All Forum Posts by: Sid Naik

Thinking of listing with redfin as they only charge 1% fee .

Any pros / cons v/s listing with traditional realtor ?

@Eduardo Zepeda

I totally get it about increasing NOI and decreasing expenses . This is applicable across US real estate in any market .

My point is to make sense of investing  in bay area for appreciation the cap rate needs to go down and areas like bay area is where the cap rates moves around quite a lot ( low during boom and up during recession )  compared to say a market like kansas or ohio . If they don't move then I am better off investing in kansas .makes sense ? 

Going by history ,at least in the san francisico bay area there has been a correction in real estate prices by 20%  every decade . 1991 , 2001 , 2009 . 2009 being more severe of 30-40% .

I am expecting a correction in the next 2-3 years by above stats . no reason why we should be different this time :-)

I am preparing by selling one of my properties just because I will have more cash . remember 200k cash is equial to 1 million of purchase . If you just take cashout or line of credit ur still paying interest on it which will reduce cashflow and ur ability to borrow by that much . The risk to it is what if the property appreciates by 20% more than what you sell . This late in the real estate cycle I am prepared to take that risk by having more dry powder . any thoughts ?

@Saj Shah

Thanks  Saj . yes that is what I was looking for . 

3. The CAP rate goes down (compresses) . The first 2 being obvious .

To invests in a market like bay area I believe there is more movement tin cap rates due to 

appreciation and correction after all there should be some benefit to invest in multifamily if cash flow is not ur ultimate aim . Below url cocnfirms movement of cap rate as we reach towards peak prices

https://www.bayareamarketreports.com/trend/bay-are...

@Jeffrey Isenberg

"So the take away here is that appreciation and cap rates move inversely".

Yes that is exactly my point . I am looking for appreciation in Multifamily and even in hot markets rents do not rise as rapidly as a SFH appreciation so why buy in an area where there are low cap rates ? Will the rents rise more rapidly and consequently price will appreciate in these areas of low cap rates ? If I am paying high $$ for a property with very less cashflow I am assuming it will appreciate better. is that true ? thats the answer I am trying to find in the context of Multifamily .

@ Saj Shah

I am not looking to get into MF right away , I am studying it a the moment . I have had a good ride investing in SFH over the past 8 years with 3x appreciation in bay area . however i will be capped in investing if I don't go for commercial properties . I want to venture out in Multi family but I am surprised if bay area multi family value appreciates only if I can increase rent . In that case I will have to look out of state as rent increases like bay area are elsewhere as well . why pay so much if the upside is limited by rent increase only . I want the appreciation play and if you study the trends carefully it is not gambling just like the last 6-7 years .

I am looking to get into Multifamily and based on what I have read it looks like properties with high cap rates is the way to go . however if I am not looking for immediate cashflow , how do you make money in areas like bay area ? does appreciation in property values count for multifamily ? in that case cap rate would have to get lowered for the property price to go up besides rent increase . if we are looking just at rent increase to increase property value with cap rate remaining same then it would not make sense to invest in areas like bay area ? if SFH appreciate i would think even multifamily appreciate without same corresponding increase in rent but with cap rate going down ? For example we have seen condo price increase 3x in bay area over the last 7 years in some areas but rent increase has not been 3x . so multifamily would never give me the kind of appreciation of buying individual units or SFH where pricing is based of rents ?

@Chris Meunier  

I am in similar situation as you and trying to decide if I should sell one of my properties next year . If you look at the last boom and let us imagine we are like 2004 in the last cycle where there is 20% more appreciation left . Somebody who bought in 2004 and went only to have his rental appreciate by 25% lets say 1 million went to 1.25 and then in 2009 went back to 900k (30% corr) . so why should be even buy anything now ?  I know its really impossible to predict if we are close to the peak but I seem to agree with Brian Burke . You buy as much as u can when real estate is down and stop once the recovery is well underway .

Going my historical bay area standards , it has never appreciated by more than 7 years which is the assumption I am using to say that we are close to the peak . sell and have plenty of cash available to then pull the trigger when u want it . 

@Arlen Chou agree timing is difficult . however in boom/bust markets like bay area I feel you can try to time at least 25% of your portfolio . you may not exactly time it but you need to recognize when it is 2004 or 2005 ( peak) and when it is 2010 or 2012 ( bottom) .for example in last boom if you did buy a lot of RE in 2005 then you might be making 5% on a long term basis ( might look like 8% today as market is near peak) . somebody who sold in 2004 missed out 20% gain but had the cash to buy when there was fear in 2009  and make a killing with the extra cash as during fear u can pull down the price by extra 5% then the market price just as today u can probably get 5% more due to bubble.  I am debating the selling part in my mind but i am clear that i am not buying any new real estate as I want 10% year over year :-)  and not 5% . just my thoughts , I really appreciate everybody's point of view and I can learn from it.

@Eric and why would bruce norris be right ?  check below link of 30 years of real estate in bay area . there is no plateau and rise . there is plateau and drop .also pls note  my post is only regarding bay area market .

https://www.paragon-re.com/trend/3-recessions-2-bubbles-and-a-baby