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I can see this being the case in the SE US. I didn't crunch the numbers but they sound plausible.
When you say best returns / least cashflow. How does this math work out? Best returns on... an eventual sale? Rental cashflow ONCE paid off?
It works out with leveraged appreciation, personally my properties all have some cash flow but the more leverage, the less cash flow. More leverage, higher returns thanks to a pretty strong market that has weathered even the worst times like 08 very well. I could buy the $1M home in my example with cash and be cash flowing day 1 but obviously that would be a very bad move. I do have condos I paid cash for and all provide decent cash flow, but my leveraged SFHs that provide little cash flow crush those returns. Like most investors I'm also not buying turn key homes, rather finding fixer uppers and making the highest ROI improvements.
Just as with any other asset classes you do not need to sell to have a gain/loss, unrealized or not it is still there. When I go to the bank to get a mortgage and list my current assets, they look at what the home is worth that day, not when I purchased it.
While the Bay Area has remained a solid investment during most peoples lifetimes, assuming it will continue to grow because it has historically is not a solid assumption. Looking back over a longer period of US history, the hot spots have really shifted around and many of the boom cities have busted. In their respective times, Baltimore, New Orleans, St. Louis, Cleveland, and Detroit were at one point the rapidly growing "tech capitals" of their time, and that growth has since subsided. The only anomaly has been New York, always on top population wise.
In 1993, I sold my Silicon Valley house for about $600K. The family to whom I sold it recentlyl put it on the market & it sold for $3.6 Million. Judging by the photos on Zillow, it hasn't been remodeled.
While the Bay Area has remained a solid investment during most peoples lifetimes, assuming it will continue to grow because it has historically is not a solid assumption. Looking back over a longer period of US history, the hot spots have really shifted around and many of the boom cities have busted. In their respective times, Baltimore, New Orleans, St. Louis, Cleveland, and Detroit were at one point the rapidly growing "tech capitals" of their time, and that growth has since subsided. The only anomaly has been New York, always on top population wise.
The city anchoring our general area (Dayton, Ohio) has been called "The Silicon Valley of the Ragtime Era". 100 years ago, it was famous as being the place with largest per-capita issuance of US patents. Site of the invention of the airplane, the cash register and all sorts of gadgets and conveniences that made modernity possible, it has been in decline for 60 years.
Cue Shelley's poem, "Ozymandias". But I wonder: can decline really ever be forecast? Does it ever have veritable harbingers? Or do we only recognize it in hindsight, after it's already too late?
More topically... suppose that the SFs and NYCs of the world stagnate, so that property that was worth $500K 25 years ago, and which is worth $2.5M or whatever today, is still only worth $2.5M in the year 2045. Well, what about other markets? Will laggards catch up? Will the whole world end? Or will most laggards remain as laggards, while entirely new markets assume leadership?
I look with abject envy at the people who jumped onto the property-ladder in America's "glamour cities" 20 years ago. That is sufficiently recent, that many of us, who are currently reading and writing on this Forum, would have been in a position to buy back then. But we didn't. We deployed our money elsewhere. Well, are we going to get a second chance? And if so, where?
A second chance was 2009-12 in my corner of the SF Bay Area... I let many know this is the time to get serious if they wanted a house.
Only one of the nurses I work with did... A single mom RN with a 11 year old daughter... She bought a foreclosure with issues... far from anyone's idea of a dream home... Her payments are less than the current rent for the place she was renting in 2010 and the value of the home she bought has more than doubled.
Side note: I think you might be mixing part of what I said with part of what another poster said. This was a little hard to follow. Who is $2,000 in the hole? lol
This poster. He said his gross rent is 4K a month and his PITI is 6K a month. Therefore he's at minimum 2K a month in the hole + vacancy, turnover expenses, and repairs and it will be even worse.
Quote:
Originally Posted by 22003yo
My best returns have come from properties with the least cash flow, many other ways to do it than just investing for cash flow. Where I am you can rent a $1M home for about $4k a month. Putting 20% down on a $1m home, getting a 30 year fixed at 4%, you're looking at around $6k a month after property taxes and insurance. I'm still a buyer at these levels and my returns still beat the SP500 by quite a bit.
While the Bay Area has remained a solid investment during most peoples lifetimes, assuming it will continue to grow because it has historically is not a solid assumption. Looking back over a longer period of US history, the hot spots have really shifted around and many of the boom cities have busted. In their respective times, Baltimore, New Orleans, St. Louis, Cleveland, and Detroit were at one point the rapidly growing "tech capitals" of their time, and that growth has since subsided. The only anomaly has been New York, always on top population wise.
If the fundamentals don't quite add up, relying on past gains to carry on through is little more than blind faith.
One thing I will point out is that transportation routes have dictacted which of those cities are "on top." When steam ship and covered wagon was the fastest travel options St. Louis and New Orleans were exceptionally important strategic locations on the Mississippi river. Then when the railroad developed Chicago/Detroit/Cleveland rose to prominence. Now with all of the imports coming in from Asia the westcoast port cities of Seattle, Oakland and most importantly Long Beach (LA) are ground zero for economic growth.
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