Posted by Matt PA on July 14, 2002 at 15:15:26:
This should steer you in the right direction: http://www.creonline.com/wwwboard/messages/arc_2001/arc_67/67062.html
Hot Market… Any deals? - Posted by Ronn
Posted by Ronn on July 14, 2002 at 13:40:50:
Hi All
I’m in the Fresno CA area and the market here is simply on fire! I bought my last home about 24 months ago for 118K and based on comps it will now sell for 180K. This is all well and good but as you can imagine demand in the market is high and supply is… well there just isn’t much of anything available. My neighbor is selling and the house is not even on the market yet, but word of mouth has brought him nine offers. Houses stay on the market here about one week or less. People are bidding thousands above the sellers asking price. This is crazy.
So the question. What do we as investors do to take advantage of this market? BTW rents don’t come close to keeping up with these increases. My house that would list for 180K would rent for about 1K per month.
With that in mind L/O sounds good but there is little motivation when a house can sell in a very short time for top price.
Well, any ideas for me and is the market the same everywhere right now?
Thnx
Ronn
Re: Hot Market… Any deals? - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on July 15, 2002 at 24:02:29:
Ronn–(CA)----------------
Different environments (= markets) require different investment approaches to make money.
When prices get quite high, the old buy/hold/rent formula does not work very well. If you pay market price, with a market rate interest on a 75% or 80% loan, and get market rent, you will probably have a negative cash flow. You will probably have a cash flow situation that you do not like, that makes no sense to you. If you can change one or two of three factors, you might be able to make deals that make sense on a cash flow basis.
With hot market, quick resell of properties at market value that were bought or controlled at bargain prices is a very good way to go. It is easy to resell. The difficulty is to find the bargains. That is where you need to concentrate. I recommend John T Reed’s “How to buy Real Estate for at Least 20% Below Market Value.” A survey book of bargain buying systems. Find it on his web site.
It is also acceptable to buy properties with a negative cash flow if you get huge appreciation to more than make up for the negative cash flow. It is just difficult to buy a lot of properties and carry them with the negative cash flows. Also, there is the possibility that the anticipated appreciation does not come about. Then you sit with a stupid grin on your face.
It is probable that rents will be rising soon. If you buy with a negative cashflow now, you may be breakeven in a couple of years.
There have been many posts with the same question over the past year or more. You might want to search for “hot markets” or “high prices” in the search function at the top of this main bulletinboard forum of CREONLINE.COM and read the earlier comments.
Good Investing*****************Ron Starr****************
Re: Hot Market… Any deals? - Posted by Kevin
Posted by Kevin on July 14, 2002 at 18:21:38:
I am in a similar situation as you are Ronn living in San Diego. I am going to struggle with this situation here and let you know what progress I make, but would love to hear from you if you find any good ways to make money in this type of market.
I recently heard in our San Diego Real Estate Club that the affordability index for homes in San Diego is 20%. The thought is that very few will be able to afford homes soon and that real estate prices will drop a little or stabilize by the end of this year or by the beginning of next year. The recommendations were to sell now if one wants to lock in appreciations. I guess when the affordability index goes down further with rising prices and when interest rates finally go up, people will stop buying. It may be worth waiting for that time as prices may be better and it may be worth getting into rentals as more people will opt to rent instead of owning.