Before you invest in real estate anymore, you need to ask a simple question: what is it *really* worth?
It’s not hard to figure out. Take the price of the land itself, which you shouldn’t base on land with a house on it, but an empty lot in the area.
What’s it going for?
Then look at the parts of the house: foundation, lumber, drywall, plumbing and sewer, electrical, doors and windows. Add labor costs. Most suburban residential homes are *really* worth about $125,000.
So why are them priced to sell at $500,000, and note that they are not selling at that price.
Importantly, even if foreclosed, they might be sold at auction for $350,000.
But is that worth it? If so, why? Just because somebody says that it is worth it?
The zinger is that such homes sell at high prices *only* because of easy credit to so many people that they are willing to pay two or three times the real value of the house.
And what if credit stops being so easy?
Yep, no doubt that a lot of people still think the old days are still here, and that house prices will keep going up. The old expression for people like that is “Rubes”.
The value of the home, even if land cost is, I concur, about $125,000...is the distance to work, the school district and the absence of illegal immigrant neighborhoods or gangs...
That’s why Beverly Hills exists.