Real Estate Investing

Yanks02 · #1 09-10-2006, 03:58 AM

I am not an expert on this subject, but I expect that a few people around here have an idea on what's going on. To preface, I live in Boston, and this discussion was pretty much just about this area.

I got into a debate tonight about buying property. As with all investments, I believe that investing in real estate is risky. I don't think real estate always appreciates at a rate that is higher than what you are paying in mortgage, or higher than you are receiving in rent if you are leasing.

The people I was debating believe that if you can rent your apartment for the cost of the mortgage, than at the end of "X" amount of years, you will have paid your mortgage off and have the equity in the home basically for free. The reason they have not bought property is that they do not have enough money for a down payment. I cannot dispute this as I have never been a home owner or landlord and know nothing about the business.

If this were the case, however; I would think that everyone would invest in real estate and everyone would make money. Obviously this isn't the case, but why? Market Values decrease, interest rates fluctuate, and there are various costs to owning a house that aren't included in the original cost (i.e. new roof, plumbing, etc etc).

I think that over the course of a long period of time, 15+ years, there is very little risk in owning real estate. But I do think there are some risks involved. Can someone with a little more experience in this let me know the reasons behind why this is virtually risk free or full of risk?

The DaveR · #2 09-10-2006, 04:02 AM

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The people I was debating believe that if you can rent your apartment for the cost of the mortgage, than at the end of "X" amount of years, you will have paid your mortgage off and have the equity in the home basically for free. The reason they have not bought property is that they do not have enough money for a down payment.

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There's a difference between cheap leverage and a good investment.

Yanks02 · #3 09-10-2006, 04:04 AM

[ QUOTE ]
[ QUOTE ]

The people I was debating believe that if you can rent your apartment for the cost of the mortgage, than at the end of "X" amount of years, you will have paid your mortgage off and have the equity in the home basically for free. The reason they have not bought property is that they do not have enough money for a down payment.

[/ QUOTE ]

There's a difference between cheap leverage and a good investment.

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Can you explain this further? I honestly have no idea about this kind of stuff and would like to know more.

#4 09-10-2006, 04:05 AM

Yanks02 · #5 09-10-2006, 04:08 AM

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wrong forum

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there are just as many if not more people in OOT that will have answers to this.

care to contribute?

edfurlong · #6 09-10-2006, 04:10 AM

A plan that that guarantees you make money can still be a bad plan.

#7 09-10-2006, 04:30 AM

Reef · #8 09-10-2006, 04:34 AM

I'm personally waiting 1-3 years for prices to fall before buying my own place and 1 or 2 investment properties. Real estate is where the $$$ is at, IMO. If you're looking long term, real estate basically is a guarantee.

disclaimer: <-- noob

PunterSThompson · #9 09-10-2006, 04:39 AM

I can only talk in terms of the market where I live, but when I recently purchased a house here, I plotted the average house price out over time, after factoring in cpi. After a bubble in the 1940s, property didn't rise in value in real terms for 30 years. Several studies have shown that the real overall rate of real estate value increase is around 0. That being said of course, if you can identify areas that are going to boom you can really gain in terms of capital (for instance, where I live there is an undeveloped port area, the last in a major Australian city)

I think the problem with buying apartments is that when you purchase a property, the real value is in the land. If you buy an apartment as an investment, you're effectively not buying any land at all. Over time the house may actually depreciate in real terms.

Just some thoughts,
Punter

john voight · #10 09-10-2006, 04:57 AM

depends what type. long term or short. Long term its almost guarantee profit in NY-BOS-PENN region. simply put, average houses will be worth more in 30 years.

however short term may be very risky. PUt your money in when market hits bottom. SO for south cali id say prices would be bottom in 2010ish. IN NY i have no idea. if the market has been hot for few years, your already too late.

if you wanna repay mortgae w/ cash flow from rent, buy 2plex, 3plex, or 4plex. you will rarely get cashflow out of renting a 1 unit building.

when you invest, make sure you will be able to make mortgage payments. you truley get rapped interms of $ and bad credit if you miss 3+ payments.

Realestate is prolly one of the best investments out there