To stimulate the conversation, let`s change gears because we are not addressing the issue of deferred maintenance costs in the calculations. This clip below is well worth your viewing time however, 6 minutes and 29 sec into the video addressed the heart of the income producing asset valuation...

Mark - Are you including the cost of the deferred maintenance in your total purchase price when calculating your 1% return?

Leverage increases your debt service and thus reduces your net income. In a low yielding /low cap rate environment leverage becomes a real large drag on your ROE.

Consequently if it needs an upgrade then it's not generating 1%. I`m not going to get into a semantic discussion about what constitutes distressed. As far as I`m concerned it`s a seller that`s forced to sell. However, let`s look at this from another angle: Given that alternative real...

Exactly!. You cannot buy anything income generating with boatloads of leverage anymore. Comparable yields in real terms and risk adjusted are much too low. Every dollar of leverage reduces your ROE. Once distressed sellers have been taken out because they no longer have access to credit to...

IMHO, I think Thomas`s numbers are very accurate and conservative from a buyer`s perspective. Notwithstanding, I find the $150,000 property example an interesting challenge to find. After all, it`s not what you`ve paid for the property that counts but mostly the total cost of having it in...

The real returns generated by Canada 10Year Bonds are negative by .25%. A property that is sold at a price that yields a gross monthly income of 1% (approximately equaling a cap rate of 10%) can only be deemed distressed. This cap rate is a 10 1/4% spread over CDN Treasuries.That would be some...

You're coming-up with some great stuff here- Thanks Speaking about currency risk: If Monti gets his way, lots of folks will have their Euro shorts squeezed. Merkel will have to change her number from 999 to something else. You know there`s something wrong with the system when people are...

A vendor take back was exactly what I was thinking about and asking if it has been done and under what terms and conditions. Investable product was another. I'm fishing the idea for comments and for other alternatives as well.

I agree but that's exactly the point of this thread. Income producing Real Estate has the best risk/return (aka Sharpe Ratio) value proposition out there. There's no question about that. Notwithstanding, there must be something else that's competitive otherwise Cap Rates must drop due to the...

Are there any CPI + indexed mortgages out there?

Totally out of the box but I like it...especially the US bit. I'll look into it. Thanks

I must say this has been an unexpected yet pleasant chain of discussion. I came here to learn about low risk/yield retail products only to be drafted into a derivatives strategy conversation. Here`s where I stand. I have owned a multi-family building for many years and was thinking about selling...

Hey thanks. I`ll look into that. I would prefer non-callable issues also. Neg-convexity can bite you in the you know where. Normally, rates should go up when inflation is in the wind but nothing is normal anymore. The central banks will stop at nothing to camouflage the decay in our...

Hi Biz, Highly leveraged? How about a calendar spread on CL (WTI) or Coil (Brent)? Short the front month and go long on the back month should provide the insurance hedge to compliment your long oil. This may solve your leverage requirements but not your time horizon. The advantage is that...

Hi Thomas, I`m just really searching for low risk alternatives which for me, does not include options, margin and un-manageable counter-party risk. Notwithstanding, I do thank you and appreciate your insight. Your comment: `Boats are safe in harbour, but that is not what they are built for`...

Hi Biz, although you`re hedge would be on the right side of politics, all that money printing IMHO will find its way into oil through decaying currencies in the long term. I share your views but Caveat Emptor: Oil is the most manipulated and politically sensitive product out there. Moreover...

Thanks Thomas- I really appreciate your input on possible solutions but, I`m really not comfortable with options and risk. Especially now since the implied volatility of both call legs are less than the stocks historical volatility making the options cheap. The $2.45 premium received for...

Please feel free to suggest Investment Alternatives to Multi-Family Real-Estate that would provide the same low risk and inflation protection. Is there anything out there that's low volatility/low risk and yields a "Real Return" above inflation greater than 1%?