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Real Estate Resurrection Begins - Forbes

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January 09 2009 - San Francisco
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Flipping is only a decent living if you are actually adding value/rehabbing the property. Some bond-o and paint does not count for increasing real value....those folks belong only on tv.

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January 10 2009
Profile picture for klarek the realist
I hope these flippers get what's coming to them and all end up flat on their backs.  Anybody that tries to profit from this market collapse deserves to fall just as much as the people that bought four or five years ago.
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January 10 2009
Profile picture for silent_observer
Check out this one.

During bubble days these condos were selling for 450K+ and now it is listed for 240K. If you buy this and rent it you'll get rents anywhere between $1500 - $1650.

So here is the math:

1) Loan taken with 10% down 24K Interest payment is 10,800 @ 5%
2) HOA - $400/month - $4800
3) Property Tax - $3000

Total - 18600
Rent Income - $18000 - 19800

Now add depreciation to the math and it is a freaking cashflow +ve investment.

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January 10 2009
I think based on the numbers the argument to Buy now is stronger (then 2007 and 2008), although I think this is still in potentially less then desirable areas for the majority of Buyers.  Also cautious money still holds strong, because there is still risk in the market.

Interested Observer is right that there are interesting trends developing that help to support the Buy argument.

That being said, I think the only reason its exascerbating to see Realtor's say "now is the time to buy" (and Doomer's want to scream NO IT ISN'T ANYWHERE!) is because Realtors haven't changed their tune at all, and now they are actually moving towards becoming at least potentially correct.
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January 10 2009
Rob,

I think you answered you own question.  "as this spreads, can I get the same return in a better neighborhood in the future?"  Based on the majority of your posts the answer is Yes.

Not knowing Phoenix at all and just basing the question on my past experiences in Los Angeles, the question I would have would be "will the areas that I see as "buy" now, become even harder to rent to in the near future, thus affecting my vacancy factor.

I realize metro Pheonix is vastly different then Hilo, HI, but we are already seeing a contraction (in Hilo) in the rental radius, with people moving closer to work (with higher then usual rental product on the market).
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January 10 2009
at some cashflow point, I don't care what the value of the home does going forward. MY value is simply the present value of all the future rent, minus all expenses, and in some zips, that is now approaching returns I want.

the only thing slowing me at this point is the following:

as this spreads, can I get the same return in a better neighborhood in the future? my experience as a landlord is that renting in better neighborhoods simply easier than renting in worse neighborhoods.
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January 10 2009
Profile picture for sunnyview
I agree. I think low rates are driving the less seasoned investors into the markets that still have room in them to drop. Other markets may be positioned better for remaining flat, but stopping the deep drops. Positive cash flow is important, but you need stable jobs to have stable rents so caution is the watchword. If your renter doesn't have a job, you don't have much rent as the landlord.
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January 10 2009
Profile picture for n00bzilla
"Before, people bought them and the only way they were going to make money was with appreciation. Now they can get income."

That sure is positive cash flow. Sadly they don't list all the expenses,  like ripping and replacing the concrete thanks to that one tenant with 10 cats.

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January 10 2009
While it is unfortunate that most people are hurting in this economy and a lot are losing there homes, history shows us that the ones who have money in down markets are the ones who make out very well.
This is exactly why the rich get richer.

With home values in decline, and money at an all time low, this makes for an awesome opportunity.

This is the first time in the past ten years where I see income producing properties with cash flow in the better areas.

Before, people bought them and the only way they were going to make money was with appreciation. Now they can get income.

Dave Tap Tapper
Realtor
Cashin Company
[content removed by moderator for being self promotional]
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January 10 2009
Profile picture for silent_observer
Lady, I am not saying there is going to be price appreciation but i see a few +ve cashflow properties selling pretty quickly in good neighborhoods. with rates so low i think this can put a "dent" on the price drops. we might see a double drop.

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January 09 2009
Profile picture for Lady Chattel
I have a friend who sold her lake house for $250K recently (bought it quite a few years back for $150K) and the buyer turned around and listed it for $400K......what crack was that "investor/wannabeflipper" smokin?  Just cuz it happened before doesn't mean it will again....this soon.  
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January 09 2009
Profile picture for silent_observer
I can see signs of it... even shiller&stiglitz believes flippers are buying now which is wrong. those who are buying now are buying for cashflow and there are bargains out here.

2B/2B condos are selling in prime bay-area california for 240K and if you rent it you'll pay $150 towards the principal. Yes it has started and we are nearing a false bottom.

i think this cycle of the bust is over as long as we have low rates. when the rates starts resetting we'll see the next wave of foreclosures and that will be the 2nd bottom.


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January 09 2009
 
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