Rates and RE Prices


#41

If someone inherits a 1965 purchase, this case can become real


#42

If using purchase price, I have 10% cap rate for a condo.


#43

The basis starts when you inherit. Not went it was built.
Besides most 1965 houses have already been remodeled in the last 52 years. Probably 2 or 3 times.
If you buy a fixer, it is probably better to fix and flip than rent. I put the min into my old rentals. Will fix and flip when I sell. Renters don’t care and just trash the places.


#44

Yield or cap rate or cashflow or cash on cash?


#45

cap rate. net income / purchase price. Cash on cash would be 50%.

I’m sure someone has 40% cap rate if using purchase price. For that 20k condo in CCC, its cap rate might be 90%.

Your cash flow calculation is pretty hard to understand, I’ll take an accounting course at coursera before I read it :sunglasses:


#46

I just put in the real cost not assume 1%, 2%… some of the costs can be cheated as in use cheap stuffs… I think because of prop 13 which a big disruption, some do get very high cash flow. If you think is complicated, it sounds like you don’t maintain a house before? Everybody who stay in a SFH should know because you face those costs eventually.


#47

All expenses PM charges, HOA, maintenance must be deducted except mortgage expenses (another exception is tax depreciation)


#48

I exclude PM because if self manage, we normally don’t impute the costs, assume is free.


#49

I think now is the time to buy REIT’s. Many got beaten down due to rate scare. Is the REIT’s earning power going down massively due to slightly higher rates? Or does it look less attractive compared to no-risk treasury? It depends on the REIT case by case. But if the answer is the latter it’s a good time to pick some up at massive yield.


#50

Thats what ive been doing - buying REITs in small nibbles. I avg-ed down once in last week’s 1000 point slide. For me to avg down more, prices have to fall by a deeper % than they have in the last week.


#51

What did you buy?


#52

It is truly case 2 case basis, depends on REITs business like mortgage REIT, hotel REITs, Mall REITs or Datacenter REITs (so many) and their future market.

I have been watching REITs esp like NLY and NRZ.

NLY is long standing mortgage REIT, but went down to $9 level during 2008, but constantly paying 10%+ dividends more than a decade. When it comes down to $9 or around, I may set aside some percentage from taxable account to get cash flow.


#53

NRZ, STWD, GOOD, EARN, SPG


#54

We can also review the ETF “O” top holdings.


#55

Maybe we should have a separate thread for top REITs


#56

Is there a REIT with low debt that only invests in multi family?


#57

I have heard of apartment REITs, but not MF specialized ones.

AVB-Avalon community is one among them.

NYSE:INVH is another one, basically Black rock investment group.

I do not know how low their debt. We need to review the individual REITs Qtrly and Monthly report. Normally, they hold short term loans like 3 year or 5 year term loans.


#58

Here is the best person/analysts who specializes REITs

https://www.reddit.com/user/dvdmovie1

Go through his postings, you will get all information about REITs…etc. Ignore some of his useless comments (2 liners or 3 liners or youtube links), focus on his big paragraphs about REITs.


#59

But Mr. Wonderful loves debt. Better not see him trying to score another debt deal on Shark Tank. :face_with_raised_eyebrow:


#60

He says it’s bad for the people in debt not the owner of the debt.