@James G. That depends on a # of factors including where you live, your cost and tax structure, your future plans, purchase price, growth and inflation expectations, mortgage details, closing costs, etc.
NY Times has a great calculator: NY Times - Rent vs Buy Calculator
Essentially, there is no right or wrong answer because it all depends on your personal situation. The average person who considers their home an asset is wrong. No financial planner/advisor worth their salt, uses the value of an investor's house as part of their net worth (regardless of what posters on this forum believe). It is not considered acceptable, conservative practice. Owning your own home is considered a "shelter to substitute" i.e. if you don't own a home, you will rent. There is an imputed cost to both decisions (invisible as it seems to many individuals).
Nonetheless, the same house, if bought, say at 30-40% below market value can be a great investment. But the economics of owner-occupied house suck and do not make for a good long-term investment. Hence, most professional investors eventually either move up to multifamily or move into commercial assets.
Grant Cardone isn't wrong on this one. Remember, most people buy a house they can't afford with money they don't have to impress people they don't like (harsh but true).
P.S. There are many reasons to buy a house. They are emotional and valid. For instance, if you work hard, save money and dream of owning your own place. You should buy it! Many people with kids buy over priced houses in good school districts. But those aren't investment decisions (although, they are valid and should be given importance).
@Dan H. I get that, however, you're now risking your primary.... and making it more of an investment than it should be. I don't get the benefit of not having any money in your primary because again ... it's your primary house.
Now if this was investment and you over leveraged and lose it... well it wasn't your primary. How does it make sense to refi all your money out of your primary and invest it? What happens if you do it on a HELOC and it gets called due ?
@Dan H. I get that, however, you're now risking your primary.... and making it more of an investment than it should be. I don't get the benefit of not having any money in your primary because again ... it's your primary house.
Now if this was investment and you over leveraged and lose it... well it wasn't your primary. How does it make sense to refi all your money out of your primary and invest it? What happens if you do it on a HELOC and it gets called due ?
I use refi over HELOC because I like the safety of the fixed rate. The refi typically is capped at 70% LTV which implies that you likely have more equity in the Re after refinance than when initially purchased. In addition, the money pulled out via the refinance is now yours which is a different/better scenario than likely when the re was initially purchased. So you are typically less leveraged than you were upon initial purchase and you have more wealth created from the refi than you likely had upon initial purchase. So your primary is at less risk than when initially purchased and your cash out can be used for other investments that ideally produce good return.
RE leverage is the largest means that I have used to acquire my RE investments. In the last couple/few years virtually all my RE has been refinanced to leverage the equity for other (often RE) investments.
In this loan environment it is difficult to leverage more via refinance/HELOC than the max leverage possible upon initial primary home purchase. However if you find a way to get over extended you need to realize the associate risk especially if your primary residence is part of that over leverage.
As pointed out by many folks above, there are many of points of view. Yes, I believe owning your home is great, for a number of reasons. 1st) Rent should pass your payment amount in pretty easily. 2nd) A home shows many lenders more stability. 3rd) I have refinanced my home, where the payment is still comfortable but I am using my equity to buy other properties. 4th) For many of us it gives peace of mind, ( 3 of my 4 siblings have there homes paid off completely). I use to feel I was really broke if I did not own some livestock also, now I buy my steak from the meat market. However Peace of Mind is worth something.
I plan on keeping my home mortgaged, yes I keep enough insurance on me, so my wife can pay off the home and most of my rentals if something happens to me, for her peace of mind.
Hi, I'm new but reading through just some of the posts here are informative and enlightening. I have been debating on the house being an asset argument and agree with it but hadn't heard how you can have the 500k tax free exclusion so looking forward to learning all I can.
@Dan H. I get that, however, you're now risking your primary.... and making it more of an investment than it should be. I don't get the benefit of not having any money in your primary because again ... it's your primary house.
Now if this was investment and you over leveraged and lose it... well it wasn't your primary. How does it make sense to refi all your money out of your primary and invest it? What happens if you do it on a HELOC and it gets called due ?
Wow. You "don't get the benefit of not having any money in your primary because again ... it's your primary house"? Why wouldn't you want to be your own bank? What are you scared of?
And, why mix "leverage" with "over leverage", as if they were the same thing?...
@Dan H. I get that, however, you're now risking your primary.... and making it more of an investment than it should be. I don't get the benefit of not having any money in your primary because again ... it's your primary house.
Now if this was investment and you over leveraged and lose it... well it wasn't your primary. How does it make sense to refi all your money out of your primary and invest it? What happens if you do it on a HELOC and it gets called due ?
Wow. You "don't get the benefit of not having any money in your primary because again ... it's your primary house"? Why wouldn't you want to be your own bank? What are you scared of?
And, why mix "leverage" with "over leverage", as if they were the same thing?...
Because you don't own it and if your investments stop paying and you stop paying your primary your gone. If this was a rental than sure go for it, that makes sense... because a rental isn't your primary house. Also if you're borrowing against equity you have no way of knowing if in the future those prices will remain true. Sure if you live there long time maybe it won't matter, but you likely won't know it will till it does.
The money you get from equity isn't free, it's a loan. The new loan on that house will increase your cost of living which was one of the main points of buying vs renting. You basically sold your house back to yourself at market price, congrats you now have a market priced house (or % there of if you don't take all the equity out).
@Dan H. I get that, however, you're now risking your primary.... and making it more of an investment than it should be. I don't get the benefit of not having any money in your primary because again ... it's your primary house.
Now if this was investment and you over leveraged and lose it... well it wasn't your primary. How does it make sense to refi all your money out of your primary and invest it? What happens if you do it on a HELOC and it gets called due ?
Wow. You "don't get the benefit of not having any money in your primary because again ... it's your primary house"? Why wouldn't you want to be your own bank? What are you scared of?
And, why mix "leverage" with "over leverage", as if they were the same thing?...
Because you don't own it and if your investments stop paying and you stop paying your primary your gone. If this was a rental than sure go for it, that makes sense... because a rental isn't your primary house. Also if you're borrowing against equity you have no way of knowing if in the future those prices will remain true. Sure if you live there long time maybe it won't matter, but you likely won't know it will till it does.
The money you get from equity isn't free, it's a loan. The new loan on that house will increase your cost of living which was one of the main points of buying vs renting. You basically sold your house back to yourself at market price, congrats you now have a market priced house (or % there of if you don't take all the equity out).
I am not suggesting to over leverage but to not take advantage of the leverage that the current (conservative) conventional home loans allow is being financially conservative. I understand people who invest conservatively. Whether that is staying away from growth stocks in their 401Ks/IRAs or not leveraging their primary residence. Maybe they sleep better with the conservative investments.
My view is that the current conventional refinance loan that will only go to 70% LTV is pretty conservative. In addition, there is no cheaper loan for most people than the conventional loan on a primary residence. This is because the interest is typically lower than any other loan source and the interest is a tax write-off (granted with the new tax laws less people will be itemizing to write off that interest).
I will not digress to the advantages of leverage in building wealth other than to say leverage has additional risks but can build wealth faster and conservative investments are safe but less likely to build significant wealth. I do not view 70% LTV to be aggressive or to be over extended. 70% LTV is my target LTV across all my RE but I am typically closer to 50% LTV across all properties because I only refinance when it is financially beneficial (I.e. I will not finance into a significantly higher interest rate and I typically only refinance if I can pull out close to 6 digits).
My point is that if not leveraging the equity in your primary residence makes you feel comfortable then do not leverage the equity. However, there are many investors on BP that are looking to build wealth and willing to take the risk associated with a 70% LTV refinance (which I consider to be low risk but some may view differently) to leverage their primary residence equity into other investments (maybe a buy n hold rental property).
I have no fear of my current leverage and I last refinanced my primary residence just over a year ago. In Oct I purchased our most recent RE investment acquisition using funds from our recent refinancing including the refinance on the primary residence. I could have purchased that RE investment without having previously refinanced my primary but the cost of the money for the down payment would have been greater (because loans on the primary residence is the cheapest money most people are going to find).
Good luck
Hi, I'm new but reading through just some of the posts here are informative and enlightening. I have been debating on the house being an asset argument and agree with it but hadn't heard how you can have the 500k tax free exclusion so looking forward to learning all I can.
Hello Larry (fellow PNWer!).
The $500K tax free exclusion is called just that, the "$250,000/$500,000 Home Sales exclusion" and is a pretty fundamental part of homeownership. Just do a search for "NOLO" and "home sales exclusion" for details, but basically, you don't pay taxes ($250K if single, $500K if married) on selling a property if you've lived in it for 2 out of the last 5 years (this, by a hairsbreadth, did NOT get changed to five out of eight years by the recent tax bill, although it was proposed. Lots of screaming Americans and Realtors correctly freaked out (and to this day, I would like to know which Congresspersons or WH staffers put it into the draft package)).
@Dan H. I get that, however, you're now risking your primary.... and making it more of an investment than it should be. I don't get the benefit of not having any money in your primary because again ... it's your primary house.
Now if this was investment and you over leveraged and lose it... well it wasn't your primary. How does it make sense to refi all your money out of your primary and invest it? What happens if you do it on a HELOC and it gets called due ?
Wow. You "don't get the benefit of not having any money in your primary because again ... it's your primary house"? Why wouldn't you want to be your own bank? What are you scared of?
And, why mix "leverage" with "over leverage", as if they were the same thing?...
Because you don't own it and if your investments stop paying and you stop paying your primary your gone. If this was a rental than sure go for it, that makes sense... because a rental isn't your primary house. Also if you're borrowing against equity you have no way of knowing if in the future those prices will remain true. Sure if you live there long time maybe it won't matter, but you likely won't know it will till it does.
The money you get from equity isn't free, it's a loan. The new loan on that house will increase your cost of living which was one of the main points of buying vs renting. You basically sold your house back to yourself at market price, congrats you now have a market priced house (or % there of if you don't take all the equity out).
You wrote: "you don't own it". But, you'd own a lot more of it than if you were renting there!
Comments like "if your investments stop paying", "no way of knowing if in the future those prices will remain true", and "a rental isn't your primary house" are spoken out of fear. Sheesh!
@Dan H. I get that, however, you're now risking your primary.... and making it more of an investment than it should be. I don't get the benefit of not having any money in your primary because again ... it's your primary house.
Now if this was investment and you over leveraged and lose it... well it wasn't your primary. How does it make sense to refi all your money out of your primary and invest it? What happens if you do it on a HELOC and it gets called due ?
Wow. You "don't get the benefit of not having any money in your primary because again ... it's your primary house"? Why wouldn't you want to be your own bank? What are you scared of?
And, why mix "leverage" with "over leverage", as if they were the same thing?...
Because you don't own it and if your investments stop paying and you stop paying your primary your gone. If this was a rental than sure go for it, that makes sense... because a rental isn't your primary house. Also if you're borrowing against equity you have no way of knowing if in the future those prices will remain true. Sure if you live there long time maybe it won't matter, but you likely won't know it will till it does.
The money you get from equity isn't free, it's a loan. The new loan on that house will increase your cost of living which was one of the main points of buying vs renting. You basically sold your house back to yourself at market price, congrats you now have a market priced house (or % there of if you don't take all the equity out).
You certainly own a lot more of than if you were renting there!
Comments like "if your investments stop paying", "no way of knowing if in the future those prices will remain true", and "a rental isn't your primary house" are spoken by those driven by fear. I'm sorry for you...
Thank you for condolences, your posts are so detailed and insightful, full of data they've truly changed my life.
@Dan H. I get that, however, you're now risking your primary.... and making it more of an investment than it should be. I don't get the benefit of not having any money in your primary because again ... it's your primary house.
Now if this was investment and you over leveraged and lose it... well it wasn't your primary. How does it make sense to refi all your money out of your primary and invest it? What happens if you do it on a HELOC and it gets called due ?
Wow. You "don't get the benefit of not having any money in your primary because again ... it's your primary house"? Why wouldn't you want to be your own bank? What are you scared of?
And, why mix "leverage" with "over leverage", as if they were the same thing?...
Because you don't own it and if your investments stop paying and you stop paying your primary your gone. If this was a rental than sure go for it, that makes sense... because a rental isn't your primary house. Also if you're borrowing against equity you have no way of knowing if in the future those prices will remain true. Sure if you live there long time maybe it won't matter, but you likely won't know it will till it does.
The money you get from equity isn't free, it's a loan. The new loan on that house will increase your cost of living which was one of the main points of buying vs renting. You basically sold your house back to yourself at market price, congrats you now have a market priced house (or % there of if you don't take all the equity out).
You certainly own a lot more of than if you were renting there!
Comments like "if your investments stop paying", "no way of knowing if in the future those prices will remain true", and "a rental isn't your primary house" are spoken by those driven by fear. I'm sorry for you...
Thank you for condolences, your posts are so detailed and insightful, full of data they've truly changed my life.
Your sarcasm is truly appreciated...
@Brent Coombs @Matt K. @Dan H.
The one thing that all over-leveraged people have in common it they say "I am not over-leveraged".
I am not saying any of you are over-leveraged, but I am also confident if you were, that you wouldn't see it as a problem until it is too late.
@Brent Coombs @Matt K. @Dan H.
The one thing that all over-leveraged people have in common it they say "I am not over-leveraged".
I am not saying any of you are over-leveraged, but I am also confident if you were, that you wouldn't see it as a problem until it is too late.
I do not agree with your statement that all over leveraged people believe that they are not over leveraged. In 2002 to 2007 I knew many "home buyers" including some investors that knew they were over leveraged but were under the false belief that homes were not going to decline significantly any time soon.
But I agree with the point that you are trying to make that those who are over leveraged for some reason think that it is not going to negatively impact them or that the risk is worth taking given their belief of the small odds of it negatively impacting them. We know some of them suffered significant consequences from the risks they took.
I do not know what percentage of BP users think that current conventional refinance rules that refinance to 70% LTV is risky but I suspect it is a very small percentage. The current conventional loan market is also very different than the loan market in 2004 to 2007 where you could get loans based on stated income (I call these loans liar's loans) at up to 95% LTV.
I am confident that most BP Users would choose to refinance at 70% LTV if they could take $100K out of their primary residence without a significant interest rate increase. This is because BP Users are investors and are looking to grow their wealth. I do realize this is not all BP users and that some BP Users are more aggressive in their risk levels than other BP investors. I know there are BP Users that are willing to take risks that I would find to be too risky for my liking.
I believe 70% LTV is not conservative or aggressive and if I could refinance using conventional loans at 80% LTV without significant interest rate increase I would use that option (so I am a little more aggressive than the current conventional loan rules permit).
A real simple answer, HOUSING is a GAMBLE - believe it or NOT, the Invisible STROKE of luck is at its full force when you buy:
Example: hundreds of folks became millionaires who bought between 2011-2013 - TIMING - a stroke of luck - which a few calculated/researched/predicted and hence capitalized on it.
There are many types of landlords - frugal/slum-lords/penny-pinchers/businessmen etc. = pick your choice!
@Brent Coombs @Matt K. @Dan H.
The one thing that all over-leveraged people have in common it they say "I am not over-leveraged".
I am not saying any of you are over-leveraged, but I am also confident if you were, that you wouldn't see it as a problem until it is too late.
I do not agree with your statement that all over leveraged people believe that they are not over leveraged. In 2002 to 2007 I knew many "home buyers" including some investors that knew they were over leveraged but were under the false belief that homes were not going to decline significantly any time soon.
But I agree with the point that you are trying to make that those who are over leveraged for some reason think that it is not going to negatively impact them or that the risk is worth taking given their belief of the small odds of it negatively impacting them. We know some of them suffered significant consequences from the risks they took.
I do not know what percentage of BP users think that current conventional refinance rules that refinance to 70% LTV is risky but I suspect it is a very small percentage. The current conventional loan market is also very different than the loan market in 2004 to 2007 where you could get loans based on stated income (I call these loans liar's loans) at up to 95% LTV.
I am confident that most BP Users would choose to refinance at 70% LTV if they could take $100K out of their primary residence without a significant interest rate increase. This is because BP Users are investors and are looking to grow their wealth. I do realize this is not all BP users and that some BP Users are more aggressive in their risk levels than other BP investors. I know there are BP Users that are willing to take risks that I would find to be too risky for my liking.
I believe 70% LTV is not conservative or aggressive and if I could refinance using conventional loans at 80% LTV without significant interest rate increase I would use that option (so I am a little more aggressive than the current conventional loan rules permit).
As you said, people "were under the false belief that homes were not going to decline significantly any time soon." When people think the values are going up, they don't think they are over-leveraged. They think increasing values take away the risk. It is only after a significant drop in property values and loss of a job that many people realized their mistake.
The main thing limiting people from highly leveraged LTV today is post crash lending standards. Most investors on BP would happily take out 100% or more of their equity if given the opportunity. That was common prior to the crash. My first rental property was 100% financed and second was 90% financed. Unfortunately these high LTV loans got people in trouble and as a result we are stuck with regulations that prevent these types of loans.
I am not saying you are over-leveraged. I don't even have enough details about your situation to make an informed opinion. I am also willing to acknowledge that my own risk tolerance limits my upside as much as it protects my down side. We all have to choose our own comfort level and take responsibility if our own decision lands us in trouble.
A real simple answer, HOUSING is a GAMBLE - believe it or NOT, the Invisible STROKE of luck is at its full force when you buy:
Example: hundreds of folks became millionaires who bought between 2011-2013 - TIMING - a stroke of luck - which a few calculated/researched/predicted and hence capitalized on it.
There are many types of landlords - frugal/slum-lords/penny-pinchers/businessmen etc. = pick your choice!
I would argue that where ever you park your assets has some risk. If I park my assets in an FDIC insured bank account the risk is that inflation outpaces the growth leaving me with less purchasing power. If I invest in RE the risk is that the RE depreciates. If I invest in stocks there is the risk of a market crash. If I invest in bonds there is a risk of default and bonds becoming worthless.
We have been investing in RE a long time and I believe we have done better on our RE investments than we would have achieved on any other investment option that we would have considered.
Also I do not feel that it was a stroke of luck for the purchases we have made including those between 2011 and 2013. We know our market. We know its history. We understand the supply and demand and its impact to prices and rents.
BP is a site largely dedicated to RE investors in its various forms. Are these investors hoping for luck? I would hope by being on this site they are educating themselves and not relying mostly on luck.
BTW our most lucrative purchase was in 1999 but even our purchases that were made shortly before a market correction (purchases in 1993 and 2003) look like they were good investments today.A real simple answer, HOUSING is a GAMBLE - believe it or NOT, the Invisible STROKE of luck is at its full force when you buy:
Example: hundreds of folks became millionaires who bought between 2011-2013 - TIMING - a stroke of luck - which a few calculated/researched/predicted and hence capitalized on it.
There are many types of landlords - frugal/slum-lords/penny-pinchers/businessmen etc. = pick your choice!
I would argue that where ever you park your assets has some risk. If I park my assets in an FDIC insured bank account the risk is that inflation outpaces the growth leaving me with less purchasing power. If I invest in RE the risk is that the RE depreciates. If I invest in stocks there is the risk of a market crash. If I invest in bonds there is a risk of default and bonds becoming worthless.
We have been investing in RE a long time and I believe we have done better on our RE investments than we would have achieved on any other investment option that we would have considered.
Also I do not feel that it was a stroke of luck for the purchases we have made including those between 2011 and 2013. We know our market. We know its history. We understand the supply and demand and its impact to prices and rents.
BP is a site largely dedicated to RE investors in its various forms. Are these investors hoping for luck? I would hope by being on this site they are educating themselves and not relying mostly on luck.
BTW our most lucrative purchase was in 1999 but even our purchases that were made shortly before a market correction (purchases in 1993 and 2003) look like they were good investments today.
I would say that not everyone knows their market and studies can certainly help, but i don't know who holds the crystal ball to tell you that everything is going to drop rock bottom in XX month of XX year. Certainly, trends can be studied etc. but going by the same trend of 7 year bull and 7 year bust market, we have exceeded the bull stage already in today's market, now going by your statement of analyzing/studying market and predicting what's coming next - when do you envision this current market on a serious dopamine run to bust? 2020? 2022?
A real simple answer, HOUSING is a GAMBLE - believe it or NOT, the Invisible STROKE of luck is at its full force when you buy:
Example: hundreds of folks became millionaires who bought between 2011-2013 - TIMING - a stroke of luck - which a few calculated/researched/predicted and hence capitalized on it.
There are many types of landlords - frugal/slum-lords/penny-pinchers/businessmen etc. = pick your choice!
I would argue that where ever you park your assets has some risk. If I park my assets in an FDIC insured bank account the risk is that inflation outpaces the growth leaving me with less purchasing power. If I invest in RE the risk is that the RE depreciates. If I invest in stocks there is the risk of a market crash. If I invest in bonds there is a risk of default and bonds becoming worthless.
We have been investing in RE a long time and I believe we have done better on our RE investments than we would have achieved on any other investment option that we would have considered.
Also I do not feel that it was a stroke of luck for the purchases we have made including those between 2011 and 2013. We know our market. We know its history. We understand the supply and demand and its impact to prices and rents.
BP is a site largely dedicated to RE investors in its various forms. Are these investors hoping for luck? I would hope by being on this site they are educating themselves and not relying mostly on luck.
BTW our most lucrative purchase was in 1999 but even our purchases that were made shortly before a market correction (purchases in 1993 and 2003) look like they were good investments today.
I would say that not everyone knows their market and studies can certainly help, but i don't know who holds the crystal ball to tell you that everything is going to drop rock bottom in XX month of XX year. Certainly, trends can be studied etc. but going by the same trend of 7 year bull and 7 year bust market, we have exceeded the bull stage already in today's market, now going by your statement of analyzing/studying market and predicting what's coming next - when do you envision this current market on a serious dopamine run to bust? 2020? 2022?
My opinion is that our market will not have the RE appreciation going forward of the last 6 or so years but will continue to have rent appreciation for at least the next few years. I have had this belief for at least 2 years and yet in my market the last 2 years had significant RE appreciation (so I was, at best, early in my prediction).
My belief on the rent continuing to appreciate is based on many factors but the primary one that I use is that rents lag RE fluctuations in both directions in my market. There is also the link I posted in this topic on the USC study of their research into the rents in my market (i.e. rents will raise $129 before 2019) and also the supply and demand (i.e. the unoccupied rate is very low).
I see no indicators of a huge RE market correction/crash in our market but we have invested through a couple RE Crashes and experienced no rent depreciation and have completed some of our better purchases in the declining/recovering market. So I look at the next RE crash as another opportunity to purchase more RE at reduced prices (like an RE sale). If properties drop 20% next year we will need to decide between apartment buildings or commercial business REs, but we will be buying.
Hi, I'm new but reading through just some of the posts here are informative and enlightening. I have been debating on the house being an asset argument and agree with it but hadn't heard how you can have the 500k tax free exclusion so looking forward to learning all I can.
Hello Larry (fellow PNWer!).
The $500K tax free exclusion is called just that, the "$250,000/$500,000 Home Sales exclusion" and is a pretty fundamental part of homeownership. Just do a search for "NOLO" and "home sales exclusion" for details, but basically, you don't pay taxes ($250K if single, $500K if married) on selling a property if you've lived in it for 2 out of the last 5 years (this, by a hairsbreadth, did NOT get changed to five out of eight years by the recent tax bill, although it was proposed. Lots of screaming Americans and Realtors correctly freaked out (and to this day, I would like to know which Congresspersons or WH staffers put it into the draft package)).
Thanks, I had heard of the concept but didn't know the name of it. Whoever it was, obviously wasn't worried if it was there or not even though it is a pretty nice perk.
A real simple answer, HOUSING is a GAMBLE - believe it or NOT, the Invisible STROKE of luck is at its full force when you buy:
Example: hundreds of folks became millionaires who bought between 2011-2013 - TIMING - a stroke of luck - which a few calculated/researched/predicted and hence capitalized on it.
There are many types of landlords - frugal/slum-lords/penny-pinchers/businessmen etc. = pick your choice!
I would argue that where ever you park your assets has some risk. If I park my assets in an FDIC insured bank account the risk is that inflation outpaces the growth leaving me with less purchasing power. If I invest in RE the risk is that the RE depreciates. If I invest in stocks there is the risk of a market crash. If I invest in bonds there is a risk of default and bonds becoming worthless.
We have been investing in RE a long time and I believe we have done better on our RE investments than we would have achieved on any other investment option that we would have considered.
Also I do not feel that it was a stroke of luck for the purchases we have made including those between 2011 and 2013. We know our market. We know its history. We understand the supply and demand and its impact to prices and rents.
BP is a site largely dedicated to RE investors in its various forms. Are these investors hoping for luck? I would hope by being on this site they are educating themselves and not relying mostly on luck.
BTW our most lucrative purchase was in 1999 but even our purchases that were made shortly before a market correction (purchases in 1993 and 2003) look like they were good investments today.
I would say that not everyone knows their market and studies can certainly help, but i don't know who holds the crystal ball to tell you that everything is going to drop rock bottom in XX month of XX year. Certainly, trends can be studied etc. but going by the same trend of 7 year bull and 7 year bust market, we have exceeded the bull stage already in today's market, now going by your statement of analyzing/studying market and predicting what's coming next - when do you envision this current market on a serious dopamine run to bust? 2020? 2022?
My opinion is that our market will not have the RE appreciation going forward of the last 6 or so years but will continue to have rent appreciation for at least the next few years. I have had this belief for at least 2 years and yet in my market the last 2 years had significant RE appreciation (so I was, at best, early in my prediction).
My belief on the rent continuing to appreciate is based on many factors but the primary one that I use is that rents lag RE fluctuations in both directions in my market. There is also the link I posted in this topic on the USC study of their research into the rents in my market (i.e. rents will raise $129 before 2019) and also the supply and demand (i.e. the unoccupied rate is very low).
I see no indicators of a huge RE market correction/crash in our market but we have invested through a couple RE Crashes and experienced no rent depreciation and have completed some of our better purchases in the declining/recovering market. So I look at the next RE crash as another opportunity to purchase more RE at reduced prices (like an RE sale). If properties drop 20% next year we will need to decide between apartment buildings or commercial business REs, but we will be buying.
Great Dan! I am able to raise $100/year for my Orange County, CA Tenants. Interestingly, I also studied a study by USC professor where he aggregated the data from over 30 years (starting 1975) to predict the boom-bust 7-year cycles. A 20% drop is a big correction as my studies tell me that back in 2011-2013 time-frame, prices in Southern CA - primarily OC properties dropped in 20-25% range. It's shaving off a solid chunk - 100k (20% down) off a 500k condo in a city like Irvine. I will be buying too if that happened in 2020.