For those of you interested in real estate and looking at %, you're missing the most important metric of all
IRR
Internal Rate of Return
Which takes into account your EXIT STRATEGY. What good is earning double digit % returns when in the end, you might get killed. Want a good example? Pick any single family house in a major market during 2008 subprime crisis. I specifically mention single family house because at least with commercial real estate (apartments, office buildings), it's BASED on cash flow vs single units where the public are just picking figures out of their ass and the appraisers/bankers go along with it because the big boys like Goldman Sachs just pitched that junk off to poor investors who didn't know otherwise.
Also, in emerging markets, there are so many unknown variables that it takes just one to fuck up the entire deal. (ex. Puerto Vallarta, developer had presold many units in a luxury development only to have the bank financing dry up. Japan, property values generally decline as most of the value is in land so unless YOU take into account construction costs, (which nobody does), you're operating on razor edge margins and it takes just one major repair to fuck everything up and there goes your double digit % return.
As for AirBnB, take a market like Las Vegas. TONS of units there but it's actually illegal from what I've heard. I think it might be the same for Hawaii but ppl still do it getting those returns. What happens if one day, YOU get caught and your source of cash flow has now dried up completely? Not saying it will but how does one quantify that and what % would one expect?
In my opinion, it's better to do a business where you're doing something you truly love on a day to day basis. That's something that I've noticed most financial analysts never take into account. The % return on their happiness level.
Peace
IRR
Internal Rate of Return
Which takes into account your EXIT STRATEGY. What good is earning double digit % returns when in the end, you might get killed. Want a good example? Pick any single family house in a major market during 2008 subprime crisis. I specifically mention single family house because at least with commercial real estate (apartments, office buildings), it's BASED on cash flow vs single units where the public are just picking figures out of their ass and the appraisers/bankers go along with it because the big boys like Goldman Sachs just pitched that junk off to poor investors who didn't know otherwise.
Also, in emerging markets, there are so many unknown variables that it takes just one to fuck up the entire deal. (ex. Puerto Vallarta, developer had presold many units in a luxury development only to have the bank financing dry up. Japan, property values generally decline as most of the value is in land so unless YOU take into account construction costs, (which nobody does), you're operating on razor edge margins and it takes just one major repair to fuck everything up and there goes your double digit % return.
As for AirBnB, take a market like Las Vegas. TONS of units there but it's actually illegal from what I've heard. I think it might be the same for Hawaii but ppl still do it getting those returns. What happens if one day, YOU get caught and your source of cash flow has now dried up completely? Not saying it will but how does one quantify that and what % would one expect?
In my opinion, it's better to do a business where you're doing something you truly love on a day to day basis. That's something that I've noticed most financial analysts never take into account. The % return on their happiness level.
Peace