http://www.followsteph.com/2005/08/01/the-great-real-estate-dilemma/ Follow Steph through his real estate and business journeys Fri, 10 Sep 2010 04:15:55 -0400 http://wordpress.org/?v=2.8.5 hourly 1 http://www.followsteph.com/2005/08/01/the-great-real-estate-dilemma/comment-page-1/#comment-24239 FollowSteph.com » Is it Possible to Predict When a Market will Crash? Wed, 17 Oct 2007 02:07:43 +0000 http://www.followsteph.com/?p=47#comment-24239 [...] What does this all lead to? Well over time an asset can only deviate so much above or below its intrinsic (real) value before it has to re-align itself (adjust its price back to a reasonable value). Right now, at least in North America for sure, prices of real estate properties have deviated significantly above their intrinsic value, so much so that they are now correcting themselves and trying to re-adjust to their intrinsic value. And don’t think we’re there yet, they’ve still got a lot of re-adjusting to do. I expect significantly more fallout before it stabilizes. As a very basic general rule of thumb, a real estate investment property should generate you at least a yearly revenue of 10% of the purchase price (including all costs - renovations, closing costs, etc.). Right now we’re not even close to this, many properties are running at negative cash flow values! This isn’t sustainable. [...] [...] What does this all lead to? Well over time an asset can only deviate so much above or below its intrinsic (real) value before it has to re-align itself (adjust its price back to a reasonable value). Right now, at least in North America for sure, prices of real estate properties have deviated significantly above their intrinsic value, so much so that they are now correcting themselves and trying to re-adjust to their intrinsic value. And don’t think we’re there yet, they’ve still got a lot of re-adjusting to do. I expect significantly more fallout before it stabilizes. As a very basic general rule of thumb, a real estate investment property should generate you at least a yearly revenue of 10% of the purchase price (including all costs – renovations, closing costs, etc.). Right now we’re not even close to this, many properties are running at negative cash flow values! This isn’t sustainable. [...]

]]> http://www.followsteph.com/2005/08/01/the-great-real-estate-dilemma/comment-page-1/#comment-23303 FollowSteph.com » Manias, Panics, and Crashes: A History of Financial Crisis Fri, 05 Oct 2007 12:34:09 +0000 http://www.followsteph.com/?p=47#comment-23303 [...] their purchases of these assets on the anticipation that their prices will continue to increase. Some of these investors may have a ‘negative carry’ in that the interest rates on the fu...; these investors anticipated that they would be able to use the increase in value of the asset as [...] [...] their purchases of these assets on the anticipation that their prices will continue to increase. Some of these investors may have a ‘negative carry’ in that the interest rates on the fu…; these investors anticipated that they would be able to use the increase in value of the asset as [...]

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