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Re: Long-term returns from real estate
Old 11-18-2006, 09:44 AM   #21
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Re: Long-term returns from real estate

Quote:
Originally Posted by rmark
Individual properties are the real estate version of individual stocks. Just as individual stocks vary wildly around the market average, so do indivual properties.

(let me tell you the story of my FIL's rental property after the early 1980's oil bust- in short, thank god he built it all himself, otherwise the bank would have had it all)

What little I've been able to read on broad real estate returns suggests a long term real return somewhere between stocks and bonds. But that average wasn't really available before REIT mutual funds.
And just like stocks and mutual funds over the longer term, the expense ratio/percentage of ownership can be the most important factor in good-bad outcomes. When new RE buyers start out, they often do a poor job estimating initial expenses, e.g. "That new roof will cost what?" Over time, your skills improve, or you just quit the RE investment game. The first property is always the toughest one where the greatest amount of learning takes place.

And if you like REITs as an asset class and want to invest a significant amount, it's probably worthwhile to learn as much as possible about management and what's going on behind the 'offered by the seller' numbers.
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Re: Long-term returns from real estate
Old 11-18-2006, 09:58 AM   #22
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Re: Long-term returns from real estate

... and for many - I am afraid - there will only be one RE purchase.

Check this link:

http://www.eagletribune.com/siteSear...tory_316064704

What were these people (realtors, mortgage originator, lenders, lawyers, and buyer) thinking?!? $9/hr at a laundry mat and she gets a $300k mortgage!
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Re: Long-term returns from real estate
Old 11-18-2006, 10:55 AM   #23
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Re: Long-term returns from real estate

Pretty accurate description of a bubble, IMHO...
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Re: Long-term returns from real estate
Old 11-18-2006, 12:11 PM   #24
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Re: Long-term returns from real estate

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Originally Posted by mathjak107
... a co-op i bought in 1987 as an investment was 73,500 , fell to 54,000 after the dip and today 150,000

... as you see these are actual geographical returns on property we own or owned and even they vary greatly in a hot city like new york city depending on what and where the real estate is.
Yes, I see.

So, did you rent out the co-op? If, for example, you were able to net $500/mo from your co-op in 1987, you were getting a yield of 8%. And you were probably able to increase that with inflation over the years. 8% rent + 4% capital appreciation = 12% annual returns. And you're complaining about low returns for this one?

On the other hand, if you had invested that money in a broad index of Japanese stocks in 1987, your returns would have been roughly zero. It's relatively easy to lose money in the stock market compared to real estate, IMO.
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Re: Long-term returns from real estate
Old 11-18-2006, 01:45 PM   #25
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Re: Long-term returns from real estate

yes we did rent it and overall it was a break even for most of the years up until recently when we cleared about 150 a month
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Re: Long-term returns from real estate
Old 11-18-2006, 03:14 PM   #26
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Re: Long-term returns from real estate

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Originally Posted by wab
It's relatively easy to lose money in the stock market compared to real estate, IMO.
Very well put. Agree, obviously.

JG
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Re: Long-term returns from real estate
Old 11-18-2006, 03:32 PM   #27
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Re: Long-term returns from real estate

Quote:
Originally Posted by tryan
... and for many - I am afraid - there will only be one RE purchase.

Check this link:

http://www.eagletribune.com/siteSear...tory_316064704

What were these people (realtors, mortgage originator, lenders, lawyers, and buyer) thinking?!? $9/hr at a laundry mat and she gets a $300k mortgage!
Irrational exuberance?

JG
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Re: Long-term returns from real estate
Old 11-18-2006, 05:07 PM   #28
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Re: Long-term returns from real estate

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Originally Posted by Mr._johngalt
Very well put. Agree, obviously.

JG
thats what you think, just wait for even a 10% slide as it wipes out tens of thousands of leveraged dollars. anyone who bought recently in our area for investment and put down say 10% on a 400,000 dollar home can watch 40,000 plus closing costs plus taxes and insurance evaporate right before their eyes unless they intend to foot the bill and hold a loosing investment for a few years.


yeah you can rent it but thats at a lose too based on rents vs purchase price and costs
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Re: Long-term returns from real estate
Old 11-18-2006, 06:26 PM   #29
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Re: Long-term returns from real estate

Quote:
Originally Posted by rmark
What little I've been able to read on broad real estate returns suggests a long term real return somewhere between stocks and bonds. But that average wasn't really available before REIT mutual funds.
Bernstein had returns of RE (8%) inbetween bonds (6%) and stocks (11%). But the standard deviation of returns for RE was much lower than stocks (couldn't find numbers).

So I think:
- RE properties are like individual stocks (returns widely distributed)
- REITs are like mutual funds
- Overall, equities return more, but have higher deviation of returns.

As a kid, my father had a bunch of rental properties - I always remember answering the phone - tennants calling about one thing or another - Dad leaves dinner table early to go fix something - he'd mumble on his way out the door, "put your money in stocks".....

So my RE allocation has always been through REITs and property groups.

Tennants can't call REIT investors......and I finish my dinner every day....
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Re: Long-term returns from real estate
Old 11-18-2006, 06:30 PM   #30
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Re: Long-term returns from real estate

Quote:
Originally Posted by mathjak107
thats what you think, just wait for even a 10% slide as it wipes out tens of thousands of leveraged dollars. anyone who bought recently in our area for investment and put down say 10% on a 400,000 dollar home can watch 40,000 plus closing costs plus taxes and insurance evaporate right before their eyes unless they intend to foot the bill and hold a loosing investment for a few years.


yeah you can rent it but thats at a lose too based on rents vs purchase price and costs
But you are taking an example of someone who did something stupid, or
uninformed, or just had back luck. The key is your "in our area". May be
true "in your area" but not applicable to anywhere else. I am hoping you will see the logic here.

JG
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Re: Long-term returns from real estate
Old 11-18-2006, 06:40 PM   #31
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Re: Long-term returns from real estate

you are right we are only seeing a 10% slide in our area right now, i believe the report last week said the national average was 13% and the hot areas far worse. yeah there are pockets of areas where things havent risen so much so they havent fallen so much but overall unless your in the midwest or so i think its the same story everywhere.
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Re: Long-term returns from real estate
Old 11-18-2006, 06:51 PM   #32
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Re: Long-term returns from real estate

Quote:
Originally Posted by Delawaredave
As a kid, my father had a bunch of rental properties - I always remember answering the phone - tennants calling about one thing or another - Dad leaves dinner table early to go fix something - he'd mumble on his way out the door, "put your money in stocks".....
Good point. I love the returns from real estate. But I hate the tennants. Hate the property taxes. And hate the transaction costs.
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Re: Long-term returns from real estate
Old 11-18-2006, 07:10 PM   #33
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Re: Long-term returns from real estate

I picked up this real estate (home) link from FundAlarm:


http://www.safehaven.com/article-6329.htm

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Re: Long-term returns from real estate
Old 11-18-2006, 08:00 PM   #34
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Re: Long-term returns from real estate

WoW!.......that was depressing.
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Re: Long-term returns from real estate
Old 11-18-2006, 08:23 PM   #35
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Re: Long-term returns from real estate

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Originally Posted by jazz4cash
WoW!.......that was depressing.
Everyone has an opinion.

JG
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Re: Long-term returns from real estate
Old 11-19-2006, 02:05 AM   #36
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Re: Long-term returns from real estate

Quote:
Originally Posted by Brat
I picked up this real estate (home) link from FundAlarm:


http://www.safehaven.com/article-6329.htm

This information is consistent with a lot of what I've heard for the last year-and-a-half or so from a number of prognosticators.

My best guess is, here in once-hot San Diego, peak-to-trough declines in home values will be around 20%. The stats that relate home values to income, inflation, etc. indicate a 35-40% correction would be necessary to get things back to normal. The safehaven.com article mentions some things that may moderate the fall and I agree that employment rates that are holding up well, interest rates that aren't going up as dramatically as many had speculated and near-term falling/flattening of energy costs will soften the blow. Then there's price "stickiness" from homeowners waiting out the storm and sellers pulling their home off the market (a trend that newspapers are reporting in So Cal).

I'm thinking most of the damage will take place in '07 and '08. I do see the possibility of smaller price declines taking place over a longer period of years, sort of a long flattening of the market.

I still hear a lot of talk about a pick-up again in Spring/Summer '07. I just don't see it.





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Re: Long-term returns from real estate
Old 11-19-2006, 03:05 AM   #37
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Re: Long-term returns from real estate

so much for not loosing money in real estate. ill take my stocks thank you...and dont get me wrong we still own alot of real estate in our central park location but for me the gains in our stocks overwhelmed the gains in even the most prime real estate in manhattan. making the big money in real estate is a professional game. developers, tax liens, fixer uppers, forclosures. thats where big money is. just waiting for the property to escalate gets you a return thats not worth the risk long term . trying to rent it today results in a big negative cash flow in most areas. of course the downside risk as we are seeing now can be huge.

i know back in the 80,s we were all shocked when real estate went down here in new york city . it was un-heard of. my investment co-op plunged from the 73,000 or so i just bought it at down to 54,000 before the smoke cleared.and that didnt include my closing costs. will rogers once said buy land they arent making anymore of it.

boy was he wrong, up went battery park city on the tip of manhattan on land fill. a whole freakin development on ground which was once water.
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Re: Long-term returns from real estate
Old 11-19-2006, 05:41 AM   #38
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Re: Long-term returns from real estate

remember too that although reits did great reits are not the same as owning real estate directly. they are stocks first and a play on real estate 2nd.

while if i was buying a business today i may pay 1 or 2x earnings at best , the same companies trading publicly trade for rediculious amounts , 8-50x earnings is possible. same is true of reits, they own property which may have doubled yet they trade at prices 10 or 20x that value .
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Re: Long-term returns from real estate
Old 11-19-2006, 05:48 AM   #39
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Re: Long-term returns from real estate

This is an update from my little corner of the world. I wrote previously in some detail about what I could see for sale right here in my neighborhood
(on or near the water). I am familiar with three homes (been through all of
them). 2 on the water and one off. One has been rehabbed, one is a fixer-upper and one is brand new. All three (3) have now been on the market for about a year and sit unsold. Now, I think it's because the prices are
too high and were to start with, as opposed to a general slowdown.
OTOH, I could be wrong. Time will tell.

JG
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Re: Long-term returns from real estate
Old 11-19-2006, 06:31 AM   #40
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Re: Long-term returns from real estate

Quote:
Originally Posted by mathjak107
remember too that although reits did great reits are not the same as owning real estate directly. they are stocks first and a play on real estate 2nd.

while if i was buying a business today i may pay 1 or 2x earnings at best , .
That (1 or 2X times earnings) is too restrictive to be a tool IMHO. For example,
you can find lots of businesses that are good deals while showing no
earnings at all. Smaller (family owned) businesses frequently show
losses consistently as the "family" is basically living off them as opposed
to building a balance sheet. I will go further. In a very small business
(say under $1,000,000 sales), the earnings really mean little or nothing
in terms of setting the price or in predicting the future viability.

I do agree with your thoughts about REITs vs, direct RE ownership.

JG
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