naples's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/129496/comments http://seekingalpha.com/article/70348/comments?source=feed#comment-133516 133516 Sat, 29 Mar 2008 20:39:34 -0400 http://seekingalpha.com/article/70348/comments?source=feed#comment-133437 133437
i thought it was important i posted because few apparently understand how to value RE properly.

]]> Sat, 29 Mar 2008 13:17:02 -0400
i thought it was important i posted because few apparently understand how to value RE properly.

]]> http://seekingalpha.com/article/70348/comments?source=feed#comment-133436 133436
calculate the cost of capital (use 7% rate for debt at 80% of home price and 15% equity cost at 20% of home price -- WACC is 8.6%), property tax, insurance, maintenance and tax adjust the costs (you have to not overadjust for taxes because everyone has std exemptions in federal tax codes). personally i use 8% of debt cost. compare this figure on a monthly basis to conservative mkt rent. if you buy a property where cost of ownership is below the mkt rent then you guarantee yourself a profit because inflation, real wage increases and population growth will push prices and mkt rents higher.

this doesnt mean the mkt is not going to pushes prices higher where cost of ownership is higher than mkt rents BUT if you dont follow this rule you are accepting lower returns and giving money alway as we have seen in recent years.

in every cycle (been thru a few), the prices always trade to a level such that investors (landlords) can profit handsomely and hold property for over a life time. currently, we have not even hit TIGHT credit yet. We just move to normal credit -- 20% down. TIGHT is when banks require 20-30% down and 70-80% owner occupancy rate for simple condos. the last time we had tight credit was early 1990s when i bought outer borough condos in NYC for 25-35K. they are now worth 350-450K. i wont sell because they are yielding over 30% pretax in net rent (after maintenance).

so be PATIENT. Dont use affordability index or mkt comps or past prices. Use the comparison between ownership equivalent rent vs mkt rent. if you use the rates i suggested above then you guarantee yourself 15% rate of return on your equity -- which is nice if you live in your own property. in addition, if you buy right using this method, then other home buyers (not investors) will see the economic incentive to buy your property if you have sell. NO ONE will tell you this because most people are home owners or have an incentive to tell you otherwise.

from what i can see the coast regions have a ways to go -- AND it will get there as i have seen in the past. RE are long cycle assets so typically 3-5yrs of decline then 3-5 yrs of bottoming (flat dull prices changes) then a rise again. West coast prices are way too high. FL still has abit to go.]]> Sat, 29 Mar 2008 13:15:40 -0400
calculate the cost of capital (use 7% rate for debt at 80% of home price and 15% equity cost at 20% of home price -- WACC is 8.6%), property tax, insurance, maintenance and tax adjust the costs (you have to not overadjust for taxes because everyone has std exemptions in federal tax codes). personally i use 8% of debt cost. compare this figure on a monthly basis to conservative mkt rent. if you buy a property where cost of ownership is below the mkt rent then you guarantee yourself a profit because inflation, real wage increases and population growth will push prices and mkt rents higher.

this doesnt mean the mkt is not going to pushes prices higher where cost of ownership is higher than mkt rents BUT if you dont follow this rule you are accepting lower returns and giving money alway as we have seen in recent years.

in every cycle (been thru a few), the prices always trade to a level such that investors (landlords) can profit handsomely and hold property for over a life time. currently, we have not even hit TIGHT credit yet. We just move to normal credit -- 20% down. TIGHT is when banks require 20-30% down and 70-80% owner occupancy rate for simple condos. the last time we had tight credit was early 1990s when i bought outer borough condos in NYC for 25-35K. they are now worth 350-450K. i wont sell because they are yielding over 30% pretax in net rent (after maintenance).

so be PATIENT. Dont use affordability index or mkt comps or past prices. Use the comparison between ownership equivalent rent vs mkt rent. if you use the rates i suggested above then you guarantee yourself 15% rate of return on your equity -- which is nice if you live in your own property. in addition, if you buy right using this method, then other home buyers (not investors) will see the economic incentive to buy your property if you have sell. NO ONE will tell you this because most people are home owners or have an incentive to tell you otherwise.

from what i can see the coast regions have a ways to go -- AND it will get there as i have seen in the past. RE are long cycle assets so typically 3-5yrs of decline then 3-5 yrs of bottoming (flat dull prices changes) then a rise again. West coast prices are way too high. FL still has abit to go.]]> http://seekingalpha.com/article/70348/comments?source=feed#comment-133427 133427
for weighted avg cost of capital (7% debt at 80% of purchase price vs 15% cost of equity at 20% of purchase price) -- or me i use 8% for debt got give me what i think is normalized interest rate. the WACC is 8.6%. so calculate the tax adjusted (you have to adjust also for the std exemptions on federal taxes) cost of capital, property tax, insurance, and maintenance per month. if this is lower than a conservative market rent for the house or condo then you are guaranteed to make money in RE over time.

this doesn't mean idiots wont bid the mkt up BUT i have seen time and time again, the mkt trade below mkt rent providing tremendous oppty for home buyers -- investors and homeowners. It WILL happen. RE is long cycle so anyone who thinks the mkt will rebound like a "V" is an idiot. also, we have seen this countless times. Home prices bottom after starts (4-5 yrs after top) and stays down for another 3-5 yrs before income and inflation pushes prices higher.

if you use the method i outlined above, you will be guarantee yourself a profit (assuming there isnt problems with house or changes in the neighborhood). the other methods of using affordability index or mkt comps exposes yourself to abnormal conditions.

i can tell you that pretty much the coastal regions have a ways to go down. West coast has so much pain left, its ridiculous -- as well as FL. I have heard even ridiculous defense on why someone should pay more to own than to rent, its all a lie to protect their own interests. I've been thru a few cycles and they are all similar. we have not even gotten to a tighten credit environment -- we just went from very loose credit to nornal credit (20% down good fico scores). when we get to tighten, banks wont lend for simple condos unless you put 30% down and require owner occupancy at 70-80%. when i bought investment condos in NYC when this happened (1992), i made a fortune. i bought outer borough condos for 25-30K and its now valued at 300-400K. i dont sell because they are now yielding over 30% pre tax. so BE PATIENT and you will be REWARDED!!!]]> Sat, 29 Mar 2008 12:53:31 -0400
for weighted avg cost of capital (7% debt at 80% of purchase price vs 15% cost of equity at 20% of purchase price) -- or me i use 8% for debt got give me what i think is normalized interest rate. the WACC is 8.6%. so calculate the tax adjusted (you have to adjust also for the std exemptions on federal taxes) cost of capital, property tax, insurance, and maintenance per month. if this is lower than a conservative market rent for the house or condo then you are guaranteed to make money in RE over time.

this doesn't mean idiots wont bid the mkt up BUT i have seen time and time again, the mkt trade below mkt rent providing tremendous oppty for home buyers -- investors and homeowners. It WILL happen. RE is long cycle so anyone who thinks the mkt will rebound like a "V" is an idiot. also, we have seen this countless times. Home prices bottom after starts (4-5 yrs after top) and stays down for another 3-5 yrs before income and inflation pushes prices higher.

if you use the method i outlined above, you will be guarantee yourself a profit (assuming there isnt problems with house or changes in the neighborhood). the other methods of using affordability index or mkt comps exposes yourself to abnormal conditions.

i can tell you that pretty much the coastal regions have a ways to go down. West coast has so much pain left, its ridiculous -- as well as FL. I have heard even ridiculous defense on why someone should pay more to own than to rent, its all a lie to protect their own interests. I've been thru a few cycles and they are all similar. we have not even gotten to a tighten credit environment -- we just went from very loose credit to nornal credit (20% down good fico scores). when we get to tighten, banks wont lend for simple condos unless you put 30% down and require owner occupancy at 70-80%. when i bought investment condos in NYC when this happened (1992), i made a fortune. i bought outer borough condos for 25-30K and its now valued at 300-400K. i dont sell because they are now yielding over 30% pre tax. so BE PATIENT and you will be REWARDED!!!]]> http://seekingalpha.com/article/57942/comments?source=feed#comment-106243 106243 Thu, 20 Dec 2007 11:47:45 -0500 http://seekingalpha.com/article/57942/comments?source=feed#comment-106240 106240 Thu, 20 Dec 2007 11:44:22 -0500 http://seekingalpha.com/article/57942/comments?source=feed#comment-106239 106239
there is one rule in home ownership. when its cheaper to own then rent , you buy. drop the market appraisals based on sales transactions,this is no different from blodget making $500 amzn call based on what ebay is priced.]]> Thu, 20 Dec 2007 11:43:41 -0500
there is one rule in home ownership. when its cheaper to own then rent , you buy. drop the market appraisals based on sales transactions,this is no different from blodget making $500 amzn call based on what ebay is priced.]]> http://seekingalpha.com/article/57230/comments?source=feed#comment-105535 105535
tom kelly, anytime you want to go heads up on a big side on performance over the next year i am all for it... and i will collect!]]> Sun, 16 Dec 2007 02:48:15 -0500
tom kelly, anytime you want to go heads up on a big side on performance over the next year i am all for it... and i will collect!]]> http://seekingalpha.com/article/57161/comments?source=feed#comment-105534 105534
hint: you can always refinance (change the liability side of your balance sheet) but you cant change the purchase price.

last i saw, the gig is up! no one there think homes are appreciating and no stupid state fund buying SIV yields at 5.5% for junk assets. so no money going into RE.

hey but its nice to know millions will be working for the bank over the next twenty years. if they happen to get divorce, change jobs etc they can file BK later.]]> Sun, 16 Dec 2007 02:12:13 -0500
hint: you can always refinance (change the liability side of your balance sheet) but you cant change the purchase price.

last i saw, the gig is up! no one there think homes are appreciating and no stupid state fund buying SIV yields at 5.5% for junk assets. so no money going into RE.

hey but its nice to know millions will be working for the bank over the next twenty years. if they happen to get divorce, change jobs etc they can file BK later.]]> http://seekingalpha.com/article/57284/comments?source=feed#comment-105533 105533
"you will be sorry for selling"
"you can get 10% higher"

30 showings and 2 bids -- contract Jan. first buyer couldn't close as underwriters began to tighten stds. another contract in mar with second buyer but i had to pay have the title insurance. closed april.

now lists are 30% lower than where i sold. i sold at 2.5x market rent (the person who bought is paying 2.5x what she could have rented the place)

keep in mind the environment, lenders are not lending for condos that are not heavily owner occupied. they want higher equity now too. insurance and taxes are higher. this all means DON'T expect prices to run away. its got a ways to go before it approaches market rent.]]> Sun, 16 Dec 2007 02:00:15 -0500
"you will be sorry for selling"
"you can get 10% higher"

30 showings and 2 bids -- contract Jan. first buyer couldn't close as underwriters began to tighten stds. another contract in mar with second buyer but i had to pay have the title insurance. closed april.

now lists are 30% lower than where i sold. i sold at 2.5x market rent (the person who bought is paying 2.5x what she could have rented the place)

keep in mind the environment, lenders are not lending for condos that are not heavily owner occupied. they want higher equity now too. insurance and taxes are higher. this all means DON'T expect prices to run away. its got a ways to go before it approaches market rent.]]> http://seekingalpha.com/article/57284/comments?source=feed#comment-105532 105532
as for the prior poster about line of thought naples, its the same old thought in FL across the board. speak no evil hear no evil but certainly keep up the line that there is demand out there and try to con your neighbors into NOT lowing the list price. dont fall for it.

hallandale beach fl oceanfront 800 sq ft sold 350K in 2005 under contract at 200K now

clearwater beach fl 1400 sq ft waterfront condo list 289K foreclosure now offered $210K ...no bidder except for me at 153K ( and i think i overbid by 30K)

use mkt rent to set your purchase price]]> Sun, 16 Dec 2007 01:46:32 -0500
as for the prior poster about line of thought naples, its the same old thought in FL across the board. speak no evil hear no evil but certainly keep up the line that there is demand out there and try to con your neighbors into NOT lowing the list price. dont fall for it.

hallandale beach fl oceanfront 800 sq ft sold 350K in 2005 under contract at 200K now

clearwater beach fl 1400 sq ft waterfront condo list 289K foreclosure now offered $210K ...no bidder except for me at 153K ( and i think i overbid by 30K)

use mkt rent to set your purchase price]]> http://seekingalpha.com/article/56920/comments?source=feed#comment-104937 104937
now how hard is it to prevent this problem from recurring? MAYBE lenders and appraisers should be required to calculate owner's cost per month (not the mtg payment) and compare this to average market rent for that home/condo. if the buyer wants to pay more, then the buyer must come up with the additional equity. didnt market comparables stoke the tech bubble as well (hey $500 AMZN is reasonable when EBAY was at....). once again, we failed to educate people on "common sense finance." in this case, why own when you can rent cheaper? by 2009-2010, it will be ONCE AGAIN cheaper to own then to rent!]]> Tue, 11 Dec 2007 17:51:42 -0500
now how hard is it to prevent this problem from recurring? MAYBE lenders and appraisers should be required to calculate owner's cost per month (not the mtg payment) and compare this to average market rent for that home/condo. if the buyer wants to pay more, then the buyer must come up with the additional equity. didnt market comparables stoke the tech bubble as well (hey $500 AMZN is reasonable when EBAY was at....). once again, we failed to educate people on "common sense finance." in this case, why own when you can rent cheaper? by 2009-2010, it will be ONCE AGAIN cheaper to own then to rent!]]>