All Forum Posts by: Collin Hays

better throw in "miscellaneous"!

Sorry for the confusion.  It's a matter of which number you are dividing into which.  I divide the earnings by price, so I am looking for a higher ratio.  16 more more before I am interested.  If you are dividing price by earnings, correct, you are looking for a lower ratio.

Pick one formula, or you will be very confused!  ;)

RE is white hot right now through most of the country.  You either need to be mining for, and betting on, diamonds in the rough, or buying momentum.  

A key question is, "What sort of earnings/price ratio is satisfactory to me?"  

For example, if a property is $300,000, and is producing $30,000 per year, That is a ratio of 10 (rents divided by purchase price).   If the rents are $20,000 per year, that is a ration of of 6.6.

Of course, that is before all expenses.  What sort of ratio are you seeking?   In the Smoky Mountains, for example, even after a significant run-up, ratios are commonly 12, 13, 14.  

There are investors who are willing to sacrifice a high ratio to buy in an otherwise highly-desirable area.  Cape Cod, Malibu, etc.

So before you can establish "where" you want to buy, I think it's important to ask "why" you want to buy. Current income?  Price appreciation?  Personal taste and vacation preference?

This forum is easily your best book.

Make sure you know how to swim for sure!

...and have plenty of income to buy your $4 million Colorado retreat! 

 Those are incredible numbers, and really underscore how much of a bargain that the Gatlinburg, TN market still is.  I went to Amy's website, and even if you aren't investing in CO, she provides a treasure trove of really good information that applies to a lot of us looking for STRs in vacation spots.  

 I rebuilt in Gatlinburg in 2018 for around $230 psf.  I would assume it’s much higher than that today.  But I think you should go for it!

 Eventually, supply meets and exceeds demand, and then everyone’s looking at each other with their 10 mortgages on homes that are suddenly worth half what they were a year ago, saying “but I thought it was different this time?”

Nope.  Just the imminent cycle of expansion and contraction.  A fresh new batch of investors is bankrupt, banks sell the properties, and things hit bottom for a while.  Count on it.

 I would think that building costs and vacant land have both risen commensurate with the prices of existing properties.  Additionally, you are losing a full year of rents while you struggle to build it.  Ask me how I know.  😂