I spoke with Burbank real estate specialist, Ana Connell, today. Ana's "other life" paralleled mine; she was a manager for a securities brokerage firm before she started her career in real estate brokerage. We chuckled as we talked about the principles of technical analysis and how it might apply to residential real estate . I want to share the product of our discussion with you, the Southern California property buyer.
I think that the real test of proper pricing for Southern California real estate is revealed when we analyze properties like a long-term investor may. We are getting close to parity here. If a property can create net positive cash flow, with a 20% down payment, and a a current market rate, interest-only loan, the game's over. Long-term investors will flock to that purchase no matter what the near-term pricing does.
Here's why. Investors believe in the long-term viability of the Southern California residential market, they just don't like the short-term negative cash-flow.
eg: The unit can produce $2150/month in rent, what is a "safe" purchase price?
Thanks for the post. When investors are ready to return to the market.... They are ready now, at the right price. Investors are in the market all the time. The 20% down to buy an investment property is not what the true investor is looking for. (Just my 2 cents)
I think it depends on where you are looking.. in most of the local Beach Cities.. rentals have never made sense using any type of standard model. We are certainly well over where we should be.. but we never fit the mold.. Our investors often have a different agenda when dealing in these neighborhoods..It's what makes CA rel estate so interesting
I don't believe you can apply the principles of technical analysis to home purchases! Nor do I believe you can apply them to small (1 to 4 unit) investment properties in a tough market.
No one likes to crunch numbers more than I do. Many years ago as an expatriate banker I got to learn from the best. For the rest of the story: Bunk, BUnk, BUNk, BUNK
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