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hi all, not sure if anyone read this weeks' economist-there was a big section about property. it was primarily doom and gloom, but ironically, i actually took away several reasons to be optimistic about RE in the US right now. mainly these 2:
-while not implicitly stated, all of the valuation of RE was done via its ability to generate rent, no "inherent valuations". dunno if you guys remember, but this was actually a debated subject during the meltdown("how do you value a piece of RE?") and one of the suggested methods was that property value is strictly a function of the amount of rental income it can generate. i wholeheartedly agree with this viewpoint.
-US has one of the most "accurately valued" RE markets in the world right now. to be clear, the number hovers at an average of 4-10% OVERvalued in the US, depending on the market. but in context: AUS ~ +45% overvalued, singapore and hong kong way up there, there were only 1 or 2 countries that had UNDERvalued markets), its really quite good. expounding on this, a 0% valuation would mean that a property would rent for the same amount that it would sell for. im assuming this is done at some type of standardized mortgage rate.
here's my viewpoint on it: if you factor in a standard loan, it complicates how well of an investment it is. if you REMOVE the loan and look at just the #'s on a property, RE looks really good, if you are looking at the right prop. im seeing props that can do 10-20% ROI after costs, or ~10% cap rate. i do think that the end of this year is going to be a great time to buy, especially if the downward trend in prices continues.
-while not implicitly stated, all of the valuation of RE was done via its ability to generate rent, no "inherent valuations". dunno if you guys remember, but this was actually a debated subject during the meltdown("how do you value a piece of RE?") and one of the suggested methods was that property value is strictly a function of the amount of rental income it can generate. i wholeheartedly agree with this viewpoint.
-US has one of the most "accurately valued" RE markets in the world right now. to be clear, the number hovers at an average of 4-10% OVERvalued in the US, depending on the market. but in context: AUS ~ +45% overvalued, singapore and hong kong way up there, there were only 1 or 2 countries that had UNDERvalued markets), its really quite good. expounding on this, a 0% valuation would mean that a property would rent for the same amount that it would sell for. im assuming this is done at some type of standardized mortgage rate.
here's my viewpoint on it: if you factor in a standard loan, it complicates how well of an investment it is. if you REMOVE the loan and look at just the #'s on a property, RE looks really good, if you are looking at the right prop. im seeing props that can do 10-20% ROI after costs, or ~10% cap rate. i do think that the end of this year is going to be a great time to buy, especially if the downward trend in prices continues.
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