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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Riskmgmt who wrote (82114)	5/24/2007 10:40:08 AM
From: John Vosilla	Read Replies (1) \| Respond to of 110194

I just did a caluclatution on a house in SW Florida say a newer 3/2/2 with about 1600 sf living. Purchase price $135k, rents $950 month and 90% LTV with 30 year fixed rate. Well negative cash flow each year for the 12 year hold and negative $5k in year one. Appreciation and growth in rent and operating expenses of 6% per year. IRR over the hold of oI came up with is only 12% that doesn't sound too good and this is an optimistic sceario with rose colored glasses..

To: Riskmgmt who wrote (82114)	5/24/2007 10:40:10 AM
From: John Vosilla	Respond to of 110194

'So if you borrow $200,000 say at 6% and they inflate to 6%+, you are ahead of the game, rental returns are secondary' They inflate again when rents catch up and supply of homes, lots and rentals on the market tightens dramatically. Folks in the biz expect it as a given to happen in a year or two. It might be 7+ years instead as the speculative money is gone and I've personally seen many areas with 2+ year supply of homes and 4+ years of lots in inventory. Hurricanes, interest rates and the economy are big wild cards too. Insurance for many of us just doubled or tripled in 2007.. Sorry I still don't see the attraction at GRM's near 20 and cap rates under 2% under any kind of debt structure.. There will be tons of distressed deals out there for a long time IMHO before inflation starts bailing folks out..