Real Estate Bottom is Here… if you know where to look

As similarities of the Great Depression mount next to our current financial crisis, and catchy websites like GD2.org start sprouting up, where do you put money that’s sitting in accounts only insured up to $100k?

Where do you put money sitting in money market funds that are not insured at all?

How can you diversify from a stock market so volatile that it first dropped 10%, and then bounced 10% in a matter of days?

Rather than pay perfectly good money for the right to know your money will still be valued as money in six months, by buying government bonds or commodities like gold which are already trading a near record highs… how about putting it in an actual hard asset like real estate?

“Whao, isn’t that what got us into this whole mess in the first place?” you ask… well yes, but if Wall Street has fog and mirrors, you have Seth Chalnick, agent extraordinaire.

In my market outlook series I posted how I see three main pricing tiers in today’s market. The long story short is that homes under, say, $500k that used to sell for $700k-$800k are out there… and not all, but some of them are selling below their intrinsic, fundamental value.

The not so long story short has to do with the middle pricing tier… ah… fagedabouddit.

A search that includes every square inch of San Diego land, from Imperial Beach to Chula Vista, up to Oceanside, and out to Escondido… yields less than 150 parcels of raw land for less than $150k. (Since you asked, there’s only one selling in Cardiff for less than $500k.)

So if we can’t buy a decent parcel for less than $150k, and if we can’t build a home of 1,300s.f. for less than $260,000 ($200/sf), then why are so many homes selling for less than $400k?

Good question.

Did you know that if you paid cash for a $400k house and charged $2,400 in rent… after first reducing your operating income to account for 25% in expenses, your net annual income would then return 5.4% on your investment?!

Would you take a guaranteed 5.4% return in today’s stock market?!

With millions more people continuing to flock to San Diego over the next 10 years, would you be willing to bet that the demand for this home will increase rather than decrease?

Do you think monthly rents of $2,400 will rise or fall, as more and more people walk away from $4k mortgage payments?

Will this same home that you can now buy for $400k (at roughly 40% off the previous sale price of $650k) stay below market value for the next 10 years?

Is inflation (already here in a big way) not a homeowners best friend?

Do you remember your grandparents laughing about buying a home that could possibly cost $1m?

If you somehow found a parcel of land for only $100k… and you somehow found a builder charging only $2/sf to build a 1,300sf home… at the very least, this home would still be worth $360k… on the most fundamental level.

There are $400k homes, located in fundamentally solid markets, selling now at discounts to cash buyers. If you are interested, simply email me and I will shoot you a list.

If you are looking for good fundamental buying opportunities, now is the time… especially when you can leverage up to 70% of your money right after closing, with 50-year low interest rates, and then repeat the process two more times for every $400k you invest.

At the risk of blowing your gasket… did you know you can do this in your IRA or 401k?

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One Response to Real Estate Bottom is Here… if you know where to look

  1. pjeary says:

    This is a very interesting post. It’s becoming a trend nowadays even in real estate. Thanks for this.

    Click here for : Aventura Houses

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