Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Try Pro Features for Free
Start your 7 day free trial. Pick markets, find deals, analyze and manage properties.
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Harish V.

Harish V. has started 3 posts and replied 183 times.

Post: Is real estate appreciation a myth? Adjusting for inflation

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @Gregory Chadwell:

From early on i was told to buy real estate as a HEDGE against inflation.  The dollar seems to be chasing the peso right now.  Look at the cost of everything!


 Yes but hedge works due to increasing rents, values are not likely to go up. Listen to recent podcast by Ashwath Dhamodharan on this and see if you agree.

Post: Is real estate appreciation a myth? Adjusting for inflation

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @Mike Dymski:
Quote from @Harish V.:
Quote from @Eric James:

One stated benefit of investing in real estate is price appreciation.  However, if you look at inflation adjusted real estate prices for the most part there isn't much appreciation.  There are specific points in time like 2006 (we know what followed that) and right now when real estate exceeds inflation adjusted prices. However,  over the long term it doesn't really appear that real estate appreciates much beyond inflation. Is real estate appreciation a myth?

https://www.supermoney.com/inf...


 Look at long term studies 100yr+ you will see

Inflation is 3% range. Bonds are in same 3% range

Real estate is 6-7% range.

Stocks are in 10% range.

There are periods of divergence from this and there will be catchup. Here is bigger pockets article on this:

Bonds vs. Stocks vs. Real Estate: Which One Wins? | Blog (biggerpockets.com)

This is offcourse favoring real estate, however you can look up other indpendent sources and find that stocks normally get 10% total returns considering dividends are reinvested.

In my opinion stocks are best for passive strategies that are long term.


If an investor can only get a 6-7% total return on real estate, they definitely should invest in something else. Direct owned real estate is too much work to not achieve outpaced returns. Most of us have 20-25+% minimum IRR hurdles. Otherwise, could just invest passively with others and get returns in the teens.


The numbers I quoted are compound annual returns. If you are saying that compound annual returns of 20% are easily achieved then  anyone who started with 25k in 2000 should have turned it to a 1m. Without adding any more money to it.

Also by extension, what you are saying is that govt pension funds etc which are modeling in 7.5% return and not able to achieve are fools.  I sure hope CalPERs etc can adopt your model. They may be able to support all pension and even reduce taxes.

Post: Is real estate appreciation a myth? Adjusting for inflation

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @Joe Villeneuve:
Quote from @Harish V.:
Quote from @Eric James:

One stated benefit of investing in real estate is price appreciation.  However, if you look at inflation adjusted real estate prices for the most part there isn't much appreciation.  There are specific points in time like 2006 (we know what followed that) and right now when real estate exceeds inflation adjusted prices. However,  over the long term it doesn't really appear that real estate appreciates much beyond inflation. Is real estate appreciation a myth?

https://www.supermoney.com/inf...


 Look at long term studies 100yr+ you will see

Inflation is 3% range. Bonds are in same 3% range

Real estate is 6-7% range.

Stocks are in 10% range.

There are periods of divergence from this and there will be catchup. Here is bigger pockets article on this:

Bonds vs. Stocks vs. Real Estate: Which One Wins? | Blog (biggerpockets.com)

This is offcourse favoring real estate, however you can look up other indpendent sources and find that stocks normally get 10% total returns considering dividends are reinvested.

In my opinion stocks are best for passive strategies that are long term.

When you buy a stock worth $100k, how much does it cost the investor?
When you buy REI with a PV of $100k, how much does it cost the REI?
You can have Margin on stocks, just like financing on REI. Besides options use can make your returns far greater.

For 30-35 yrs, rates went only down, so wind was on back of REI. Even then I have seen people loose houses and REi being untouchable for years. Let's see what future holds.

There will always be opportunities in both real estate and stocks in any environment. What I am talking about is returns for strictly hands off passive investors over long run.




Post: Is real estate appreciation a myth? Adjusting for inflation

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @Eric James:

One stated benefit of investing in real estate is price appreciation.  However, if you look at inflation adjusted real estate prices for the most part there isn't much appreciation.  There are specific points in time like 2006 (we know what followed that) and right now when real estate exceeds inflation adjusted prices. However,  over the long term it doesn't really appear that real estate appreciates much beyond inflation. Is real estate appreciation a myth?

https://www.supermoney.com/inf...


 Look at long term studies 100yr+ you will see

Inflation is 3% range. Bonds are in same 3% range

Real estate is 6-7% range.

Stocks are in 10% range.

There are periods of divergence from this and there will be catchup. Here is bigger pockets article on this:

Bonds vs. Stocks vs. Real Estate: Which One Wins? | Blog (biggerpockets.com)

This is offcourse favoring real estate, however you can look up other indpendent sources and find that stocks normally get 10% total returns considering dividends are reinvested.

In my opinion stocks are best for passive strategies that are long term.

Post: CAP rates in rising interest rate environment

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111

Don't get too stuck to a position. Have flexibility. I have seen people give up properties in 2013 that they bought in 2005, the watch them explode higher. On other hand they went through he'll from 2005 to 2013.

inflation does not mean rents will go up necessarily, unless incomes go up. It may take longer for rents to go up compared to prices falling. 

Now is probably time to keep some powder dry to deploy at right time. Do not over leverage.

Post: A recession is coming and maybe as early as summer

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @Brian Ellis:

Who knows where the markets heading.. all I know is it has become more difficult than ever to find a deal that works. Even off market deals aren’t making sense. 

I personally think we’re close to a correction. I have been very optimistic over the years but I can see very irrational spending lately. 

Everyone in 2017: “don’t buy a house, wait until the market goes down!

Everyone in 2022: "this is a deal! 5% COC"


I don’t get it, but I’ll keep looking. 


Things are changing quickly with Mortgage back to 5, 10 yr bonds from 1.x to almost 3 in 30 days. I think COC will have to increase to 7-8% plus by year end. One can only wish this all happens without recession. If it does there will be inflation of 3,4 or even 5% for next few years.

Post: California proposes additional 25% tax for flippers

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @Janelle K. Eagle:
Quote from @Account Closed:
Quote from @Janelle K. Eagle:
I don't know what the concern is, those politicians were elected, re-elected, re-elected again over and over. They make the laws & raise the taxes. Seems the people of Califonia love to feel the pain.

"The definition of insanity is doing the same thing over and over again and expecting different results"

————


  correction - Chris Ward is a *first term* representative who has not been re-elected nor elected again over and over. He’s trying to make a name for himself in San Diego, where the market has truly gotten insane. He’s doing it the wrong way and just because he introduced it doesn’t mean he has broad support or that it will pass.

Hmmm, are you saying that your taxes aren't too high? Maybe so for yourself. However, the Revolutionary war was faught over a 2% TOTAL tax. 
And by the way, one exception (Chris Ward) doesn't make the rule. Those that would vote on the bill and perhaps pass it never met a tax increase they didn't like, and their voting records show that. They've been around a long, long time. But, facts don't really matter when they come to taxes.

Or maybe you like pipe dreams and don't mind being soaked of your toil.

"In 2008, when voters approved nearly $10 billion of state bond funding, they were promised bullet trains traveling at more than 200 mph from San Diego to San Francisco and Sacramento at a cost of $45 billion. By last year, the cost estimate had jumped to $83 billion and perhaps as high as $100 billion, but just for a system from San Francisco to Anaheim."

No, what I wrote is what I said. California is known for its diversity- including diversity of opinion. One freshman representative does not a “movement” make. Nor a revolution. 

 Boy oh boy. That Kiplinger's writer is living pipe dream. House prices 300k.  Incomes 70k/household in california.

Post: A recession is coming and maybe as early as summer

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @Isaac S.:

Ok, to summit it up for for everyone....

The sky is either starting to fall or going to eventually fall...BUT, if you have a big enough and strong umbrella, you should be fine.


 Yes , you can only do umbrella. You cannot predict sky falling accurately.

Post: A recession is coming and maybe as early as summer

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @John Morgan:
Quote from @Harish V.:
Quote from @Michael P. Lindekugel:
Quote from @Harish V.:
Quote from @Joseph Coleman:

If inflation keeps high causing rates to rise, home prices may stall and rents may start rising. Its important to be flexible with your strategy and not rely only on appreciation. However in case of sharp recession both may go down for little time, hence important to keep Cash aside to ride the storm (if any).  


rents price inflation has been happening in most the country since last year. some places as much as 15% to 30% rent price inflation. existing home owners buying second homes are not listing there first home for sale couple with an existing shortage supply of all types of housing.

 My personal experience is bit different in Bay area here. While prices are sky rocketing the rents are actually going lower, here are few samples:

801 Clyde Ave, Santa Clara, CA 95054 | Zillow
1828 Blue Spruce Ct, Milpitas, CA 95035 | Zillow
1695 Jackson St, Santa Clara, CA 95050 | Zillow

This is one of the reasons why I believe Bay Area is not suitable for investors anymore. In fact most California has this problem.



Why are rents going down in the Bay Area? Those are pretty cheap rentals for those good locations. I’m from Los Altos and moved to Dallas due to the cost of living. We couldn’t afford to live out there on one income. It seems like half of CA is moving out here. I’m getting $1500-$2100/month in rent for the same types of houses. But I’m only paying around 140-200k for them so the ROI is decent. Those homes are probably 1-1.5 million so that’s a terrible ROI. I’d sell if the market is still on fire out there. Then 1031 exchange them into rentals out of state. 

 Yes! you are right, this proves the saying all real estate is local. 

Post: A recession is coming and maybe as early as summer

Harish V.Posted
  • Investor
  • Fremont, CA
  • Posts 187
  • Votes 111
Quote from @Michael P. Lindekugel:
Quote from @Harish V.:
Quote from @Joseph Coleman:

If inflation keeps high causing rates to rise, home prices may stall and rents may start rising. Its important to be flexible with your strategy and not rely only on appreciation. However in case of sharp recession both may go down for little time, hence important to keep Cash aside to ride the storm (if any).  


rents price inflation has been happening in most the country since last year. some places as much as 15% to 30% rent price inflation. existing home owners buying second homes are not listing there first home for sale couple with an existing shortage supply of all types of housing.

 My personal experience is bit different in Bay area here. While prices are sky rocketing the rents are actually going lower, here are few samples:

801 Clyde Ave, Santa Clara, CA 95054 | Zillow
1828 Blue Spruce Ct, Milpitas, CA 95035 | Zillow
1695 Jackson St, Santa Clara, CA 95050 | Zillow

This is one of the reasons why I believe Bay Area is not suitable for investors anymore. In fact most California has this problem.