets it in the end, not the kids

    All along the way with our express written permission, major banks and corporations have stolen your kids wealth, giving it back to the one percent, you signing on the dotted line all along the way


    One thing, the one percent all invest in real estate, no renters there..............

  8. #8
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A House as an Investment - Caveat Emptor

    Buying real estate contains your costs, when you rent, you are subject to ever increasing costs, that are completely out of your control
    In the interest of accuracy, I need to point out that owning real estate still leaves many potentially significant costs beyond the owner's control. Obviously this begins with increasing property and school taxes. However, in the past couple of years, insurance costs have become a major variable as well. For example, in the aftermath of the NY / NJ hurricane damage of a couple of years ago, lots of homeowners are finding that their < $1000 per year flood insurance ( which is mandated by their mortgage lenders ) now costs more like $10,000 per year ! Similarly, properties in areas subject to decreasing 'security' i.e. police force cutbacks, turning off street lights etc., now face significantly more expensive homeowner's insurance ( which is also mandated by mortgage lenders ). Again, there's no substitute for doing your research.

    In the most basic terms, the only costs that are truly 'fixed' when buying real estate are the purchase price of the property and the interest rate charged on the mortgage. The underlying market value of that real estate is clearly a 'moving target' ... subject to local supply and demand factors which appear to be increasingly volatile. And the old paradigm that, if you hold onto the property long enough, eventually local real estate prices will rise to the point of producing a 'capital gain' versus the original purchase price, is now dubious in most areas ... and especially so in terms of 'inflation adjusted' dollars.


    the one percent all invest in real estate, no renters there
    As explained to me by industry acquaintances, recent increased 'corporate landlord' investments by hedge funds is strictly driven by the differential between the very low interest rate purchase funds available to those hedge funds with which to buy rental properties outright ( plus some tax preferences for the hedge fund REIT investors which offset taxes otherwise due on other income ) , versus the de-facto rate of return made possible via rents charged minus 'operating' expenses. Some of these hedge fund 'corporate landlords' are already experiencing difficulties in achieving the forecast de-facto rate of return, as rising property taxes, insurance costs, maintenance costs etc., as well as non-paying tenants, thus attorneys' and agents' fees etc. ... have cut into their 'profit margin'. In fact, a few of these hedge fund investors are already beginning to sell their rental properties. See .

    The important point for would-be 'individual' single family home / condo buyers is that, unlike yourself, the hedge funds who may now own 50% of all similar properties in your area have no permanent 'ties' to these properties ... thus they could sell out on a moment's notice to seek higher rates of return via other types of investments ... while reducing the market value of your own property as an unavoidable side effect. Today's real estate market is NOT the same market as existed 10 years ago. A much higher percentage of total properties are now owned by 'hot money' investors who do not have any long term stake in said property ownership. At the same time, far fewer would-be 'conventional' real estate buyers ( still ) have the available after-tax incomes and credit-worthiness to be approved as future buyers by mortgage lenders. Once again, CAVEAT EMPTOR.
    Last edited by Melonie; 04-27-2014 at 09:41 AM.

  9. #9
    God/dess whirlerz's Avatar
    Joined
    May 2004
    Location
    Midwest
    Posts
    27,134
    Thanks
    55,898
    Thanked 26,028 Times in 13,271 Posts
    Blog Entries
    1
    My Mood
    Aggressive

    Default Re: A House as an Investment - Caveat Emptor

    Yea, good points..I've been trying to tell someone to keep an eye on selling, esp. in IL they're pushing for a 'progressive tax'


    MANY MEN WANTED TO LAY ME DOWN, BUT FEW WANTED TO LIFT ME UP

    -Eartha Kitt

  10. #10
    Moderator
    Joined
    Jun 2013
    Posts
    901
    Thanks
    635
    Thanked 1,519 Times in 585 Posts

    Default Re: A House as an Investment - Caveat Emptor

    Quote Originally Posted by Melonie View Post
    In the interest of accuracy, I need to point out that owning real estate still leaves many potentially significant costs beyond the owner's control. .

    Obviously, but all of those costs are incurred by the owner of a rental property, who marks them up and charges you

    Renting, and working for a W2 are two sides of the same coin, making money for someone else

  11. The Following User Says Thank You to oldster For This Useful Post:


  12. #11
    God/dess whirlerz's Avatar
    Joined
    May 2004
    Location
    Midwest
    Posts
    27,134
    Thanks
    55,898
    Thanked 26,028 Times in 13,271 Posts
    Blog Entries
    1
    My Mood
    Aggressive

    Default Re: A House as an Investment - Caveat Emptor

    Yea. Reminds me of the saying, "you either pay your mortgage or someone else's"

    http://money.cnn.com/gallery/real_es...ent/index.html
    Last edited by whirlerz; 04-27-2014 at 08:34 PM.


    MANY MEN WANTED TO LAY ME DOWN, BUT FEW WANTED TO LIFT ME UP

    -Eartha Kitt

  13. #12
    Veteran Member
    Joined
    Jun 2006
    Posts
    575
    Thanks
    20
    Thanked 176 Times in 70 Posts

    Default Re: A House as an Investment - Caveat Emptor

    I purchased a house last year in cash. But now I am in the awkward position of having to rent it out because I am moving. Which is preferable to selling it because I got a good price and the value will continue to rise. I am just annoyed I guess because I resent having to pay rent to someone else. I am moving to a city which is more expensive and it's not practical for me to buy another house yet.

    It is all about location and timing. Definitely consider whether you will be able to sell quickly if you want to, because that is the easiest way to lose money. If I had to sell right now I would lose some $ because I replaced windows and updated the electric.

  14. The Following User Says Thank You to carolina6 For This Useful Post:


  15. #13
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: A House as an Investment - Caveat Emptor

    First of all , this is the lively topic I thought it would, could and should be. More importantly , echoing Melonie , do your RESEARCH before you buy. I'm NOT telling anyone not to buy a house ; just to give it serious and thorough thought before doing so. Affordability and location are just two of several issues and factors to be considered. There are some "political" things that go into the mix that I will NOT expound upon except to say - Think taxes , schools and public services. Carefully consider your long term financial and work prospects and your overall investment posture.
    Last edited by Eric Stoner; 04-28-2014 at 09:33 AM.

  16. #14
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A House as an Investment - Caveat Emptor

    I purchased a house last year in cash. But now I am in the awkward position of having to rent it out because I am moving. Which is preferable to selling it because I got a good price and the value will continue to rise. I am just annoyed I guess because I resent having to pay rent to someone else
    Again, if one begins to move beyond the pre-2007 paradigm and view home ownership like any other type of investment ...

    - you're buying a fairly 'illiquid' asset, meaning that opportunities to sell without a loss may be limited
    - the market price of your asset is increasingly dominated by short term 'speculators' versus long term 'investors'
    - interest by long term 'investors' is waning, because fewer and fewer potential long term 'investors' can qualify to purchase this particular investment
    - the 'brokerage fees' involved to buy or sell this asset are substantial ( real estate agent, mandatory tests, transfer fees, new medicare tax etc.), meaning that marginal gains in asset value can translate into overall losses once all costs are accounted for.

    Carrying the following 'new normal' analysis to other aspects of home ownership ...

    - you are effectively paying 'rent' to local gov'ts and school systems via property taxes
    - you are paying equivalent 'rent' in the form of insurance premiums
    - you are also paying equivalent 'rent' in the form of maintenance costs ( albeit that those costs tend to come in large chunks vs monthly )
    - if mortgage financed, you are paying equivalent 'rent' in the form of mortgage interest

    And where real estate ownership as a personal residence is concerned, there is also a potential 'lost opportunity' cost ... i.e. that money tied up in ( owner resident ) real estate equity provides zero equivalent interest or dividend earnings.

    There is actually an elaborate equation which allows one to compare the 'costs' of owner resident real estate ownership versus the 'costs' of renting in the same market. A simplified version can be found at

    I would also add that mortgaged home ownership now also involves yet another potentially unknown future 'cost risk' factor ... i.e. the equivalent cash value of the home mortgage interest tax deduction. Politics aside, the recent IRS Alternative Minimum Tax clarifications have already reduced this equivalent cash value of the home mortgage interest tax deduction for some mortgaged homeowners in some situations. Beyond this, discussions have already been held about abolishing the home mortgage interest tax deduction altogether because it disproportionately benefits 'the rich'. Thus this major 'cost factor' regarding resident owner mortgage financed home ownership is, at minimum, something which cannot be counted on to remain unchanged over the 30 year life of a mortgage.

    The over-arching point, of course, is to make sure that, to go along with potential capital gains accruing to a real estate owner if market prices increase, that the potential 'loss risks' also associated with real estate ownership not be underestimated. Renting vs owning means that the tenant will not participate in any potential capital gains, but also means that the tenant will not be saddled with any potential losses.
    Last edited by Melonie; 04-28-2014 at 08:19 AM.

  17. #15
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: A House as an Investment - Caveat Emptor

    There is a very good article in today's ( Monday , April 28th ) N.Y. Times Business Day section that summarizes nicely some of the things Mel has been saying about inter alia institutional investors buying single family homes AND their buying distressed mortgages.

  18. #16
    Veteran Member
    Joined
    Oct 2009
    Posts
    493
    Thanks
    32
    Thanked 211 Times in 137 Posts

    Default Re: A House as an Investment - Caveat Emptor

    Quote Originally Posted by oldster View Post
    Obviously, but all of those costs are incurred by the owner of a rental property, who marks them up and charges you

    Renting, and working for a W2 are two sides of the same coin, making money for someone else
    I think that is a pretty big oversimplification. Rental rates are most often set by the market, not by what owners want to charge. As an owner you may have to lay out a few thousand to repair some type of problem in the property, but if it's a weak rental market with lots of supply, you will not likely be able to pass those charges onto your tenants.

  19. #17
    Moderator
    Joined
    Jun 2013
    Posts
    901
    Thanks
    635
    Thanked 1,519 Times in 585 Posts

    Default Re: A House as an Investment - Caveat Emptor

    No it is not an oversimplification at all. that is how the business works. You rent property to turn a profit. There are few weak rental markets right now, part of the reason there is this type of discussion

    I don't think there is any need to discourage a person from buying a house that they could rent for half as much, and that is not the case in the vast majority of markets now.


    I do not fall for fashion, either you must buy now hype, or renting is a smart option hype

  20. #18
    Veteran Member
    Joined
    Oct 2009
    Posts
    493
    Thanks
    32
    Thanked 211 Times in 137 Posts

    Default Re: A House as an Investment - Caveat Emptor

    Quote Originally Posted by oldster View Post
    No it is not an oversimplification at all. that is how the business works. You rent property to turn a profit. There are few weak rental markets right now, part of the reason there is this type of discussion
    I wish it was that simple. I am a landlord and can think of no better way to invest than in rental properties bought in the right market and managed the right way. That said, saying that a property owner can simply raise the rent or pass along costs to a tenant whenever they want is naive and inaccurate.

    Also, the fact that there aren't many weak markets right now is in no way an indication there won't be weak or very weak markets in the future. Just because you are an "owner" and you rent the property to "turn a profit" does not mean that reality is going fall in line and grant you your wishes. As mentioned, there are limitations on rental rates that are determined by the market and there are potential expenses that no amount of rental income is going to cover except over the very long haul.

    I do not fall for fashion, either you must buy now hype, or renting is a smart option hype
    I think it's a little more responsible to suggest people not buy or rent any "hype" but take a look at their individual situation, there proposed location and do some analysis with both short long-term factors in mind.

  21. The Following User Says Thank You to jimboe7373 For This Useful Post:


  22. #19
    Moderator
    Joined
    Jun 2013
    Posts
    901
    Thanks
    635
    Thanked 1,519 Times in 585 Posts

    Default Re: A House as an Investment - Caveat Emptor

    I do not know where you are renting, but there is currently not a whole lot of limits to what the market will bear right now

    I am not suggesting anyone do anything except not fall for a trendy topic

  23. #20
    Veteran Member
    Joined
    Oct 2009
    Posts
    493
    Thanks
    32
    Thanked 211 Times in 137 Posts

    Default Re: A House as an Investment - Caveat Emptor

    Quote Originally Posted by oldster View Post
    I do not know where you are renting, but there is currently not a whole lot of limits to what the market will bear right now
    I'm not renting anywhere, I've been a real-estate investor and landlord for over 20 years.

    As far as what the market will bear, that is kind of my point regarding oversimplification. There isn't one market, there are tens of thousands of individual markets that are affected by hundreds of variables independently.

    You also completely fail to include property taxes, insurance premiums and surcharges in your analysis. I live in an area that got hit hard by Hurricane Sandy, thousands of people sustained major and in some cases complete damage to their investment properties. Insurance companies paid out 50% on the dollar for claims. Most of these areas also have very high property tax and insurance rates, in short it will be a pretty long time until those owners can recoup their money. There is a market for rentals and they can only charge a certain amount if they want someone to rent their property, they cannot simply raise the rental rate to a high enough amount to cover their losses/costs as you implied in your original post:

    Obviously, but all of those costs are incurred by the owner of a rental property, who marks them up and charges you
    Last edited by jimboe7373; 04-28-2014 at 06:17 PM.

  24. #21
    Moderator
    Joined
    Jun 2013
    Posts
    901
    Thanks
    635
    Thanked 1,519 Times in 585 Posts

    Default Re: A House as an Investment - Caveat Emptor

    thanks for telling me the things I have forgotten, as I had forgotten them

    and:

    Rent:
    .1. a. Payment, usually of an amount fixed by contract, made by a tenant at specified intervals in return for the right to occupy or use the property of another.
    b. A similar payment made for the use of a facility, equipment, or service provided by another.

    2. The return derived from cultivated or improved land after deduction of all production costs.
    3. The revenue yielded by a piece of land in excess of that yielded by the poorest or least favorably located land under equal market conditions. Also called economic rent.
    v. rent·ed, rent·ing, rents
    v.tr.1. To obtain occupancy or use of (another's property) in return for regular payments.
    2. To grant temporary occupancy or use of (one's own property or a service) in return for regular payments:



    So, how about not about not assuming what I know or do not know, or what I remember or do not, or whether I can read or use the english language, let us agree to differ and be done

  25. #22
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: A House as an Investment - Caveat Emptor

    Come on guys. Both of you are arguing over the obvious. Yes, it can be a good and sometimes a GREAT investment to buy a property and rent it out. Depending on where the property is and what the current market conditions are. Everyone wants to buy low and sell high. If you can figure out how to guarantee that please let us know lol.
    In certain areas it is a seller's market with few restrictions on what landlord's can or cannot do ( like the South and West ). Other areas have highly regulated rental markets ( NYC ; Santa Barbara and other SoCal locations.) As I posted, on Long Island affordable housing is a major problem for Generation Y-ers and Millenials who are moving out in droves.
    When I bought those two condos in Florida I rented one out and never used the other one before selling them. Because of the glutted market I didn't even get enough rent to cover the taxes , utilities and maintenance and common charges. My profit came strictly from the sale.
    Last edited by Eric Stoner; 07-14-2021 at 08:15 AM.

  26. #23
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A House as an Investment - Caveat Emptor

    some additional news regarding where some 'hedge fund' real estate investors are now directing their money and attention ... from

    (snip) Carlyle Group’s Latest Investment…Trailer Parks

    it was noted that trailer park owners share the following attractive quality:

    Our customers have no alternative shot at homeownership, nor do they [normally] even have the credit scores and quality to seek anything better…They never leave the park they are in, and the revenues are unbelievably stable as a result.

    (snip)Warren Buffett is also positioned to benefit.

    From Bloomberg:

    Want to buy a trailer park? Freddie Mac wants to give you a loan.

    The unit of the government-owned mortgage giant that funds apartment buildings is set to begin financing manufactured-housing communities, the company said in a statement today.

    The firm is broadening its reach in the multifamily segment of the housing market as it seeks to fulfill its mandate to provide affordable options for low-income families. The McLean, Virginia-based lender will work with established companies in the industry across the U.S., said David Brickman, the head of multifamily operations at Freddie Mac.

    “It’s rounding out our ability to touch the affordable housing space,” Brickman said today in a telephone interview. “Manufactured housing is a big piece of rural affordable housing.”


    Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., lamented the punitive rates charged to purchase factory-built homes in his 2009 annual letter to shareholders. Berkshire owns Clayton Homes Inc., a builder of manufactured housing.(snip)


    If there is a noteworthy take-away, it's that hedge fund 'corporate landlords' rotating into mobile home parks probably comes at the expense of them rotating out of previously owned single family homes and/or apartment buildings. The sale of hedge fund owned single family homes used as rental units obviously creates additional downward pressure on local single family home price levels. That's potential 'good news' for would-be buyers, but bad news for current owners.
    Last edited by Melonie; 05-01-2014 at 03:31 PM.

  27. #24
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A House as an Investment - Caveat Emptor

    An interesting analysis of 52 US real estate markets ... courtesy of the Wall St. Journal -



  28. #25
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: A House as an Investment - Caveat Emptor

    From yesterday's WSJ - Large institutional buyers of houses are shifting from buying to generating steady income from rents. Prices in three key markets ( Phoenix, Las Vegas and SoCal ) have gone up as much as 55% from post crash lows. The Blackstone Group WAS the biggest single buyer of houses spending $8.6 billion on 45,000 homes. But their current purchase pattern has slowed from a high of $140 million per week all the way down to $30 to 40 million. Gross yields are also down from 15% to about 10. Still nothing to sneeze at , of course. There is a noticeable shift from buying to "flip" to buying to rent. BUT of the four rental home companies whose stock is publicly traded , only American Homes 4 Rent has a stock price greater than it's original IPO level.

    My take on just one aspect is that after helping drive up home prices in certain markets the "big boys" are sitting tight. They've slowed down their buying but are not looking to sell as much as rent out what they've bought. One might think that this would result in lower rents ( increased supply of rental housing ) in these areas but not so fast. In some areas the opposite is true and rents are going UP !

Page 1 of 2 12 LastLast

Similar Threads

  1. $250 house fee (Fri. and Sat.) & $200 house fee (weekdays)
    By emily405 in forum Stripping (was Stripping General)
    Replies: 30
    Last Post: 04-22-2013, 08:28 PM
  2. Initial Investment
    By ChoclatDiva21 in forum Newbie Board
    Replies: 8
    Last Post: 07-15-2009, 06:38 PM
  3. Those Investment Basics
    By JustineTaylor in forum Dollar Den
    Replies: 4
    Last Post: 11-23-2004, 11:41 AM
  4. Boobs= Investment?
    By tampafldancer in forum Body Business
    Replies: 15
    Last Post: 10-15-2004, 08:32 PM
  5. more investment questions
    By Lena in forum Dollar Den
    Replies: 16
    Last Post: 05-21-2004, 06:41 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •