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So is Patrick’s (yearly rental)l/(cost of house) a good guidline to purchase a home as an investment?
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2010 Sep 15, 3:34am 1,060 views 3 comments
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bubblesitter
2010 Sep 15, 10:08am
If you can get your hands on a short sale. Did you already receive the offer from the sellers bank?
EastCoastBubbleBoy
2010 Sep 15, 10:28am
Truth be told, i take anyone numbers with a grain of salt. Patrick's, Lawrence Yun's, Baghdad Bob's, heck even my own (I'm not to ashamed to admit I've made math errors on more than one occasion)
I think that Patrick's guidelines are good guidelines, but they are just that. Guides, not end all and be a ls. Plus, I think his numbers could use some updating given current rates and current prices.
If you can get your hands on a short sale. Did you already receive the offer from the sellers bank?
Per the seller's realtor, the bank is in the process of accepting the offer but they want to add a deficiency clause enabling the bank to go after the sellers in the future. This is a non recourse state so of course the sellers are going to refuse this clause. Upon removal of this deficiency clause which according to my realtor is likely to happen, we'll get a month to do inspection and close escrow.
By burritos Wednesday, 15 Sep 2010 9:11 am | 10 views | 0 comments | email this | edit | subscribe to this post
annual rent / purchase price = 3% means do not buy
annual rent / purchase price = 6% means borderline
annual rent / purchase price = 9% means ok to buy
I’m about to purchase a shortsale 3bed/2bath for 200k. The monthly rent is 1500K. Does this mean it’s “ok†to buy? These homes were 320k 2 years ago. There are certainly plenty of homes available and even a few homes that are even a little cheaper than when I started the short sale 6 months ago. I guess I could wait and time for a better deal, but according to the patrick equation, it’s ok to buy and if prices go down even more, it’ll even be better to buy maybe another one? The rental market is strong. It’s near a massive army base(we are a war based economy after all), a major port, it’s west coast. I don’t see any crazy appreciation going on for the next decade or 2, but that’s ok. It’s my hedge against inflation over time.
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