Real Estate in Secular Uptrend

[REInv]

@hanera

Did you compute gross rental yield (rent/price)? With high mortgage rate, can you still get positive cash flow for a downpayment of 20%? Moons ago, investing in BA is for appreciation, now that appreciation is in doubt, why are you still investing in BA? Negative cashflow, declining home price, why invest?

Many reasons:

1. I live in Bay Area and have no plans to move out for another 10 years.
2. Bay Area historically has done very well, for last 50 years. Austin not so much. So it has a track record on its side. Its like if I have to choose between investing with Warren Buffet vs Cathie Woods, I will pick WB in my sleep. CW types come and go every few years.
3. Bay Area has very strong fundamentals. Weather, Diversity, Outdoor options, Accessibility, Education, VCs, Citizens, Immigration hub, Innovation hub.
4. Bay Area has strict construction code and not much room to expand which is great for RE.
5. I you are smart, you can cash flow and make money in Bay Area in RE. I invest in large multi family properties. The ones I bought in 2014 etc. are of course very profitable but even the ones I bought in 2020 are great. I bought around 20M worth of properties in 2020; I put 30% down and 2-2.5% mortgage. I put in another 2.5M on extensive renovations. Total rents when I bought was about 90K per month. Now the rents are sitting at 145K per month, almost 45% of it is pure profit (tax free). Based on my analysis the value of the 22.5M properties are now easily 30-35M, so I can do cash out refinance when rates come back down. So both solid cash flow and solid appreciation, if you are smart.