In the 6 years I've been on this and the richdad forums, there were always a bunch of guys who said:
"The RE market is going up. I'm gonna wait until it hits bottom."
As most of you know, we didn't do this. Using Robert Kiyosaki's "buy for cashflow, not for appreciation" formula, we bought a bed and breakfast in the Napa Valley, and started using the $$$ we made from it (the cashflow) to fund our next RE investments.
We continue to do this.
From 2002 to 2008, we have made over $4,000,000-- by developing properties into something that was worth more than we paid for them. We didn't use appreciation as our growth tool-- we used "improvement" and "change of use". And we used the cashflow from our first investment (the B&B) to keep funding things.
**********
So if you were one of those people on the fence back in 2002, telling everyone you were gonna wait until the market went down, well,
NOW IS THE TIME.
Yes, it's possible that housing prices will continue to decline.
And, of course, the RE market is going to be different in different parts of the country-- and other parts of the world.
But if you're buying a place as an investment to rent out, this is a pretty incredible time.
I'll post an example or two in this thread, of SFH's (single family homes) in my area that have actually gotten to the point where they will start to cashflow with, say, 10-20% down. This has NEVER been the case for SFHs as long as I've been doing RE in California (again, in other parts of the country, the markets are different).
Some of the prices on foreclosed SFHs are just plain crazy right now. They don't reflect market value-- they reflect the panic/burning desire of the lender to get the bad debt off their books as soon as possible.
See, the lender (a bank) would rather take a short term loss (say, $100,000) on a house than keep it on the books for the next 3 years until the markets recover. Why? Because the sooner they clear out all of their bad debt, the better they look to outside investors. From the bank's point of view, it's better to have a quarter or two with billions of dollars in losses, and return to profitability within a year, than to have a lot of property that is "worth" more on paper, but does not give them cash.
And these same banks are not really making a lot of new loans right now. It's not surprising, in light of the losses they're taking. But some of the pricing I'm seeing is flat out crazy-- people not being able to get loans on a $200K house in a development where all of the other (identical) homes are $350K.
Someone is picking up some amazing deals right now-- the REOs and foreclosures at about 70¢ on the dollar.
So that's the point of this thread:
Real Estate gurus say that you make your money when you buy, not when you sell (in other words, if you buy LOW, you have already made your money).
When people asked "What kind of price reflects making money when you buy?", I've always answered, "If you can get RE for 30% under full market value, you're in the ballpark."
Gee, the 70% of FMV we've talking about all these years-- and right now, it's not 1 in a 200 houses at this price, it's the majority of what's actually selling!
If we could only get loans on the dang things . . .
-Russ H.
"The RE market is going up. I'm gonna wait until it hits bottom."
As most of you know, we didn't do this. Using Robert Kiyosaki's "buy for cashflow, not for appreciation" formula, we bought a bed and breakfast in the Napa Valley, and started using the $$$ we made from it (the cashflow) to fund our next RE investments.
We continue to do this.
From 2002 to 2008, we have made over $4,000,000-- by developing properties into something that was worth more than we paid for them. We didn't use appreciation as our growth tool-- we used "improvement" and "change of use". And we used the cashflow from our first investment (the B&B) to keep funding things.
**********
So if you were one of those people on the fence back in 2002, telling everyone you were gonna wait until the market went down, well,
NOW IS THE TIME.
Yes, it's possible that housing prices will continue to decline.
And, of course, the RE market is going to be different in different parts of the country-- and other parts of the world.
But if you're buying a place as an investment to rent out, this is a pretty incredible time.
I'll post an example or two in this thread, of SFH's (single family homes) in my area that have actually gotten to the point where they will start to cashflow with, say, 10-20% down. This has NEVER been the case for SFHs as long as I've been doing RE in California (again, in other parts of the country, the markets are different).
Some of the prices on foreclosed SFHs are just plain crazy right now. They don't reflect market value-- they reflect the panic/burning desire of the lender to get the bad debt off their books as soon as possible.
See, the lender (a bank) would rather take a short term loss (say, $100,000) on a house than keep it on the books for the next 3 years until the markets recover. Why? Because the sooner they clear out all of their bad debt, the better they look to outside investors. From the bank's point of view, it's better to have a quarter or two with billions of dollars in losses, and return to profitability within a year, than to have a lot of property that is "worth" more on paper, but does not give them cash.
And these same banks are not really making a lot of new loans right now. It's not surprising, in light of the losses they're taking. But some of the pricing I'm seeing is flat out crazy-- people not being able to get loans on a $200K house in a development where all of the other (identical) homes are $350K.
Someone is picking up some amazing deals right now-- the REOs and foreclosures at about 70¢ on the dollar.
So that's the point of this thread:
Real Estate gurus say that you make your money when you buy, not when you sell (in other words, if you buy LOW, you have already made your money).
When people asked "What kind of price reflects making money when you buy?", I've always answered, "If you can get RE for 30% under full market value, you're in the ballpark."
Gee, the 70% of FMV we've talking about all these years-- and right now, it's not 1 in a 200 houses at this price, it's the majority of what's actually selling!
If we could only get loans on the dang things . . .
-Russ H.
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