Question: Since real estate prices (2012) are 50% less than 2006 prices, what are your thoughts about “Value Investing” in real estate?
Scott Thompson: Any bargains available? Avoid value traps, etc…
Darren Hm: Commercial real estate finance has some metrics you can use to compare one investment against another. For example, you can look at the cap rate of an individual property or compare cap rates of different regions of the country. The difficulty with real estate is its illiquidity and lack of transparancy.Some books on real estate finance:http://www.amazon.com/Comple…/dp/0471647128/ref=sr_1_12…http://www.amazon.com/Estate…/dp/0071603271/ref=sr_1_3…http://www.amazon.com/Real…/dp/0470260408/ref=sr_1_4…
The Complete Guide to Real Estate Finance for Investment Properties:…
amazon.com
Darren Hm: Real estate in each region is affected by what’s happening to the local economy. I’m long-term bullish on commodities (neutral in the short term), which makes me bullish on real estate in Oklahoma and Texas. Cap rates are also higher in the Midwest than on the coasts.
Judy Priory Cromer: Scott, I have been trying to sell my farm (horse) for more than a year. I’m luckier than most, since I don’t have a mortgage and I have low taxes—-but it takes 10 hours to mow the lawn—time to downsize—wish I could afford to just throw it away and move. But with all the local short sales, foreclosures and repo’s around here, I don’t think it will ever get sold
Scott Thompson: Hope your farm sells soon Judy. Wish you the very best!. 🙂
Judy Priory Cromer: Since my husband passed away, it’s more than I can handle. Thank God, I have some good investments, so that helps also. Yikes—anybody here want a nice 21 acre horse farm, with an updated 3br 3 full bath house—fireplace, floor to ceiling windows-yada yada yada for a steal
Scott Thompson: Feel free to post a couple photos of your property here Judy. You never know who may buy it!
Judy Priory Cromer: will do—better yet—-just go to zillow—1177 Raccoon Road, Willard, NC 28478
Skyler Weinand: Real estate is a lot simpler to value than most other investments. You can efficiently value and estimate future rents, tax rates, insurance, etc. After all of those cashflows have been set, simply type in the discount rate you want to earn and that’s the value. You create your own margin of safety and don’t need the market to validate your purchase! That’s what I don’t get about the equity markets; you can do all your homework, spend all month analyzing charts to find the right entry point, etc. Then the you realize that the company had all these off balance sheet vehicles circa Enron, or have management lie outright on calls.
Maulik Mistry: Enormous MOS exists in Real estate in USA; if the objective is the cashflow. You can just look at the long-term trend, over the last 40 years. Prices today are right on the trend-line, after coming down about 30%. In Florida, they’re down 30-50% for a lot of properties. So, you can invest in real estate again. And you can get a fair deal. It’s priced at fair value – statistically. So, you can buy it without worrying too much about it going down. And it’s not like gold. You can get income from it.Now if there is a bubble at all in realty sector it is in Mumbai (India) and in commercial sector specifically. http://economictimes.indiatimes.com/…/arti…/11793060.cms
Slowdown in commercial property market: Survey – The Economic Times
economictimes.indiatimes.com
Lan Cao: All investment has its own risk. Many investors have bought or are still buying real estate. The recession has created lots opportunities. It will depend on what you are good at, if you see them as an opportunity and if you are prepared for them. I am sure I passed many opportunities in my life without seeing them, even they were right in front of me. And yes you are right, Real Estate is local. Interest rate is really low and lots incredible deals are out there.
Anh Hoang: what’s ur intrinsic value calculation? for me, one way is on the constant cash flow, the other is the relative valuation (compared to the neighborhood with same quality)
Lorenz Lrz: I saw people selling properties from the States in this part of the world (Singapore) lately. They were selling some resort homes nearby Disneyland for 75% below pre-crisis level and promising 10% net rental yield. The units will be managed by professional management companies. The catch is offshore investors will have to purchase them with cash in full. The cheapest unit is going for around $60-70k. I believe u can get better deal than 10% net rental yield elsewhere in the States. Has anyone done any comparison between direct property investment and REIT in terms of risk adjusted return on the same level after adjusting or all the differences (esp leverage, and financing cost)? To me, It seems like both offer very similar return profile, but different risk profile – liquidity risk (for direct property investment) vs mark to market risk (for REIT). The slight differential on returns could probably be explained by the diffierences in ownership structures (direct ownership vs REIT unitholder). What do u think?Cool thing is investors could get additional return from direct property investment as a compensation for taking on implicit costs (esp spending own time managing property, working on asset enhancement).
Ruth Lordan: i wish i had the energy to buy and move i have the money