how do experts predict future appreciation-rate? - Posted by bobFd

Posted by Ronald * Starr(in No CA) on July 25, 2003 at 23:24:07:

Phil Fernandez-----------------

You say: “You should not base your buying decisions on appreciation. Make sure the deal can stand on it’s own. Appreciation is just the frosting on the cake.” I can understand why you might say that and believe it.

However, I suspect that is because you have not seen much appreciation where you are. Here in Coastal CA, appreciation has been the game for many years. Any positive cash flow is “the frosting on the cake here.”

I agree with you in cautioning people about the unpredictability of the appreciation. However, I think that the rental rate and the cash flow can also be unpredictable. I think about the people who owned apartment houses in Oklahoma state when the oil-patch debacle occurred in the late 1980s. Many people moved out of the state. The property owners were devastated because the rents dropped. Many properties were foreclosed upon.

So, from my perspsective, the rent rates are not guaranteed either. So, to choose cash flow as you main goal may lead you to trouble. Now, of course, when the cash flows of the properties when down in OK, the property values did also.

But, in my perspective, one should try to project all three financial benefits of investing in properties: C, A, and T. If the total of the three looks good, go for it. If not, don’t. Don’t rely on just one of the three financial beneifts is my advice.

Now, of course the projections for the future are just that projections. They are not reality and may not even come close to reality. But what else are you going to use to buy a property if not an expectation of what the future financial value will be>

Good Investing************Ron Starr******************

how do experts predict future appreciation-rate? - Posted by bobFd

Posted by bobFd on July 25, 2003 at 11:13:49:

is there a proven system that they use?

Re: how do experts predict future - Posted by phil fernandez

Posted by phil fernandez on July 25, 2003 at 13:14:47:

There is no way to forecast what appreciation rates will be in the future. There are many, many factors that affect appreciation and most of these factors are very fluid , changing constantly.

Also every market is different and there are even smaller markets within markets.

Real estate does not follow a straight line of appreciation. It might go up for a few years and then level off for awhile. Or in some markets it might stagnate for years or even decline a bit. If you have a special crystal ball that will predict with certain how a particular property will appreciate, I’d pay alot of money for it.

You should not base your buying decisions on appreciation. Make sure the deal can stand on it’s own. Appreciation is just the frosting on the cake.