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Re: Stagflation Investment Idea – Part I: Multi-family residential real estate
Bingo! It's a fixed target.
I'd be very careful about any RE "investing" in the near future. People's ability to pay will be the biggest single factor. Generally speaking, multi-family housing = lower income wage earners. Which segment to you see doing the best in terms of employment? I say betting on Joe the factory worker or Sue the cashier is a losing bet. Jane the corporate career gal and Bill the bureaucrat have better prospects. If you just have to invest in RE, look for affordable family sized homes of good build quality. Not the McMansion stuff or the starter homes, but simply a good solid place to raise a family. Those will always be in demand.
Many glowing reports of ROI on rental property, even in during the housing boom, ignored or conveniently misapplied maintenance costs. The chickens are coming home to roost on all those "kick ass" homes people were buying as investments a few years back. My company works with sellers to get homes ready to sell and fix home inspection issues. 20 pages of "defects" are not uncommon on inspection reports. This is either because they were simply built like poop, or the fact they are so damned old that they are near the end of their useful life. In my experience, people not in the business tend to grossly underestimate the repair costs of a home. Folks play Russian roulette with leaky roofs, hot water heaters, and other systems. Always hoping nothing breaks before they can move to the next city and pass it off on some other poor sucker. As people tend to stay put and move less often in the post bubble economy, this game will become more difficult to play. I'm noticing that buyers now actually care more if a roof is new vs 25 years old. They seem concerned if that furnace is an old dinosaur. During the boom times, it was about price and features period, not quality or condition.
Originally posted by Jay
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I'd be very careful about any RE "investing" in the near future. People's ability to pay will be the biggest single factor. Generally speaking, multi-family housing = lower income wage earners. Which segment to you see doing the best in terms of employment? I say betting on Joe the factory worker or Sue the cashier is a losing bet. Jane the corporate career gal and Bill the bureaucrat have better prospects. If you just have to invest in RE, look for affordable family sized homes of good build quality. Not the McMansion stuff or the starter homes, but simply a good solid place to raise a family. Those will always be in demand.
Many glowing reports of ROI on rental property, even in during the housing boom, ignored or conveniently misapplied maintenance costs. The chickens are coming home to roost on all those "kick ass" homes people were buying as investments a few years back. My company works with sellers to get homes ready to sell and fix home inspection issues. 20 pages of "defects" are not uncommon on inspection reports. This is either because they were simply built like poop, or the fact they are so damned old that they are near the end of their useful life. In my experience, people not in the business tend to grossly underestimate the repair costs of a home. Folks play Russian roulette with leaky roofs, hot water heaters, and other systems. Always hoping nothing breaks before they can move to the next city and pass it off on some other poor sucker. As people tend to stay put and move less often in the post bubble economy, this game will become more difficult to play. I'm noticing that buyers now actually care more if a roof is new vs 25 years old. They seem concerned if that furnace is an old dinosaur. During the boom times, it was about price and features period, not quality or condition.
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