property values in my area have climbed about 20%/ year the last two years.
i intend on moving across the country to a new home state, where i will begin my investing career with a 4 unit property.
my questions are:
how would i go about finding an area where i can reasonably expect growth?
I assume this would be a seller’s market II, which means that we’d be getting close to the peak, but i don’t plan on holding more than a year anyways. is this accurate?
in these markets, because prices are flying up, it’s my understanding that deals are much tougher to find. i’m afraid that even if i find a solid deal, cash flow will suck because the purchase price would still be too high, relatively speaking, to be covered by teh rental income. is that accurate?
any input is appreciated, i’m still about 7 months out from the big move, so i’m just trying my hardest to determine rough areas or markets of the state i want to go, so i have ample time to learn about where i’ll be investing before i actually go
Cash flow will be almost impossible to find in that type of market. It’s like going to a stockbroker and telling him you want to buy a stock which pays a 5% dividend and has a high expected rate of appreciation. There’s no such animal. It’s either or, and it’s the same in real estate.
Consider buying the best deal which fits your needs as your primary residence. Live in it for 2 years. Sell for a nice tax free gain (you hope). Repeat. At the one year point if it has appreciated in value you can take out a second and use that money for investment. If it doesn’t appreciate, you have a nice house to live in. Think multiple exits.
thanks a lot that helped shed light on it. to further understand the reasons, plz let me know if i’m on the right page.
In an area where prices are going up, and i can expect/hope to have a good chunk of equity a year later, there are many other buyers trying to get in on it as well. because of that, sellers don’t have to sell for deep discounts, or for any discount at all, as they know they can get what they are asking from someone else if i were trying to lowball them.
because of this market rate purchase price, the mortgage will be too high to cash flow positively from teh rents of the 4 units. am i fully understanding this?
i will actually end up out there in several years. I’m up in new england right now, and as soon as i get my degree i’ll be heading to FL to get a small apt.
my plan is to use the profits from teh first apt to buy anotehr (or 2 more) out in FL. assuming i have enough cash and feel comfortable enough after the second round of property(s) in FL, i will be heading out to CA
Your conclusions are most likely correct, but remember that all markets are different. And expected appreciation is not a sure thing.
If nothing else, consider looking for a small edge by buying a cosmetic fixer-upper. A house in need of $10,000 in paint, floor coverings, and minor repairs may sell for $30,000 less than a renovated house. But that can mean $20,000 in instant equity for you. Even in a hot market, most buyers can’t see past the problems with a house which has horrible colors, torn up carpet, and a funky smell.