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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (135912)	7/23/2008 11:29:04 AM
From: Jim McMannis	Read Replies (1) \| Respond to of 306849

RE:"Also I noticed my buy is not included in the "Zillow zestimate". The zestimate is 250K higher than what I paid for this house" Amazing, your house is worth $250k more than what you paid. Zillow never lies. Grin

To: Lizzie Tudor who wrote (135912)	7/23/2008 3:59:48 PM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 306849

but what is the cash on cash return on rent? when you include all your costs--purchase cost plus upgrade costs, and if repairs take a long time, one should probably include some kind of cost of capital while the place is not rentable--what is the annual rental yield? The rental market is incredible here. if people are paying you 2-4% of your purchase price to rent, there is nothing incredible about it. one can get better returns on a CD. such prices are a tremendous bargain for renters. if you up the rental price to a more reasonable return, like 12%, then you'll see if rental demand is really that great. let's say a landlord paid 700K for a "bargain" house out there. can the place rent out for $7000 per month? if so, then it is a decent, not great, investment. if the place rents out for 2000-2500, it is a great deal... for the renters. as for the whole "dollar denominated asset" thing, that hasn't been true in the past. in the past the dollar crashed (I'm thinking about the 80s) against the yen, and real estate rose to levels people were astonished by. first, it was rising from very low prices, whereas now it's falling from very high prices. and let's not forget this is in a context where mortgages started the decade (1980s) at very high levels, and began a descent which lasted a quarter-century. now we are going in the other direction. second, in the 1980s wages were growing, so renters could afford to pay more every year. now real wage growth is negative, so rental prices can't even keep up with inflation over the long run. Also I noticed my buy is not included in the "Zillow zestimate". The zestimate is 250K higher than what I paid for this house. well, you were buying a distressed property, it sounds like. but obviously there was huge demand for the property, since you had to outbid seven or eight other parties, so you did not buy at a cheap price. all this really shows is that Zillow is useless.