Ironically new builds are selling around Town for $77 to $85 per sq ft.
Why is this important? Once all the bank owned are gone then we will see real appreciation again!
A dear friend said he made 26% in the stock market last year, so why invest in real estate? I told him that sounded a lot like what I heard just before the real estate bubble! “ I made 30% in real estate in 2005 so why invest in stocks?”
Here is why to start to re-invest in real estate. We hit bottom in March of 2008 and have nowhere to go but up! In the last 50 years stocks and real estate have appreciated at a steady rate of 8%; With the exception of the last 5 years and a couple of Black Octobers.
So why buy real estate? Cash on Cash!
In the stock market you pay $150,000 and if you buy solid Blue Chip it will go up 8% on average.
With real estate you buy $150,000 house to rent, and we should see it appreciate 8%. The difference is the rental income. A typical bank owned home is 3000 sq ft and sales for $150,000 in Queen Creek. The rents are $1450 to $1500 or $18,000 per year. To calculate cash on cash you take the cash income received and divide it by the total cash invested. $18,000 divided by $150,000 is 12% cash on cash. Assuming they both go up 8% then the real estate is 12% ahead of the stock market.
I would not say to take all your money out of the stock market and buy rental property, but now is the time to look at buying rental income properties once again!
Can anyone guarantee 8% appreciation? No, but we may never again in our lives see real estate selling for ½ the cost to build!
Don’t take my word, just look at the 940 new homes being built by General William Lyons. He has better demographics and knows the market better than me. He left sunny Southern California to build homes on the North West corner of Chandlers Heights and Ellsworth Road. He just finished the pipe, roads, playgrounds, and fences and will start selling homes this year!
If you have a different opinion please contact me as I truly enjoy the conversation!