Comparable Rent Schedule / Operating Income

[Calvin the Airedale]

Thanks for the time and effort of your response. I think what has me confused on owner versus tenant occupancy and HBU is that the definition of HBU refers to use of a property that will maiximize value and that in higher end neighborhoods, it would take an extremely high GRM of 250+ to reconcile market rents with market values.

Could you please explain what you mean by "dont confuse investment motive with what type of return can be expected".?m2:

Video, audio, disco... I hear, I see, I learn.

I think you'll find that in high end neighborhoods, when the homes are rented, the GRMS are so low as to make almost no sense as an investment when compared to traditional income properties. Obviously, owners have other motives for renting, as was the case with your subject property. The owner wanted to control the property. His son's tenancy was more a convenience than made out of pure investment motive. But investment motive like so much indeavor in life runs a pretty broad gamut. It includes people that hold property to receive a return on and a return of their invested capital (on one end), and people who merely rent to offset costs of ownership, while hoping to receive their main capital returns in some other form (at either reversion or in some other way.) In the case of your subject, the owner bought the property for some of its assemblage potential. But why does he continue to own it? Obviously, he can make better money via cash flow by investing in traditional income producing property. My guess is that he is holding the property until its price recovers. Conservation of wealth is a valid investment motive, and that appears to be what is taking place with your subject.

So on the one extreme, as far as investment motive goes, you have people investing in tradition income properties of all description. At the other end you have people just parking their money till the market recovers (wealth conservation). That is what I meant by "don't confuse investment motive with what type of return and investor anticipates.

Let me offer another example. Up until 04/07 I had all my investment and retirement savings in several aggresive growth mutual funds. My returns were in the range of 10% to 12% per year. On 04/01/07, in anticipation of a declining stock market, I cash everything out and put it in money market funds. My returns since have been in the range of 1 to 3%. But it has conserved about a third of my capital that would have disappeared had I let it ride in growth funds. Both are investments, both involve returns on money invested. But the later strategy was executed to conserve wealth, not to grow it. When I think the market has made its final correction, I get back into growth investment.

HBU relates to the particular use which produces the highest return.

 

[David Rasmussen]

Rent schedule & Operating Income

Were either of these required in the orginal assignment. If not charge. $125.00 per sounds good. Have you been paid for the assignment yet? Get paid first for the orginial work and then proceed with the subsequent request.

 

[CANative]

I think you'll find that in high end neighborhoods, when the homes are rented, the GRMS are so low as to make almost no sense as an investment when compared to traditional income properties.

Don't you mean the GRMs are so high as to not make sense? It's the cap rates that would be so low as to not make sense.

 

[Calvin the Airedale]

Don't you mean the GRMs are so high as to not make sense? It's the cap rates that would be so low as to not make sense.

Thank you Greg. My bad! Rents are low, GRMs high, and almost no one maintains a running total of expenses (or time spent) sufficient to even calculate cap rates.

 

[CANative]

I was watching some talking head quickie interview on a local news show the other night. It was some "expert" on real estate and she was say sales prices and rental rates always move in the opposite direction.

But in most of the markets I've observed this doesn't seem to be true. If supply and demand are so out of balance where is everyone going (where are they living)?

Despite the "cautiously optimistic" predictions at this time I have a feeling 2010 is going to be a horrible year for many, many people.

 

[Calvin the Airedale]

I was watching some talking head quickie interview on a local news show the other night. It was some "expert" on real estate and she was say sales prices and rental rates always move in the opposite direction.

But in most of the markets I've observed this doesn't seem to be true. If supply and demand are so out of balance where is everyone going (where are they living)?

Despite the "cautiously optimistic" predictions at this time I have a feeling 2010 is going to be a horrible year for many, many people.

Yeah, apartment (and SF rental) vacancies are up too, just as home ownership is declining. One has to look back to the Great Depression to see the last example of what I believe is taking place today.

In urban Cleveland, there are many two family homes that started as single family dwellings and were converted during the 1930s. Most often the families were related. This doubling up continued through the war years as resources were tight. When housing again took off in the '50s, these homes maintained their two family status.

Among my friends, I've seen examples of adult children (even children with families) moving back with their parents due to tough times. In addition, prospects are bleak enough for recent graduates that "failure to launch" is becoming more common.