Your thoughts on a new bubble?

[Ultrarunner]

Originally Posted by charlie_paige

I've been wondering, if you are in an area with a hot real estate market, as a buyer, what do you about houses that have been on the market for a very long time, like over 100 days? I have previously been told by realtors not to bother making any offer, because the sellers won't take anything less than 100% of asking, and that is why they are on the market so long. Is that the case? If the typical house is selling for about 100% of asking, but some houses have just been sitting, what % of asking would you offer. Obviously presuming that you like the house.

Some of my best buys were problem homes... either price or other.

Never hurts to make an offer you can live with... the worst is to have buyer's remorse.

Right now there is a home that is very well done with some land that I looked at... it has been on the market for several months... the only reason is the price.

Just because it is the nicest home in an area with a mix of homes... including some shacks, doesn't mean it is worth all the money the seller has put into it... eventually, the price will come down if the home is to be sold...

The seller was really fixated on price because in addition to spending a lot on top renovations... he bought near the top of the market.

The listing broker has called me several times with the seller offering to carry a first deed of trust and the broker cutting commission to make it happen... I still believe it is way overpriced for the neighborhood and apparantly so do others...

[jm1982]

The market just started "heating up" pretty recently. Real estate goes in cycles and it's different from the stock market. If it's trending up it tends to trend up for years...if trending down it trends down for years too.

What some people didn't realize is that when the market "was bad" was the best time to buy...

It's funny that now all the major publications are suggesting now is the time to buy because I've seen prices go up significantly from even last year.

I bought a fixer REO in 2010 , it seems like the selling prices are significantly higher and the other thing is things seem to be selling much quicker and i'm not even in a great area.

It seems people are trigger happy now because they feel prices will rise a lot and they will get priced out again and might never be able to afford a house.

I am in los angeles...personally I see other markets that are still very undervalued based on price per square foot, and current price versus previous "bubble high" price from 2007 or so..

An important thing to keep in mind is that 'all real estate is local' ...

I don't see prices doubling anytime soon in my local market..but I see other markets where prices could still double or go up more 100% or more.

These are mostly lower end homes and the rents are high enough that they cash flow. Homes for $50,000 or so that rent for $800+ a month for example.

If you buy several of these with leverage from your profits received from selling a house in California for example (a market that has risen) it seems a lot of money can be made and even if appreciation doesn't happen (which would be unlikely) the cash flow will still be great...so the risk is not too great.

Of course this would involve moving from one of these markets or making sure you have a great property manager.

Let's say you take 300k profit from a house sold in California and leverage that to 1.5million (20% down)

If those properties double in value sometime in the future...they will be worth 3million .

You would owe the bank less than 1.2million if you sold because some of the principal would be paid off..plus you will have the cash flow from the houses being rented.

So let's just say it's 1.2million.. you're profit will be $1.8 million dollars..of course you will have taxes but it will be long term gains if you hold for at least a year.

This is how people can get rich and/or retire early.

There are other strategies you could probably use too like 1031 exchange and exchange all of the smaller properties for a larger one that is easier to manage , like a NNN Triple net property where the lessee pays all the bills including taxes and even repairs of the property! You basically just receive a check.

Ok there ....I mapped out a plan of action for anyone that has a bit of equity in their house and wants a good shot at being wealthy in a relatively short period of time.