The ultimate goal is to find a property that has <a href="http://www.johntreed.com/positive.html">positive cash flow</a>. As the link states, that is difficult to find. However, appreciation is gone, and the so called appreciation investors are gone with it. Thank gawd. I have seen a few 2-4 unit properties that are tempting, but nothing yet to make me jump in. It may still take a while, but those appreciation investors will get tired of being landlords of a depreciating asset soon enough. I have seen a few multi-units that are in foreclosure, and a few that have gone back to the bank, and I know there will be more. I watched properties sell for prices with a cap rate of 1%-2% in 03, 04 and 05, and thought these people were nuts. Now, rents have not gone up and neither has the value of the property. No one likes losing money, and as soon as they realize they are losing it hand over fist, they will walk.
An SFR as an investment property is typically an awful investment. Unless you can pick up an SFR from a scratch and dent lender for $0.40 on the $, then forget about if can't. They are almost never near cash flow positive, and we are still in so far away in the rent to own ratio, that it would be a major wallet drainer. Maybe, you could buy in bulk from a bank's REO collection, but that will take more than a little start up money. SFRs that can be bought cheap, fixed up, and sold for a profit are great. But, with sales volume being as low as the 70s, I wouldn't even think about. If you do not believe me, then go to the foreclosure auction. You will see it has become a spectator sport, and even the players are just watching.
I have never invested in commercial, so take it for the €2 it is worth. I would stay away. CRE is about to get hammered. Last quarter there was a negative absorption rate of over 800k sqft. The cap rates the last few years have been utterly stupid. There has been a tremendous amount of over building, that it almost reminds me of all the buildings sitting empty in the 90s. Not as bad, but almost as bad. I mentioned that I liked medical buildings in the past. Medical is the one sector that is growing, continues to grow, and grew in all the other recessions. However, they are typically larger buildings, and cost a good chunk of change. I wish I could say I have the cash to make it happen, but it may be a few more years before I do. CRE requires big down payments, and it seems the credit crunch is starting to hit there too, so it will not be easy to get a loan. And, for whatever reason many doctors are terrible money managers. I think it is because they are just too busy and tired to care. And, if patients can't pay, then they do not get paid. Just another layer of risk to take on there.
Don't let me discourage you, but you do have to know it isn't easy to invest in RE. There have been and will be deals out there, and there will be many more to come. Patience is the key here. I have been for 5 years and I can be for a few more too.
. Any advice is helpful (SFR vs. multi-family dwelling vs. commercial property). II did read all the consumer-type pamphlets and how-to books, so I'd be interested in your personal experience/anecdotal evidence.</p>
