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Strategies & Market Trends : John Pitera's Market Laboratory

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To: russet who wrote (6107)	5/16/2002 8:46:50 AM
From: Terry Whitman	Read Replies (1) of 33421

Great comments. These people buying into rentals are probably making alot of the same mistakes the 'bubble-onians did'. They're investing in something they don't understand, because it looks good at the moment. Greed driven, in other words. They think they're investing, but it turns out they're just speculating. I looked at an apartment building a couple weeks ago. It seemed priced a bit high for the area- and after inquiring about the current rental income, I found that it would take 11 or 12 years of the gross rental receipts to pay it off. The rule of thumb used to be 6 to 7x gross annual recpts (on an 11 mo. basis). I think it has creeped up a bit in the past decade or so- but I wouldn't ever pay more than 10x gross. Would only go that high if I thought the area was growing- otherwise, I'd try to stay in the 6-8x range. Regards, TW

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