All Forum Posts by: Account Closed

@Mo S. Not sure about 'very tough' but it can be tricky -- I mean if you are good at either forecasting or spotting trends, it can be rewarding. 

Some investors focus on cash flow because they have needs for it today or more like yesterday. Some investors pay the mortgage on the rental based on income from rent. So if there is a mismatch (shortage) between rental income and monthly mortgage on rental, that can be a problem. 

Also you don't hope for appreciation. Some markets have a way of growing at its historical norm although at times something will alter a pattern - some will cash in on those and some won't. You can make just as much or more riding a growth or appreciative wave. 

There are various factors that affect prices, primarily, its about demand and supply. In markets where demand often exceed supply, the pressure on price is usually north. If there is only 12 houses in an entire city but only 5 people in the city, prices will be lower compared to a city also with total of 12 houses but with 1000 people trying to get under a roof in its supply condition.

@James Syed Sure. When you think about it, an investor in any rental RE investment, is really ultimately primarily concerned with the income / cash flow generating capability of the asset. So it would make sense to base the valuation on income or cash flow.

The price-to-sales ratio and price-to-earnings ratio are both tools utilized in valuing a publicly traded firm to determine if the price of the stock is trading at a discount or overpriced compared either to the general market (S&P500) or specific industry (hotels, apartments etc.).

In real estate terms, the formula for computing GRM (gross rent multiplier) is almost exactly the same as the price-to-sales:
Price-to-sales ratio = Price of acquiring entire company / company's gross sales per year.
GRM= Cost of acquiring rental property / gross income from rental per year

So both would produce same result. If the average in your local market is the 6.37, you could use the value to compare prospective rental targets. Typically, the lower this number, the better (underpriced, cheaper etc.).

The price-to-earnings ratio is structurally similar to the price-to-sales but replaces the sales variable with earnings. Earnings in this case is specifically, 'Net Income' hence the price-to-netincome. Just saying 'earnings' can confuse some investors because many at different times may refer to EBITDA, EBIT, pretax income all as earnings.

The price-to-earnings ratio is very similar to the concept of a Cap Rate in real estate. The only structural difference is that the Cap Rate uses the rental's NOI as the denominator in the Cap Rate formula; the price-to-earnings ratio however, uses actual 'Net Income' as the denominator and there can be a material difference between Net Income & NOI.

So you want to multiply Net Income (not NOI) by the 59.01 to determine max purchase price based on current industry net income multiple experienced by some of the big boys in the industry.

Both the price-to-sales and price-to-earnings valuation should establish a preliminary price range that is based on current market trends. Also, based on your market, this may be just a starting point in the investigation.

@Peter Torres Does the vacancy rate and cap rate reflect as much as feasibly possible local conditions where the property is located?

@Gwen Fyfe Sorry to hear but lol @ belligerent ex; and apparently it does seem that legal separation still has its challenges as it doesn't necessarily has the force and effect of a divorce in terms of solving the particular issue at hand.

@Mo S. So I can count at least 2 or 3 markets even  in California that have experienced  in the last 5 years an average of 19%+ growth in property value per year -- and its not the usual suspects. There are also some markets that have in the same period experienced either very marginal growth, flat or price declines. 

Total value has to do with total increase in property value during your holding period. If you plan on exiting an investment 5 or 10 year down the line, total gain will vary per market during that period. 

Markets that often have an extremely bad reputation in regards to negative cash flow on rentals, price controls etc.. in some cases often grow at a faster rate. It is also not rare that in some cases, markets with extremely strong rental cash flows, may experience dull value increases per year or barely break even.

@NaDean Bowles In a very weird kind of way it does;  but hey... what's a single guy doing talking about marital problems? I wouldn't even know the half of that :)

That being said, it appears in Arkansas, although NOT a community property state (where issue occurs frequently ), you have something called Dower and Curtesy in the works there in AR and a few other states. This has to do with each spouse default interest in property regardless of whether purchased individually. This can create a cloud on title and other challenges for a lender if both parties don't sign.

It does appear though, based on Arkansas law , that these are relinquishable entitlements; so if his only reason for stalling is to injure or cause financial harm out of malice, some sort of action may have to be brought against the ex to legally compel he signs off. 

If state law in Arkansas says a married couple can still own property individually even when married under certain circumstances, it seems like there are ways around it. 

Of course the question then is did you only go as far as a legal separation (knowing of course the challenges it creates) because of broader issues, mutual benefits etc.. that may be at stake or is it just something you just haven't gotten around to yet?

@Nitin Bhakta so that would be the data for some of the largest players in the space trading primarily on US stock exchanges like: NYSE, Nasdaq etc. Some of the firms of course may have some international operations but for the most part, these are entities owning hotel chains all across America and in just about every price point. The specific industry data is the price-to-sales and price-to-earnings ratio for each of the major hotel chain operator in the industry and the median for the group.

@Tracy D. we disagree because you are/were wrong! Your view is just that... your view. Do not belittle his concerns.. do not try to play Dr. Phil... you have no fact to base some of these totally ridiculous and outrageous observations. 

lol @Adam Craig sure, blame the accountant. They didn't see eye to eye with you huh? Do you need to get your eyes checked then? :)

There are accountants and there are Accountants. You don't go to a gynaecologist to perform open heart surgery just because of the MD designation; you want to find an accountant familiar with any accounting and tax consequence of investment decisions.

Also, investing and accounting are different disciplines but without understanding the numbers, you are likely to bungle your life savings.

@Tracy D. While I would rather discuss real estate or something else slightly more productive... I realize this could also be equally enlightening.

It is accusatory because your assumptions until this point is that the ONLY reason why he may have experienced the obstacle(s) he described was because of some fault of his. As you so eloquently put it:

"Until you find a way to fix your own inadequacies and overcome the obstacles that you yourself put in front of you, you are never going to change the way others deal with you. you have to start with you. "

This is a statement you made to almost an absolute stranger. There is no factual basis to the statement. His own inadequacies? Obstacles HE put in front of himself? Change the way others deal with you? Some people just have a problem that not even a shrink can fix.

If you are saying that there is NO probability that there is some possibility that he may have indeed experienced some form of bias (however often that was/is the case, we do not know) but if you are saying that never happened, never happens, cannot explain some form of obstacles others in his position may face, then without mincing words, I can tell you that is incorrect.