I'm a new investor and have been browsing for my first investment. I have what might be a dumb question. The properties that I have come across in my area are pretty price inflated. Who buys these properties and why? The cash flows are all negative, and the rents are already at market rates. Is there something I'm missing? Somebody must be buying these up if they're able to price them this way, right?
I'm browsing MLS based sites... is that the problem? These are retail, and not investments?
"investors" in hot markets who are chasing appreciation. They can be recognized by using "Cash-on-cash" returns as their primary financial metric and they hope to sell to somebody also willing to overpay down the road. Also known as "the bigger fool theory".
Foreign investors and those with deep pockets will park their equity in RE, knowing that there will be growth and thus it's a truly safe investment (unless you subscribe to the Apocalypse conspiricy) .
Hi @Mike Austin ,
Find the right CPA and they may tell you to buy one of those very things when you have made a bunch of money off a place you offloaded.... once you were done depreciating it :)
RE losses are not always a bad thing.
Ahhh... I hadn't thought of that. :)
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