Quote:
Originally Posted by CoachKandSportsguy
The other way to look at the decision value is with a discounted cash flow analysis, and see if the gain on the sale of the house after 5% per year exceeds your cost of capital, which is a dependent formula. RE guys shorten this calc and call it cap rate, which is the purchase cost per square foot. If too high, won't make money, if too low, great as long as you know why the caprate is so low. . (the cap assumes alot of long term cost and income assumptions though)
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People on TOTV and in The Villages in general, seem intent on considering The Villages market (both sales & rentals) as a "one of a kind market".
It is not. It is a real estate market that's no different than any place else. It's driven by supply & demand. It's a market that can be somewhat skewed by the presence of "the Developer", but TV is now big enough that the Developer's influence is increasingly less defining.
We're in a declining real estate market. Sales are slow, prices are softening and the exact same thing applies to the rental market. The rental market and the sales market, seldom operate independently or contrary to one another.
Right now, a CAP rate of 7%-%8 isn't bad for an investor ... 5%-6% is good for an amateur.
Right now, I don't see how buying and renting a new home in TV gets you more than about 2%-3% max ... more likely, it's a loss.
As you point out, you can look at rentals differently if "profit" isn't your goal and one is only looking at cash flow balance.
As in every market, things change, but right now doesn't seem like an opportune time to be buying new in TV and thinking when you retire in 10 years, you're going to have a "free retirement home" that'a appreciated 200%.