Definitely!
Posted on 03/02/2005 5:13:45 PM PST by baseball_fan
Sales of second homes soared last year and accounted for more than a third of all residential sales transactions, according to a study released yesterday.
The study, conducted by the Washington-based National Association of Realtors, showed that nearly one in four U.S. homes bought in 2004 was purchased for investment purposes; 13 percent were bought as vacation homes.
Together, that constituted the surging second-home market, which accounted for 36 percent of the 7.7 million homes sold in the country last year. Second-home sales were up 16.3 percent over 2003.
Kelly Robinson and Debra Thomas, two office colleagues in Bethesda, were just two of last year's buyers. The women decided recently to team up to invest in real estate together.
A few months ago, they bought their third investment property -- a $225,000, four-bedroom townhouse in Gaithersburg that they now rent out.
And it's people like Robinson and Thomas who are buying homes they're not planning to live in rather than just high-income lawyers and lobbyists. A second survey by the Realtors association found that the typical investment property buyer last year earned an annual salary of $87,500 and was 47 years old. The typical vacation-home buyer was a little older and made a little less -- a 55-year-old making $71,000 a year.
"The second-home market is firing on all cylinders," said David Lereah, chief economist of the Washington-based Realtor group. "And it's middle Americans who are buying, not high-flying investors."
Thomas, a 53-year-old administrative assistant in a busy real estate office, sums up why she decided to turn now to investment property: "I had money in the stock market, but the market always seemed to be going down, down, down. I decided to take that money out and invest it in real estate." ...
(Excerpt) Read more at washingtonpost.com ...
Economists say yes."
In the stock market there are limits to how much leverage one can have after the experience of the Great Depression when people could buy a $1 worth of stock for pennies on margin, and when things turned they got caught. Is there anything remotely like that kind of risk with leveraged real estate for investment purposes?
"Forty percent of the farms in Mississippi were on the auction block on FDR's inauguration day." source: http://www.nps.gov/elro/glossary/great-depression.htm
"But..but..but the middle class is getting squeezed by the rich and their tax breaks. The economy is in shambles! They're low paying jobs! Raise the minimum wage!Blah, blah, blah.....!"
Has the cost of your second home adversely impacted your family's financial situation?
Definitely!
Just another indication of how badly Bush has F'ed up the economy, I mean there's people out there who can ONLY afford two homes (unlike sKerry the goldigger and his demented sugarmomma)./sarcasm off
Research vacation areas, find the URL’s which display rental opportunities in these locations, see what’s booked, price out units, and do the math. Get creative and determine initial selling costs when built.
Why is it lucrative to invest short term with simple costs such as a cleaning and credit card service, and a URL? How many beach fronts... are eventually bought to be dozed?
Regarding any remote possibility of a real estate bubble, just repeat, "All real estate values are local."
On the surface, I think this is a good statistic.
Here are the worries I have about Real Estate as an investment
1.) Debt to Equity. How much debt are consumers taking on to purchase 2nd and 3rd homes?
2.) Diversity. What percentage does real estate represent of the individuals overall financial condition?
I have been reading about the idea of a real estate bubble for the last few months. I am not a big real estate person, so I can't speak to the credibility of the research or the situation.
My third home is pure investment, on the other hand. So far, I have made 100% profit.
Next week, I intend to buy another.
Would you put 10% down to buy a $200,000 investment property?
There is very little difference. Leverage is 10:1 in both cases.
If the market moves 10% against you, your equity is totally lost. If the market moves 10% for you, your equity is doubled.
I don't think that most people understand the HUGE risk involved in such real estate investments.
The difference is....someone else is paying for the 2nd real estate investment loan, via rent.
I had a chance to buy a second home ten years ago in a resort community for $415,000. I didn't. It is now worth 1,500,000. Someone else would have paid off the note!
"The difference is....someone else is paying for the 2nd real estate investment loan, via rent."
The price of housing has been outstripping the rise in incomes which is what makes it eventually unsustainable. If the price of real estate were to correct fairly dramatically, many people would owe more on their mortgage than what the investment property is worth, also wiping out in many cases all their equity. Many people would just hand it back to the bank, which would throw more supply on the market while also driving down rents. When someone goes to sell a house when interest rates are much higher, they will have to lower the price to bring it back into line with incomes will they not?
Depends on the demand, the local market, and how high rates go. You do have a point.
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