My property is still down over 40%! BEWARE!

2 Replies

I've written about this before but I just had an appraisal come back for one of my commercial properties.  It literally appraised  at 50% of what it appraised for in 2007.  I put 20% down on the building and I've paid down over 25% of my mortgage, but I'm still underwater.  

Today after a long vacancy, I finally filled my last vacancy.  The total rent is less than 65% of what it was when I bought it.  

Did I make a poor choice? Obviously!  Did I not know what I was doing? Absolutely! 

But there are things I did right and was still hurt by the bursting of the commercial bubble.  I bought a nice building in a good location with no vacancies.  

Be extremely wary that even if you buy right  you may still get pounded by market forces. Since I had substantial cash reserves I was able to and can still ride out the continuing problems with the commercial market at least in my part of Atlanta. 

One other point, on the residential side we are a very long way from the bottom from a few years ago and much of that is due to artificial stimulation from the FED.   Right now we as RE investors are relying on the presumption that QE will continue (even after the bond buy backs taper off).  

Just be cautious and know bad things can and will happen.  Make absolutely sure you have enough reserves to make it through any significant downturn, whether that starts next week, next year or in 2020 because it will happen.   

One difference in residential from commercial is that the US kept growing at near 3,000,000 people per year through the downturn, yet relatively few new residential units were built from 2008-2013.  There is still pent up demand for more housing in the growth states/cities.  Still, the cycle will peak and turn at some point. 

Originally posted by @Jon Klaus:

One difference in residential from commercial is that the US kept growing at near 3,000,000 people per year through the downturn, yet relatively few new residential units were built from 2008-2013.  There is still pent up demand for more housing in the growth states/cities.  Still, the cycle will peak and turn at some point. 

 That is basically 21 million more Americans since I bought my property.  In a normal situation the commercial side of things would be recovering also; however, with the vast expansion of regulations in the last couple of decades, accelerated even more since 2009, that is just not the case.  

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