If this is not a Wall-of-Worry then what is?

[gwasser]

You look at recent headlines and you may think that there is no end to our economic gloom. Greece, Spain, rising interest rates, minority government, big deficits and falling - no crashing or about to crash - stock markets, collapsing oil prices, etc. Wow life is terrible!

Yet the stock market is near a 52 week high, barely 700 points below the 12400 high of the TSX. Yeah a market crash must be unavoidable. Then we`re learning about record quarterly earnings of the banks, and Toronto and Vancouver real estate prices at top-heavylevels. The deficit is noticable less than expected and B.T.W. the Canadian economy grew a measley 6% in the last quarter.

Surely the world is coming to an end... or let the good times continue. Guess what, I like these `walls of worry` and the continuing hand-wringing of famous bears whose names I seem not be able to remember and of whom we never heard until the last crash. These are the times to buy stocks and real estate. These buying opportunities won`t last, whether it is investing in dividend, positive cashflow or good value in Alberta.

 

[Rickson9]

I agree. It is far easier to make money when asset prices collapse. Bull markets are horribly boring because the only thing I can do is play video games.

 

[housingrental]

I agree with on " It is far easier to make money when asset prices collapse"

I don`t agree with " These are the times to buy stocks and real estate. These buying opportunities won`t last, whether it is investing in dividend, positive cashflow or good value in Alberta. "

Things are looking fully valued in the context of a persistent low interest rate environment

If you think that bonds will be moving up a few percentage in the next few years most markets are looking a little overbought.

I wouldn`t be surprised if a few years out multi-family properties in most markets haven`t moved, or dropped marginally in price.

 

[bizaro86]

Anytime I`m buying something, someone else is selling it. It seems likely that I`ll get a better deal when the headlines are negative, since the people selling me assets are negative about their future outlook.

Since I don`t happen to think the bankruptcy of unimportant European countries will affect the value of my assets, I`m happy buy assets of all types at a discount based on those worries.

Markets of all kinds have to climb a wall of worry. Once everyone agrees the market is going up, then everyone has bought, and nobody is left to buy at higher prices.

Once everyone is saying "This time its different" for whatever damn fool reason people will come up with next, it`s time to stop buying, start selling, and "play videogames." I`ll probably spend that time reading Barron`s and travelling internationally, but different strokes for different folks.

The concept is the same for stock markets, real estate market, and markets for coins, stamps, crude oil, and everything else.

Michael

 

[housingrental]

I`ve not seen anyone selling real estate in Ontario because of "bankruptcy of unimportant European countries"
In fact not many (any?) motivated sellers to be found in multi-family in most markets in Canada
Just a thought

 

[gwasser]

QUOTE (housingrental @ Jun 1 2010, 10:34 AM) I`ve not seen anyone selling real estate in Ontario because of "bankruptcy of unimportant European countries"
In fact not many (any?) motivated sellers to be found in multi-family in most markets in Canada
Just a thought


Calgary markets are still very muted. There are here ever better looking opportunities. But rents are somewhat down as well. This is the problem when working with the positive cash flow model. We are evaluating using current rents and then stress testing them for future interest increases. Falling rents results in lower cap rates and so we`re always looking for properties at the bottom range of the market and in the rougher areas.

This method transforms investors into bottom feeders always dealing with renters that are looking for the lowest rents because that is all they can afford. Of course, you could look at it from another point of view. To make positive cash flow, you need a cap rate higher than the mortgage interest rate this way you can invest in higher priced markets such as Calgary where the lower cap rate is offset by higher rates of longer term appreciation.

If not, you may end up standing along the wayside while REIN rates Calgary the #1 city of Alberta to invest in. As you can see, I am still struggling with this issue.

 

[Thomas Beyer]

QUOTE (housingrental @ May 31 2010, 08:46 AM) I wouldn`t be surprised if a few years out multi-family properties in most markets haven`t moved, or dropped marginally in price.
I would ..

Multi-family properties I bought at 30`s/door in 2000 and low 40`s/door in 2001 and 2002 or 50`s/door in 2005 or high 60`s/door in 2007 is now 90`s/door .. and will likely be 110`s/door in 3-4 years and 130`s/door in 5-8 years .. assuming normal interest rates and normal economies [and not a worldwide collapse ]

Why would prices be flat for a decade ?

 

[DaveRhydderch]

Definitely a good time to buy real estate. There`s some great deals out there.

 

[housingrental]

REIN provides quality research and information
Even the best aren`t psycic though
A lot of expected future growth in this area is predicated on resources price stability and growth.
Personally there is too much risk for me.... And I`m also of the perspective that there`s been a lot of distortions in the oil market


As for your choice you should ask yourself this - If these were listed business you were looking to purchase at there current valuations wouldn`t you be thinking "Geez, these are all dogs, time to look elsehwhere" ?

QUOTE (gwasser @ Jun 1 2010, 01:14 PM) Calgary markets are still very muted. There are here ever better looking opportunities. But rents are somewhat down as well. This is the problem when working with the positive cash flow model. We are evaluating using current rents and then stress testing them for future interest increases. Falling rents results in lower cap rates and so we`re always looking for properties at the bottom range of the market and in the rougher areas.

This method transforms investors into bottom feeders always dealing with renters that are looking for the lowest rents because that is all they can afford. Of course, you could look at it from another point of view. To make positive cash flow, you need a cap rate higher than the mortgage interest rate this way you can invest in higher priced markets such as Calgary where the lower cap rate is offset by higher rates of longer term appreciation.

If not, you may end up standing along the wayside while REIN rates Calgary the #1 city of Alberta to invest in. As you can see, I am still struggling with this issue.

 

[housingrental]

Multi-family valuation price level increases in Canada have been due to:


Lowered returns available in alternate asset classes - decrease in market cap rates
Availability and reduced cost of financing
Increased rents

If - and I`m guessing you aren`t too concerned on these (?) happening:
Increased returns available from altenerate asset classes
Reduction in availability and increased cost of financing
Increased expesnses - utilities, property tax increases in most areas expected to outpace rental rate growth, hst


They will have negative impact on multi-family values

Net income would be the only driver to push values higher - and I don`t see this happening in most markets.

As always there might be additional $$ to be made for the right purchaser with the right asset that value can be added to at the right price in the right market

QUOTE (ThomasBeyer @ Jun 1 2010, 03:45 PM) I would ..

Multi-family properties I bought at 30`s/door in 2000 and low 40`s/door in 2001 and 2002 or 50`s/door in 2005 or high 60`s/door in 2007 is now 90`s/door .. and will likely be 110`s/door in 3-4 years and 130`s/door in 5-8 years .. assuming normal interest rates and normal economies [and not a worldwide collapse ]

Why would prices be flat for a decade ?