I researched like crazy yesterday and found nothing new. The old favorites — see the little right hand chart – are doing OK. Prices seem pretty high at present, with most stocks fairly priced. A lot of “favorites” hitting the wall. I’ll look more this weekend.
Chesapeake Energy CEO’s idiocies are getting a whole lot of play, and hurting the stock, but only a little. Shucks. I’m short CHK. My Radio Shack short is doing better.
Are cheap houses good investments? Can you buy a cheap house, rent it out and make a decent return on your money? Some people believe so and are buying.
I don’t have a lot of numbers. But the trends look favorable:
+ Housing prices continue to drop.
+ People need to live somewhere. Renting is many people’s only option. Especially if they’re been foreclosed on.
+ The banks will actually lend you as much as 75% of the price of the home and lend you the money cheaply.
There are risks. Huge risks.
+ Your investment house’s price may tumble more.
+ You may lose your only tenant and not find another one.
+ You are unlikely to see capital appreciation on your cheap home for years, maybe eons, maybe never.
Keys to success in this business are location, location and location. That’s the first one. Then we have vacancies before you get a new tenant. And finally maintenance. Sometimes it will eat you alive. Especially if your departing tenant steals your appliances.
So far I don’t see returns of greater than than 5% or 6%. And that’s pushing the assumptions.
My friend Jim Stanko has started a new business finding and managing single family homes in California for investors. He’s JStanko104 at aol.com. He tells me that there’s a web site call finestexpert “which analyzes the Buy and Hold strategy which you and your readers may find helpful.” Click here.
The best-paid workers in the world are in Australia. With minimal skills you or your children can earn $200,000 a year working in the mining communities of northern Australia.
Pluses:
+ The money. The Aussie dollar is strong, better than the Yankee dollar.
+ They speak English and the natives are friendly.
+ The food is great. All the steak you can eat.
+ You can save all your salary. There’s nothing to spend your money on. Nothing.
+ They like Americans. Some even learn Australian. Eventually.
Cons:
+ It’s hot.
+ It’s lonely.
+ Accommodation is sparse, though comfortable.
Australia is short of workers to fuel its mining boom. It’s holding a job fair in Houston. Google “Jobs in Australia” for more.
Don’t dilly dally on your airfares. Planes are full. Fares get more expensive the closer to departure. A friend went for a long weekend from New York to Salt Lake City. His fare? $529. He said “it could have gotten it for less closer to $400 had I booked earlier.”
Don’t believe those ads about special glass for your spectacles. It’s BS, 100% marketing crap. The only things that work with glasses is their prescription, how clean they are and how tired you are.
Harry Newton who always wonders why the younguns of the world love to “share” their trivia with other younguns. This week’s most popular app on Apple’s Appstore is Viddy, which “is a simple way for anyone to capture, produce, and share beautiful videos with the world. Record a moment of your life, give it that cinematic look with our production packs, and share it with those who matter most.” According to CNBC VIddy has more than 500,000 new videographers each day. I have made several videos using my iPhone and my Canon G10. They give boredom a whole new meaning.
I can't believe you talked about buying cheap homes and renting them out as a form of investment. I got my real estate license in Chicago last year for that very reason. I figure I can buy condos in Chicago under $300k in good locations that will rent out in no time and the Chicago rental market is beyond hot right now. You are right that the returns are only 6-7% but it's consistent and if you buy in a great location the property value will increase in 5 years as is the case in certain pockets of Chicago. There is one huge variable that makes this type of investment risky beyond unforeseen maintenance and that is PROPERTY TAXES. That can eat up your bottom line in no time not to mention increases in assessments.
Also, not sure about the New York housing market but prices are still decreasing in Chicago but in the past 30 days there has been a rapid increase in homes under contract and I'm not sure why…We might finally be at the bottom???
Fortunately one of the only tax advantages here in CA is that property taxes can only be increased 2% a year so that is not a concern investors face.
Hi Harry,
You wrote: “+ You can save all your salary. There’s nothing to spend your money on. Nothing.”
Could you elaborate: why nothing to spend money on in Australia? What is the difference compare to here in US?
You're up in a mining camp thousands of miles from shops and towns. of course, when you are flown back for your regular visits, you can spend anything and everything you want.
Buying houses for Section 8 rentals is a great idea with great returns. It's such a great idea that in every city the local Realtors are pairing with the banks to catch whatever comes on the market for themselves. As an individual you have to work very hard, be persistent, and be lucky to find the houses to buy right. Then, you have to manage them. However, returns of 12-15% (paid by government check like clockwork) are available and you can SEE your assets. Also, the effort and investment is LOCAL — as opposed to trusting some assholes in Manhattan.
Harry….real estate still works for me…I don't buy and sell…I buy and keep. The values may drop but the rents just keep on coming in. Mind you, my rentals (4 Condos) in Sun City, AZ are occupied by single (older) ladies on 5 year leases. You must be 55+ to live here. I just bought the condo that adjoins one I already own for $30,000. (+$10K renovations) I had paid $85K for the other one 8 years ago. I get more rent for the second one than the first one. I will send you an article from today's Arizona Republic that reports houses in Phoenix increasing 20% last month and there is a shortage of available housing here.
Regarding eye glasses…after you have your cataracts removed, and new lens implanted, you can buy your reading glasses from the 99 Cent store…that is what I do!