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Today’s question – real-estate as an investment? Would I do it? What will happen with prices?:
Bottom Line: Today’s question is from a gentleman who wants to know if real-estate investment is a good idea, if I would do it & what will happen with prices?
So I’ve been a bull on real-estate since late 2011. You’ll recall that I identified it as the best opportunity for 2012. On cue Ashley and I decided to move up buy and put a home under contract in January of 2011 and Closed in April of 2011.
The point? I’ll never even theoretically suggest something would be a good idea I wouldn’t either do or be willing to do myself. So let’s talk about real-estate as a pure investment.
This generally happens in two ways:
Let’s look at what you should consider first. In my view the first consideration is the level of investment you’re capable of making with cash. I’m not a fan of financing real-estate investments. If everything goes well and you’re highly sophisticated you certainly can make money by taking on debt to finance real-estate investments but just as I don’t recommend using margin when stock market investing I don’t support the practice with real-estate.
Second is if you have the adequate team in place to rehab a property efficiently (cost and time) to turn around for a profit or if it’s a rental property – are you prepared to be a landlord?
I’m a fan of acquiring rental properties provided that it’s right for you. In my case I don’t like being a landlord (so if I were to acquire rental properties again I’d factor in the expense of a property manager because I don’t want to deal with the day to day myself). Vacancy rates nationwide are at the lowest level (4.5%) since 2001 so there is a very good chance you can be successful with a good plan in place.
Last on prices… I do think the real-estate recovery continues to be strong in 2013 including higher prices. If you’re buying for the longer term – rather than counting on big gains in real-estate prices (and there will be some big stories of appreciation), you’d be well served to look at the historical averages. Historically real-estate has appreciated at about 4% per year.
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S&P 500 – now at 5 year high & what to takeaway:
Bottom Line: Yesterday the S&P 500 hit levels not reached since December of 2007. Yes it’s a 5 year high which is news worthy but there is a bigger story to be told.
The Great Recession actually began the last week of November 2007. With the S&P 500 back to its levels of Dec. 07’ – the market in effect has recovered all of the losses incurred in the Great Recession. When you consider everything that has occurred, all of the uncertainty that still exists, the sluggish economy, etc. It’s quite remarkable. But even just getting back to even isn’t the whole story.
If you continued to invest throughout the downturn you’d actually be sitting on sizable gains over the last five years. By progressively investing you would have received the investment gains of the newly invested money all of the way back up. I’m not suggesting that setting and forgetting your investments is the right idea (though even if you had and continued to invest you’d have performed well), it clearly would have been best to move to the sidelines before the fall of 08’ and back in during March of 09’ (both of which were my recommendations at the time). The biggest point is this…
The stock market continues to be the greatest wealth creation machine in the
Could the flu cause a recession?:
Bottom Line: The flu and cold season has severely gripped this country. Every state and the
In the typical year $10.6 billion of direct losses are incurred by businesses as a result of seasonal illnesses. This is clearly no typical year. The season doesn’t conclude until March (or the end of Q1) so we don’t know what the full impact will be but some economists are starting to project the damage – if they’re right – it could be ugly.
There are now economic models that show that this flu season could wipe out 1.5% of all
Amazon news feature for buying music:
Bottom Line: The year was 2000 and people listened to music on items called compact disks. Ok so I’m being a little silly but certainly the digital music market has far surpassed the traditional cd these days. What if you want both?
Amazon’s latest move enables you to obtain a free digital copy of each cd you buy through their store that can be saved in their cloud service and used on any digital device.