May 2008 (EBITDA) Is that a good time TO INVEST in R.E. ?

20 MAY 2008

Is that a good time to invest in the U.S. in Commercial Real Estate ?

001 : 10Y Interest rates have declined in the past 2 years.

002 : US Real estate, in my opinion, cannot decline further more because the Price for used houses are now 20% under the Price of construction (USD 350/SF w/o land). Real Estate do not include any speculation margin.

003 : Price of houses has declined but Rental Prices remained flat : so the Return on Investment grew automatically.

004 : Buying a commercial business of 2.000 SF for USD 600.000 with 5 offices and 5 lease contract with cool US entrepreneurs. Each Office is paying USD 10.000/Year. A normal price for rentals in the Miami targeted market (USD 2/SF/ Month) As a consequence : You have a 50.000/600.000 = 8.33% EBITDA 8.33% is not enough, but the idea there.

005 Problem : Many Constructions in the US are light constructions unlike in Europe (old big walls houses). Cotages and Brown-stone building are rare.

006 Problem : A non-republican president in the US might have a negative tax-effect, and a negative growth rate-effect on the US economy.

007 Problem : Finding the Building with EBITDA 10 to 12%.

Many thanks for your reply from your knowledge and experience in R.E.

cougloff misc.invest.financial-plan

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Reply to
Pseudonyme
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Where did you get the $350 per sq foot number? In most of the USA you can build a house for less than $150 per sq foot.

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Reply to
catalpa

All real estate is local The US is a big place and there is a huge in real estate in say Detroit vs. Dallas. In Detroit, you are doing serious bottom fishing, hoping for a turn around. In Dallas, you are buying into a market that is only slightly soft.

Any investment can decline further. In fact, one of the surest ways for it to decline further is to say it can't. $350/SF w/o land is a very, very fancy house.

But the price/rent ratio has been badly out of line for the last three or four years. It has some catching up to do.

Are you in Europe? Do you really want to be an absentee landlord?

-- Doug

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Reply to
Douglas Johnson

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