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Strategies & Market Trends : Value Investing
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To: Elroy who wrote (68502)9/1/2021 5:47:32 AM
From: JohnyP1 Recommendation  Read Replies (1) of 78954
 
In the Big short, Mike Lewis mentions that as rule of thumb, you buy when the price is 10 times the yearly rent (10% yield) and sell when the price is 30 times rent (3,33% yield). It was mentioned by Ben Rickert (Brad Pitt in the movie), although there was no mention of this rule in the movie.

Intuitively it makes sense, if the price is 30 times rent you can rest assured that we are in bubble territory. If you can buy as low as 10 times yearly rent that's a great return, especially since you can use leverage. In my area in the Netherlands the yield is about 5% now, curious about what happens in US areas.
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