Quote: (08-17-2013 04:13 AM)Anaguma Wrote:
Quote: (08-16-2013 05:12 PM)BostonBMW Wrote:
Quote: (08-16-2013 04:48 PM)LowerCaseG Wrote:
It really depends on what your appetite for aggravation is. 10% cash on cash sounds great but is it 10% of 20k or 200k. Makes a big difference when you are compensating yourself for being a landlord.
You cannot formulaicly value a property, unless it is a condo in a large building with 100 other units that are exactly the same, or a house in a subdivision. The best real estate investors are obviously good with numbers, but make decisions on instinct and gut feeling, not excel spreadsheets.
I have one client who makes a ton of money flipping houses, and another one who makes similar money buying, renting, holding for 5+ years and then selling, and rolling into something else. Probably neither of them could adopt the other's methodology and be nearly as successful. You have to employ an operation that you are comfortable with, are good at, and works for you.
You are asking someone to tell you what this property will be worth xx months/years into the future. That would be like me going to my stock broker and saying, "I am thinking about buying Exxon Mobil. What will I be able to sell it for in 18 Months?" Nobody will ever tell you the truth which is, "I have no idea."
I think that there are some misunderstandings here, so please allow me to clarify:
- I'm not asking someone to tell me what the property is going to be worth in the future, but understanding whether there is a valuation methodology that I can use. Something that has yielded definite results.
Also, I completely disagree that you cannot formulaically value a property. Individual investors, REITs, and Commercial Developers do this all the time. To rely on "gut" and not run the numbers through an Excel sheet is foolish -- that is how people lose their shirts.
Also, you are conflating what I am asking (calculations for present LTV and ARV for local markets) with the Equities. Real Estate is a value add proposition not an invest purely based on analysis, namely, you can not do much to shift the stock price after you have taken a position (unless you're an institutional investor/HF/PE). So no one can predict the stock price movement 18 months from now, however you can certainly value the equity. I use Fundamental Analysis with formulas based on Ben Graham's Security Analysis and Intelligent Investor. I have done fairly well in the market and don't need a stock broker. I'm looking for something similar in RE.
http://www.johntreed.com/REIbooks.html
Get the "How to Buy Real Estate for at Least 20% Below Market Value" and the "Best Practices for the Intelligent Real Estate Investor" books. The principles are very similar to Ben Graham's Intelligent Investor.
That being said, RE investing is a lot of hard work for a merely okay return, and is more like a full time job compared to stocks. If you are already beating the S&P from stock investing in your spare time then you should just continue to do that instead.
Perfect! I've ordered that book. This is something that I wanted and was looking for!
I have been beating the S&P by a few percentage points. I agree that RE investing is hard work, however if you look at cap rate + equity (sweat) you're in much better shape than the market which is subject to global trends instead of local ones. Besides, value investing has allowed me to keep on pumping my 401K pre-tax on auto pilot.
The last time I did some short term trading (not day trading/high frequency), my returns were 14% or so, it took a lot of time, took me out of the comfort zone and the capital gains, pissed me off. If I end up flipping any of my deals, you can be assured that I will do a 1031 exchange.
I don't need the money right now, in fact, I'm trying to live a minimal lifestyle.