property value increase
- Thread starter DavidTSI
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That the great thing about the current situation is it allows you to purchase positive cash flow properties in good areas. since you do not plan to sell in the next 3-5 years, the current price flacutations are not a concern at all but rather an opportunity to find AMAZING deals.
Good luck. if that`s not convincing enough have him/her call me (joking).
Good luck. if that`s not convincing enough have him/her call me (joking).
QUOTE (investmart @ Nov 25 2008, 03:51 PM) That the great thing about the current situation is it allows you to purchase positive cash flow properties in good areas. since you do not plan to sell in the next 3-5 years, the current price flacutations are not a concern at all but rather an opportunity to find AMAZING deals.
Good luck. if that`s not convincing enough have him/her call me (joking).
I understand that but usualy you say its going to increase a certain percent and thts part of the returns so?
Good luck. if that`s not convincing enough have him/her call me (joking).
I understand that but usualy you say its going to increase a certain percent and thts part of the returns so?
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Very geniune question . All the JV literature is based on price rise so if that is not included what will be ROI and how sharing takes place if there is no substanial return. Thanks
I am not in a position to speak from experience as I have not yet done a JV deal, however I remember reading a post a couple of months back from Thomas Beyer about how you can make money even in a flat market with a combination of positive cash flow, mortgage paydown and then the equity increase (if any, is gravy). Don also spoke about this somewhat at quickstart. And if you have a JV putting up the downpayment, any return on the first two things I mentioned is infinite (since you actually don`t have any of your own money invested!) Throw in a 3% per year increase in property value, over 5 yrs you made 15% in that arena alone! Better than stocks or bonds in my mind!!
Mark
Mark
You can talk about historical averages on average Real Estate has increased in value by 4 - 8% per year. Explain that now is the time to buy positive cash flow properties in areas that have strong fundamentals such as job growth, in migration, rising incomes etc.
Ask them what they think a property will be worth in 5 - 10 years time and use their numbers I will guess if it cash flows the numbers will look good at the end no matter what the appreciation.
Regards,
Ask them what they think a property will be worth in 5 - 10 years time and use their numbers I will guess if it cash flows the numbers will look good at the end no matter what the appreciation.
Regards,
For a $460k mortgage($115k down) at current rate 35y amort you only get under $30k of mortgage pay down over the first 5 years. Not a very good return, but like the previous poster said, if the down payment is from a money partner, that`s free money. Not such a good news for your money partner though... add a $350/m cash flow that`s an extra $20k. Under $50k in 5 years, for $115k investment, that`s still under 8% ROI/y.
Who here is investing if they know for a fact there`s no potential of capital gain?
QUOTE (markl @ Nov 25 2008, 07:25 PM) You can talk about historical averages on average Real Estate has increased in value by 4 - 8% per year. Explain that now is the time to buy positive cash flow properties in areas that have strong fundamentals such as job growth, in migration, rising incomes etc.
Ask them what they think a property will be worth in 5 - 10 years time and use their numbers I will guess if it cash flows the numbers will look good at the end no matter what the appreciation.
Regards,
Who here is investing if they know for a fact there`s no potential of capital gain?
QUOTE (markl @ Nov 25 2008, 07:25 PM) You can talk about historical averages on average Real Estate has increased in value by 4 - 8% per year. Explain that now is the time to buy positive cash flow properties in areas that have strong fundamentals such as job growth, in migration, rising incomes etc.
Ask them what they think a property will be worth in 5 - 10 years time and use their numbers I will guess if it cash flows the numbers will look good at the end no matter what the appreciation.
Regards,
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QUOTE (DavidTSI @ Nov 25 2008, 02:36 PM) Hi what do you tell a joint venture partner in such a market when property values seem to be going down ?
Hi David,
Some of the other replies (Mark`s) outline speaking about the historical averages of RE. That is a good place to start if you are pitching a potential JV. Show the fluctuations of the years and how that correlates to your market and the underlying fundamentals.
The way I`m reading your questions is: "What do you tell a current JV about a decline on their property?"
In the case that you have JV`d and your partner is worried about the property declining in value I would directly address his concerns.
Review the purchase price and why it made sense at that time, the benefits of the property now (CF or breakeven money) and your plan to hold for 3,5 or 7 years.
Some years the market will go up 10% others down -5% but overtime it should average out to be between 5%-8%. The key is it takes time. If it is CFing then you`re doing fine. Worst case scenerio is that it doesn`t go up in value and you own it free and clear in 25 years with a big stream of CF.
I know that you probably don`t want to hold that long, but that is one way to look at the investment during a down market. You can also mention that it is a safe and secure place to put your money as you do have to `put` your money somewhere, right?
The preceived decline is only realized if you sell. If you stick to your plan time should take care of you and the asset (CF, equity paydown and appreciation).
I know it is a scary time now, and we can`t predict X% capital appreciation per year, but its likely that homes will still be bought, sold and rented and that values will increase. Your explanation to your parter can be qugmented with the economic growth fundamentals of your area.
Hope that helps.
Best regards,
Hi David,
Some of the other replies (Mark`s) outline speaking about the historical averages of RE. That is a good place to start if you are pitching a potential JV. Show the fluctuations of the years and how that correlates to your market and the underlying fundamentals.
The way I`m reading your questions is: "What do you tell a current JV about a decline on their property?"
In the case that you have JV`d and your partner is worried about the property declining in value I would directly address his concerns.
Review the purchase price and why it made sense at that time, the benefits of the property now (CF or breakeven money) and your plan to hold for 3,5 or 7 years.
Some years the market will go up 10% others down -5% but overtime it should average out to be between 5%-8%. The key is it takes time. If it is CFing then you`re doing fine. Worst case scenerio is that it doesn`t go up in value and you own it free and clear in 25 years with a big stream of CF.
I know that you probably don`t want to hold that long, but that is one way to look at the investment during a down market. You can also mention that it is a safe and secure place to put your money as you do have to `put` your money somewhere, right?
The preceived decline is only realized if you sell. If you stick to your plan time should take care of you and the asset (CF, equity paydown and appreciation).
I know it is a scary time now, and we can`t predict X% capital appreciation per year, but its likely that homes will still be bought, sold and rented and that values will increase. Your explanation to your parter can be qugmented with the economic growth fundamentals of your area.
Hope that helps.
Best regards,
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[quote name= but its likely that homes will still be bought, sold and rented and that values will increase. Your explanation to your parter can be qugmented with the economic growth fundamentals of your area.
Hope that helps.
Best regards,
Are we only talking about SF homes here? In this case I will assume yes.
My question is on multifamily and/or commercial, today`s economic challenges aside what typically would the appreciation be for a commercial property?
- 2%? 3%?
Hope that helps.
Best regards,
Are we only talking about SF homes here? In this case I will assume yes.
My question is on multifamily and/or commercial, today`s economic challenges aside what typically would the appreciation be for a commercial property?
- 2%? 3%?
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- Aug 29, 2007
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In my opinion the appreciation on a multi or commercial property is directly tied to the income.
Although multi family may be impacted by surrounding real estate if the income does not rise the appreciation will be negatively impacted particularly in poor economic times. Commercial even more so in my opinion.
I do not believe anyone should "Expect " appreciation. This is the risk JV partners take as speculators.
JV partners investing in positive cash flow is entirely different.
Although multi family may be impacted by surrounding real estate if the income does not rise the appreciation will be negatively impacted particularly in poor economic times. Commercial even more so in my opinion.
I do not believe anyone should "Expect " appreciation. This is the risk JV partners take as speculators.
JV partners investing in positive cash flow is entirely different.