If only they had used that column to explain yields.
Do they make this stuff up as they go or do drugs and then make it up? At this point its not only stupid but embarrassing and a sure sign of desperation.
I’ve noticed a change in trend…
Up until last few weeks, almost every new home that hit the market came asking for something within 15% of top of the bubble prices. Then over the next few months the price would gradually slide.
In other words, places on the market 6-12mos+ were significantly cheaper than equivalent places fresh on the market.
In any case, over last few weeks it seems that the trend has changed… there is alot of stuff coming on the market and immediately undercutting whats already available and been sitting there for months
Vendors have obviously realised that if you want to sell you need to stand out. Sitting there in vain hope of a rebound just costs money as the market drips away
You don’t want to bother the poor armature investor with complex things like yields, they shouldn’t have to worry about things like that! So long as they can barely afford it then its a good buy!
I think the article explained it all quite well, it simply didn’t use the technical terms such as yield.
Well they could have said in the absence of capital appreciation, a good rule of thumb is that anything less than 6% yield would be a bad investment, and then given the formula for calculating yield.
That would have been a proper answer to the question how do I figure out what’s a good buy?
The problem with using the does the rent cover the mortgage scenario is that it leaves open what type of mortgage we are talking about… interest only? 20, 30, 40 year term?
It’s too vague, yield is easily calculated and provides a very solid method of estimating the ‘goodness’ of a buy.
I stumbled across this “Buying A Home” Advice section on would you believe it an EA’s website.
It is refreshingly candid, I particularly liked the “Buying what you Want not what you Need”
More of this is required.
Could go further:
“It is unlikely that the rent you could get would even begin to cover an 80 per cent mortgage, before even counting the assicated costs, vacancies etc, and you sure as hell (as long as it remains unfrozen over) ain’t gonna get any capital appreciation, so how in the name of the holy leg of the divine lamb of god do you expect to turn a profit from your investment* ?”
*Investement: laying out money or capital in an enterprise with the **expectation of profit **
i.e. We’re trying to offload a stack of shoeboxes in commuterville