Best RE investment opportunities in Austin?

[centralaustinite]

Such a contentious subject! I will say that over the past two year my (admittedly very small stock holdings) have done much better than my house! My house value is down almost 30% from its peak, and if I had to sell it in the next year, I'd have to realistically price it below that. Thank goodness for the mortgage interest deduction! And my house is a nice place to live, pretty cheap to maintain, etc. And I can afford it. I am happy that I own my house but the lack of liquidity that real estate presents is a real obstacle! If I am ever a "true high net worth individual" then I could diversifying investments into real estate but I'd never make it the foundation.

Everyone's tolerance of risk, need for liquidity, and gut feelings about the future differ. You have to do what will let you sleep at night! For some that is multiple investment houses, for others gold and ammo, still others, cash and stock.

[Austin97]

Originally Posted by sliverbox

uh... have you been reading the news lately? A lot of times they don't appreciate in fact. Ask any literate economist and unless that home is paid for- its a liability.

Read your history and it clearly shows that over time, homes have only gone up maybe 3-4% annually over the past 100 years and stocks have performed on average 7-10% annually. In other words if you took a dollar and invested it in a house and then took another one and invested it in stocks after 30 years the stocks would be worth a lot more. Sure- if you buy a home to live in in 30-40 years it will probably be worth considerably more than what you paid, which is to be expected. But if one were to choose to "invest" in real estate ) as in buying houses for profit in addition to the one you live in) instead of taking that same money and putting into stocks you would actually make LESS money.

But then again I see you're a real estate agent so I assume you don't buy that argument at all.

Yeah but there are a couple of additional items
1) you have to pay to live somewhere so deduct that from the cost of the house
2) you get 5:1 leverage on your primary residence so 1 dollar actually buys 5 dollars of house. If the house goes up 3% then your return on your invested capital is 5x that.
3) The interest rates that you are borrowing at are significantly lower than just about for any other loan you could get.
4) If you run numbers for everything included, your primary residence doesnt have to do that well to outperform the stock market. I have run the numbers.

[homeinatx]

10 years ago, you could have made a small fortune in Central East Austin. In 2003, we bought a house in Wilshire Woods for 200K. The owner before us bought the same house in 1998 for 40K before the airport moved. We sold the house for 350K in 2008. There is currently a listing for a slightly bigger house on the same block for 469K. Between 2000 and 2007, house prices in 78702 and 78722 west of Airport on average more than doubled in price - an appreciation seen nowhere else in the Austin MSA. The ship has mostly sailed, but there are still bargains to be had in Central East Austin. Most of the houses need work, but the land will only only continue to appreciate. If I was investing/speculating, I would buy the cheapest biggest lot I could find south of 290, within a mile east of 35 and north of the River. Sure the schools are bad, your neighbors won't all be white, but your land value is going to go up faster than anywhere else in the Austin MSA, though probably not as fast as it has in the last decade.

[Austin97]

Originally Posted by homeinatx

10 years ago, you could have made a small fortune in Central East Austin. In 2003, we bought a house in Wilshire Woods for 200K. The owner before us bought the same house in 1998 for 40K before the airport moved. We sold the house for 350K in 2008. There is currently a listing for a slightly bigger house on the same block for 469K. Between 2000 and 2007, house prices in 78702 and 78722 west of Airport on average more than doubled in price - an appreciation seen nowhere else in the Austin MSA. The ship has mostly sailed, but there are still bargains to be had in Central East Austin. Most of the houses need work, but the land will only only continue to appreciate. If I was investing/speculating, I would buy the cheapest biggest lot I could find south of 290, within a mile east of 35 and north of the River. Sure the schools are bad, your neighbors won't all be white, but your land value is going to go up faster than anywhere else in the Austin MSA, though probably not as fast as it has in the last decade.

There were many houses forsale along the hike and bike trail as well around festival gardens that were in the 150K range around 7 years ago. That area was obviously going to go up even faster than the rest of east austin because of the proximity to town lake.

We ultimately ended up buying on lake travis instead which has definitely not appreciated as well

[sliverbox]

Real estate appreciates over time, always. Yes, there are ups and downs, and also examples of specific permanent depreciation (some areas of Detroit for example), but those are easy to avoid by following simple common sense rules when buying.

... so do stocks, but more so than real estate ( which was the entire point of my previous comment). Again- look at the long-term historical average: Stocks have outperformed real estate for more than 100 years. We're talking about averages here, which is what economics is all about. I will agree that buying a house is a good idea. My argument was never to NOT buy a house. But to say that real estate is a better investment than stocks is historically incorrect. Someday I too plan on buying a house. But Its not going to be an investment vehicle. Its where I plan on placing furniture, my car, and where I plan to watch TV and sleep. If it goes up in value then good for me.

Regardin

Liability:

A liability can mean something that is a hindrance or puts an individual or group at a disadvantage, or something that someone is responsible for, or something that increases the chance of something occurring

So let's put two and two together shall we? So let's assume that consumer "X" goes out and buys a house tomorrow. "X" is a good consumer and puts down a healthy down payment. Things are going great until lo and behold "X" loses his job and is unable to make the payments on his house. The bank- which owns the house- forecloses and thus "X" not only loses his down payment, but has his credit rating downgraded, thus making him ineligible for future loans for an extended period. As seen in the definition of liability above, a liability can place an individual at a disadvantage. In "X's" case the disadvantage was losing his credit rating and his down payment.

Like I mentioned before- I am not exactly a fan of real estate investing. I put real estate investing as one of the reasons why places like Coastal California, NYC, and probably parts of Austin are totally unaffordable. A home is merely something to live in and that's it. Otherwise they serve no other practical purpose.