All Forum Posts by: Charles Worth

@Ben Leybovich I definitely agree with the premise, people should know how to use the tool and ideally know how each number is derived and what is behind it. However, the question was somewhat philosophical as to if newbies should be allowed to use the calculators and I think its fairly obvious that a large number of people will look for a shortcut and this shortcut is better than the alternatives and seems like a great tool for those who did take the time to understand what is behind it.

Testing brings up a whole new set of issues including who is going to administer a test, what will be a passing grade, how do you deter cheating on the test, etc.   

I live in BK and own one property there. Queens is supposed to be the next area to look like BK. The subway service to upper Manhatten is normally even quicker than BK.

Would be curious to hear what people thought about the Bronx. Its been hyped as the next area for a long time but its never really gotten there, I think because of the bad reputation (true Brooklyn had that problem as well) and its not nearly as close as many of the other areas like BK or Queens. I have looked for a long time there but never really got comfortable. Also, most areas do not have great subway access there. 

@Ben Leybovich

Your cynicism always cracks me up. In this case though I think it is kind of like a lot of the medicine we use in the healthcare system in that its true it can be bad for you but the alternatives are far worse. In this case I think most newbies, unless they have a background in running numbers or doing analysis, will probably either download some type of similar analysis on the web, listen to people they probably should not be listening to or worse relying on gurus and common knowledge (real estate is always a good investments, $20K houses can’t be worthless, etc.). As such, a calculator like this is a great tool to those who learn all the other things that matter and what the numbers actually mean. There will always be those that don’t but they likely would have found other paths to the same place by relying on something else.

For me personally I am a newbie but practically live in excel doing analytics as a banker so I have not really used the calculators but I have seen similar ones sent to me or PDFs and I too see how it can be overwhelming and find it easier to find a very simple analysis in excel that I really have to think about but to each his own.  

@Brandon Turner there are a lot of ways to build in checks and balances to a model, and if not there already this might be good to have in there. Feel free to PM me if you want. 

@Brandon Turner 

#askBP 

I think it would be interesting to have a fireside chat format with some of the better-known people on here that way you get various viewpoints on certain key issues (some recent ones that stirred up controversy is if appreciation should be factored in, using the 2% rule etc.). The various debates would also make for great listening. 

Personally, another thing that would be very interesting is what the people on here that have huge SFR or small multis have experienced as true costs for estimates that are key in property analysis such repairs, maintenance , vacancy etc. for various types A&Bs vs. Cs and Ds as well as pitfalls in these estimates.

I have been looking in North NJ but so far I am having a lot of trouble justifying pricing without resorting to more risky situations (lower income areas, etc.). On a rental basis most properties I have looked at have trouble being worth it. 

@Account Closed There is no such thing as worthless real estate means no offense but you can't be a true investor. A property with long-term negative cash flows is basically worthless to an investor unless it can be turned around, bought at a lower price or sold for a much higher price than you paid for it after all costs. 

Maybe you can be a speculator and pray for appreciation (so there is option value for sure) but its normally not enough to offset the negative cash flow unless you have really deep pockets. 

I am not saying that is the case here I don't know your inventory but its a comment on your comment about no real estate being "worthless" as there are definitely properties that will lose money for a long period of time for anyone who bought at prices that were too high. Eventually prices will drop but that can easily be way below prces quoted today. 

A little late to the party but this was a very interesting read. 

@Jeff B. 

I too have a strong background in stock market investing. As any investor knows in the long run stock prices are determined by two main things cash flows and risk (also known as the discount rate). Now it is true that, as every investor knows Mr. Market (what famous investor Ben Graham called the stock market) is manic-depressive, and as such the multiple people are willing to pay for cash flows varies widely based on outside factors. Many times those factors do have to do with either cash flow or risk though. For instance, you used Apple as an example and in Apple’s case the perception of future growth swings widely as investors change their mind on this consumer product driven company. However, that growth rate is what determines future cash flows so a price compression is warranted if the market thinks the growth is slowing especially for such a huge company.

To me, this would be even more true for real estate, which with transaction costs, taxes and long listing times real estate is definitely a long run investment for rent seeking investors. As @J Scott said it very well that the rent/cash flow was the main focus. If a certain area is more favorable it will eventually show up in the cash flow through lower vacancies or higher rents. In areas where there is significant dislocation (such as NYC) a lot of it has to do with certain types of RE (lux here), hot money investors and factors that are probably not sustainable (like investors from other countries just parking money in RE no matter the price). For me, it is a probability bet, what are the odds in five or 10 years that someone will want to or can pay the implied rents on the prices being seen in some markets?  

You can also extrapolate the growth rate being implied by prices and for me that has been a god sanity check in stock market investing and should work in RE investing as well. 

Lastly, it is extremely hard to believe that rates will not be higher in five or ten years. When they are RE becomes much less affordable and unless wages rise many would not be able to afford premiums over rental prices.

@Rey Grabato 

Do you anytime have access to the money for these projects or get an upfront fee?

Do you have 5 or 10 clients that are active here on the site that have invested with you over a long time period? Considering that I found articles going back to 2010 I find it very hard to believe that there seems to be no one on here that has a track record over a 5 year time frame or more with the company.

Even if everything you said is true you should think about being more upfront with the risks or downsides because even if everything is true the way it is advertised seems fishy as does the way you answered the questions on here in “ad speak”.  

@Michael Noto In my area $259K would not even buy a studio in most cases so I know what you mean but returns here in NYC are generally not very high unless you take a lot of risk, can do a rehab, get inventory others do not have or bet right on appreciation plays.

Thank you its in 44121 and I did not know parking was so hard to get.

So if I understand correctly, they will up my taxes I assume the year after I buy based on the purchase price?