Housing market situation

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41southchile
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Re: Housing market situation

Post by 41southchile » Thu Nov 22, 2018 3:27 pm

at46 wrote:
Thu Nov 22, 2018 3:15 pm
admin wrote:
Thu Nov 22, 2018 7:09 am
i dont know. the airbnb is probably not too bad of a return.

say you have a house or apartment in a high demand area. if it is not, your airbnb biz is not going to do well anyway. you pribably get at least 10 to 15% a year in apreciation. if you can get even probably one two airbnb a year, you have covered cost of ownership such as community expenses, property tax, etc. a few more a year, and you are covering the interest payment on the mortgage. a few more a year and you are covering the mortgage payments. especialy the last few years with historicaly low interest rates. cost of ownership can get close to zero with just few bookings a year, which probably gives a better return than a full yearly rental with rents running pretty close to mortgage payments or even a bit below.

the numbers are probably even better for anykne that owns their property outright, or at least has so.e substantial equity built up in their property.

i would never do it. too much of a hassel, but i can see why it would be popular.
If the purchase price is around 2200-2400 UF, as it is in the Centro around Bellas Artes, and Airbnb with superhosts starts at 20 mil these days, you need to rent it out for 18-22 days just to cover the mortgage, GGCC and utilities.

Average occupancy used to be around 22 days back when I looked at it a few years ago. You could get a bit more if you really pushed it, but it´s a lot of hassle, as you correctly pointed out, and you´d still not be able to get to 365 days a year if you wanted to have a life and not just prove a point.

At the same time you can get it rented out unfurnished for around 290-310 ano corrido and get all or most of your mortgage covered that way while the renter pays the gastos and utilities.

Appreciation is the same in both cases.

So, to me, renting it unfurnished is a no brainer, and I think that's what Chilean Airbnb superhost wannabes have started to realize in the last year or so.
Exactly, you are getting roughly the same rate Airbnb as a full time renter, Airbnb is a lot of work and commitment , año corrido is definitely a no brainer now days. Like everything in Chile, everyone has jumped in thinking it's a fantastic idea and that is depressing returns for everyone, happens with everything here.
The early Airbnb apartment owners have probably cashed out and banked their cap gains they are probably already out of that game and have found something else to invest in while the followers are wondering what they have got themselves into.
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41southchile
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Re: Housing market situation

Post by 41southchile » Thu Nov 22, 2018 10:30 pm

41southchile wrote:
Thu Nov 22, 2018 3:13 pm
admin wrote:
Thu Nov 22, 2018 7:09 am
i dont know. the airbnb is probably not too bad of a return.

say you have a house or apartment in a high demand area. if it is not, your airbnb biz is not going to do well anyway. you pribably get at least 10 to 15% a year in apreciation. if you can get even probably one two airbnb a year, you have covered cost of ownership such as community expenses, property tax, etc. a few more a year, and you are covering the interest payment on the mortgage. a few more a year and you are covering the mortgage payments. especialy the last few years with historicaly low interest rates. cost of ownership can get close to zero with just few bookings a year, which probably gives a better return than a full yearly rental with rents running pretty close to mortgage payments or even a bit below.

the numbers are probably even better for anykne that owns their property outright, or at least has so.e substantial equity built up in their property.

i would never do it. too much of a hassel, but i can see why it would be popular.
Let's say I have 80 million sitting around so I dont need a mortgage and I buy one bedroom appartment in Puerto Varas let's assume that includes furnishing, everything I need to rent it out. I can rent it for 50000 pesos a night.
Over the summer I can probably rent it out nearly every day, but the rest of the year, it will be harder and there is so much supply , so let's say it was rented out 35 percent of the time as an average over the year, that's 11 nights a month. 550000 gross, I have to pay gastos comunes of say 50000, insurance probably the same, a cleaner after each guest if I dont want to do myself, that's 110000, power and internet say 50000, that's leaving me aprox 290000 PM, or 3.48 million a year, so its probably giving me 4.35 percent on my freehold appartment . I haven't included guests stealing stuff, replacement linen etc, gas heating costs etc, my time spent receiving guests and looking after the place .
So while it's not a terrible return if its freehold, its certainly not great either for the effort and if I have to take a mortgage out I'm probably barely making a return, I am just banking on making capital gains, but the number of apartments is increasing every year increasing supply so what's my used appartment going to be worth in 10 years time?
I honestly can not see prices increasing at the rate they have been in the last 5 years. The time for investing in apartments was 5 years ago, I think. I may he wrong in my assumptions and I guess they are best guess estimates on occupancy rates based on what I've heard and read etc. Either I am wrong or the market will continue on its illogical path and in 2023 I'll be saying why the hell didn't I buy an appartment in 2018? but looking at whats happening to real estate globally at the moment there could be a few bargains in the next few years for apartments in Chile.
Actually my rent out figures were too high and my purchase price too low it seems, so the return is even shittier than what I had above. Rental now is about 20 to 40k per night according to Airbnb and purchase is north of 3300UF, so closer to 90 million. So I might be making 2 percent on my theoretical 50sqm freehold appartment but for a lot of work in, I better be making an amazing cap gain, otherwise I'll stick my imaginary 90 million in a shitty term deposit for now that also barely covers inflation, but I dont have to do anything and have time to dedicate to other ideas.
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Re: Housing market situation

Post by at46 » Fri Nov 23, 2018 9:33 am

41southchile wrote:
Thu Nov 22, 2018 10:30 pm
41southchile wrote:
Thu Nov 22, 2018 3:13 pm
admin wrote:
Thu Nov 22, 2018 7:09 am
i dont know. the airbnb is probably not too bad of a return.

say you have a house or apartment in a high demand area. if it is not, your airbnb biz is not going to do well anyway. you pribably get at least 10 to 15% a year in apreciation. if you can get even probably one two airbnb a year, you have covered cost of ownership such as community expenses, property tax, etc. a few more a year, and you are covering the interest payment on the mortgage. a few more a year and you are covering the mortgage payments. especialy the last few years with historicaly low interest rates. cost of ownership can get close to zero with just few bookings a year, which probably gives a better return than a full yearly rental with rents running pretty close to mortgage payments or even a bit below.

the numbers are probably even better for anykne that owns their property outright, or at least has so.e substantial equity built up in their property.

i would never do it. too much of a hassel, but i can see why it would be popular.
Let's say I have 80 million sitting around so I dont need a mortgage and I buy one bedroom appartment in Puerto Varas let's assume that includes furnishing, everything I need to rent it out. I can rent it for 50000 pesos a night.
Over the summer I can probably rent it out nearly every day, but the rest of the year, it will be harder and there is so much supply , so let's say it was rented out 35 percent of the time as an average over the year, that's 11 nights a month. 550000 gross, I have to pay gastos comunes of say 50000, insurance probably the same, a cleaner after each guest if I dont want to do myself, that's 110000, power and internet say 50000, that's leaving me aprox 290000 PM, or 3.48 million a year, so its probably giving me 4.35 percent on my freehold appartment . I haven't included guests stealing stuff, replacement linen etc, gas heating costs etc, my time spent receiving guests and looking after the place .
So while it's not a terrible return if its freehold, its certainly not great either for the effort and if I have to take a mortgage out I'm probably barely making a return, I am just banking on making capital gains, but the number of apartments is increasing every year increasing supply so what's my used appartment going to be worth in 10 years time?
I honestly can not see prices increasing at the rate they have been in the last 5 years. The time for investing in apartments was 5 years ago, I think. I may he wrong in my assumptions and I guess they are best guess estimates on occupancy rates based on what I've heard and read etc. Either I am wrong or the market will continue on its illogical path and in 2023 I'll be saying why the hell didn't I buy an appartment in 2018? but looking at whats happening to real estate globally at the moment there could be a few bargains in the next few years for apartments in Chile.
Actually my rent out figures were too high and my purchase price too low it seems, so the return is even shittier than what I had above. Rental now is about 20 to 40k per night according to Airbnb and purchase is north of 3300UF, so closer to 90 million. So I might be making 2 percent on my theoretical 50sqm freehold appartment but for a lot of work in, I better be making an amazing cap gain, otherwise I'll stick my imaginary 90 million in a shitty term deposit for now that also barely covers inflation, but I dont have to do anything and have time to dedicate to other ideas.
One thing that's not so good about the term deposit idea is that the lack of attractive investment options reveals excessive monetary stimulus that stopped working. If the trend continues, we're facing inflation that may not only bite a piece out of your deposit but destroy it completely should things really get out of hand. If they do, you'll pat yourself on the back for owning a concrete apartment in a high demand area.

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41southchile
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Re: Housing market situation

Post by 41southchile » Sat Nov 24, 2018 11:08 am

at46 wrote:
Fri Nov 23, 2018 9:33 am
41southchile wrote:
Thu Nov 22, 2018 10:30 pm
41southchile wrote:
Thu Nov 22, 2018 3:13 pm
admin wrote:
Thu Nov 22, 2018 7:09 am
i dont know. the airbnb is probably not too bad of a return.

say you have a house or apartment in a high demand area. if it is not, your airbnb biz is not going to do well anyway. you pribably get at least 10 to 15% a year in apreciation. if you can get even probably one two airbnb a year, you have covered cost of ownership such as community expenses, property tax, etc. a few more a year, and you are covering the interest payment on the mortgage. a few more a year and you are covering the mortgage payments. especialy the last few years with historicaly low interest rates. cost of ownership can get close to zero with just few bookings a year, which probably gives a better return than a full yearly rental with rents running pretty close to mortgage payments or even a bit below.

the numbers are probably even better for anykne that owns their property outright, or at least has so.e substantial equity built up in their property.

i would never do it. too much of a hassel, but i can see why it would be popular.
Let's say I have 80 million sitting around so I dont need a mortgage and I buy one bedroom appartment in Puerto Varas let's assume that includes furnishing, everything I need to rent it out. I can rent it for 50000 pesos a night.
Over the summer I can probably rent it out nearly every day, but the rest of the year, it will be harder and there is so much supply , so let's say it was rented out 35 percent of the time as an average over the year, that's 11 nights a month. 550000 gross, I have to pay gastos comunes of say 50000, insurance probably the same, a cleaner after each guest if I dont want to do myself, that's 110000, power and internet say 50000, that's leaving me aprox 290000 PM, or 3.48 million a year, so its probably giving me 4.35 percent on my freehold appartment . I haven't included guests stealing stuff, replacement linen etc, gas heating costs etc, my time spent receiving guests and looking after the place .
So while it's not a terrible return if its freehold, its certainly not great either for the effort and if I have to take a mortgage out I'm probably barely making a return, I am just banking on making capital gains, but the number of apartments is increasing every year increasing supply so what's my used appartment going to be worth in 10 years time?
I honestly can not see prices increasing at the rate they have been in the last 5 years. The time for investing in apartments was 5 years ago, I think. I may he wrong in my assumptions and I guess they are best guess estimates on occupancy rates based on what I've heard and read etc. Either I am wrong or the market will continue on its illogical path and in 2023 I'll be saying why the hell didn't I buy an appartment in 2018? but looking at whats happening to real estate globally at the moment there could be a few bargains in the next few years for apartments in Chile.
Actually my rent out figures were too high and my purchase price too low it seems, so the return is even shittier than what I had above. Rental now is about 20 to 40k per night according to Airbnb and purchase is north of 3300UF, so closer to 90 million. So I might be making 2 percent on my theoretical 50sqm freehold appartment but for a lot of work in, I better be making an amazing cap gain, otherwise I'll stick my imaginary 90 million in a shitty term deposit for now that also barely covers inflation, but I dont have to do anything and have time to dedicate to other ideas.
One thing that's not so good about the term deposit idea is that the lack of attractive investment options reveals excessive monetary stimulus that stopped working. If the trend continues, we're facing inflation that may not only bite a piece out of your deposit but destroy it completely should things really get out of hand. If they do, you'll pat yourself on the back for owning a concrete apartment in a high demand area.
Yeah that's true. I was reading a while ago that there is a sort of building boom in Venezuela (for those that are still there) it's an effective strategy to protect their wealth from being totally destroyed by 1 million percent inflation, even cars and other assets were being used as a source of investment to conserve wealth
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Re: Housing market situation

Post by Baltimore » Sat Nov 24, 2018 1:00 pm

I'm still puzzled about the housing market in, say, Pocuro in Providencia. Apartments that are sold for nearly 400M are also available for a monthly rent of 1M or less (take a quick look at PortalInmobiliario). A real estate agent told me that she had some of those rental properties in her portfolio and that they take a loooong time to rent at those prices, around 750.000 - 800.000 per month is the threshold where the rental market becomes very very illiquid (this does not mean that there are people that are not willing to pay more than that!).

She told me that, in general, owners post asking rental price for nearly 1.2M per month in portalinmobiliario, then the apartment sits empty for ever, and they they end up renting it for nearly 800.000 per month (this latter price is not posted in portalinmobiliario). Also, take into account that many of these properties have gastos comunes for nearly 250.000 per month.

On the other hand, those same apartments sell very quickly! What do you think that explains this difference between these two markets for the exact same properties? Is it that a bunch of rich people with a tons of cash sitting around that don't give a damn about their return on investment? Is it that they just want a safe place where to put their money (i.e., a nice neighborhood), even if the return on investment is really low?

I'm a Chilean that had the opportunity to live in Boulder CO, Baltimore MD, and Albuquerque NM and I never saw anything like this in those markets, even in the nice neighborhoods. And in those cities there are also folks with lots of $$, particularly in Boulder. In general, rental values were very close to mortgage payments, so the rule was "if you have the cash for the down payment and can get a mortgage, buy it!". I have a hard time seeing the benefits of following that same logic for someone interested in buying something to live in with 2+ bathrooms and 3+ bedrooms in Providencia, Vitacura, Las Condes, Ñuñoa or La Reina.

Any insights on this would be greatly appreciated.

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Re: Housing market situation

Post by 41southchile » Sat Nov 24, 2018 1:42 pm

Baltimore wrote:
Sat Nov 24, 2018 1:00 pm


Is it that a bunch of rich people with a tons of cash sitting around that don't give a damn about their return on investment?
Your getting warm there, right i had better go and do my Laundry
😏
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Re: Housing market situation

Post by at46 » Sat Nov 24, 2018 1:53 pm

41southchile wrote:
Sat Nov 24, 2018 1:42 pm
Baltimore wrote:
Sat Nov 24, 2018 1:00 pm


Is it that a bunch of rich people with a tons of cash sitting around that don't give a damn about their return on investment?
Your getting warm there, right i had better go and do my Laundry
😏
They do get their return in appreciation though. Look up price increases in Providencia over the last five years for example. Renters come with their own set of problems, so...

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Re: Housing market situation

Post by Britkid » Sat Nov 24, 2018 4:37 pm

As I've said before, it's probably a bubble, and bubbles do sometimes drift downward or even pop.

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Re: Housing market situation

Post by Baltimore » Sun Nov 25, 2018 3:03 am

at46 wrote:
Sat Nov 24, 2018 1:53 pm
41southchile wrote:
Sat Nov 24, 2018 1:42 pm
Baltimore wrote:
Sat Nov 24, 2018 1:00 pm


Is it that a bunch of rich people with a tons of cash sitting around that don't give a damn about their return on investment?
Your getting warm there, right i had better go and do my Laundry
😏
They do get their return in appreciation though. Look up price increases in Providencia over the last five years for example.
I think you are totally right, this is exactly what the presidente of Asociación de Desarrolladores Inmobiliarios says, a lot of people are investing based on appreciation, not based on revenue streams from rentals because properties have appreciated so fast that they are performing better than other investment options (e.g., stocks or bonds).
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What is interesting is that if you go into Wikipedia and search for "speculation" you find that this type of purchase fits the definition pretty well:
"Speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable in the near future. Many speculators pay little attention to the fundamental value of a security and instead focus purely on price movements."

I have nothing against speculation, in fact I am a believer that it can increase the efficiency of markets. The only problem is that, unlike financial securities, shorting real estate is almost impossible. If you believe that the market is going bananas, there is no way to bet against the ones that have the believe that it can only go up (no, choosing to rent instead of buying is not shorting the market). Markets where you can only make bets in one direction of price movements (e.g., up) tend not to work very well...

I know two couples of friends that have purchased 2 of these seemingly overvalued properties, however, their motives where rather different. "We lived in London for a while and we couldn't even dream about buying a house there. When we got to Chile we were exhausted and didn't want to keep renting, we are well aware we paid like a 40% premium over the rental alternative, but we were OK with it, we didn't want to wait more". The other couple said something like "We didn't want to wait, we loved the house and the neighborhood and did not want to rent, even if that meant paying (a lot) more." These seem like reasonable reasons to me, emotional ones. They were not trying to make a profit by buying now and hoping that prices would keep going up.

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Re: Housing market situation

Post by admin » Sun Nov 25, 2018 6:25 am

we handle a lot of international inheritence cases, both in chile and all over the world.

there is another reason why chileans like real estate, and realy why foreigners should like it too: it survives the probate process.

i have seen millions of dollars in estate assets just go up in smoke when someone dies. stocks, bonds, cash, etc all get eaten up in the probate process. everything from taxes taking a major bite out of the asset to families not being able to document ownership of an asset with say a bank or insurance company, to personal tax situation in other countries, and so on.

but not with chilean real estate. chilean real estate tends to survive and make it in to the hands of the family. even with fights and back stabbing among family members, the nature of the inheritance laws in chile insure everyone agrees, or there is no reselliable title to the property. it tends to get peolle to settle on a plan of action.

a foreigner especialy, that buys a chilean property with funds earned before becoming a resident, is off the hook for lot of the inheritance taxes (too long a story to get in to now).

not so in the united states and many other countries. there is no certainty that your property is going to make it through probate and to your kids.
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Re: Housing market situation

Post by 41southchile » Sun Nov 25, 2018 9:09 am

at46 wrote:
Sat Nov 24, 2018 1:53 pm
41southchile wrote:
Sat Nov 24, 2018 1:42 pm
Baltimore wrote:
Sat Nov 24, 2018 1:00 pm


Is it that a bunch of rich people with a tons of cash sitting around that don't give a damn about their return on investment?
Your getting warm there, right i had better go and do my Laundry
😏
They do get their return in appreciation though. Look up price increases in Providencia over the last five years for example. Renters come with their own set of problems, so...
Funny that real estate doesn't come with this warning, yet it is advised on nearly any other formal investment

“Past Performance is no Guarantee of Future Results,”
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41southchile
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Re: Housing market situation

Post by 41southchile » Sun Nov 25, 2018 9:28 am

at46 wrote:
Sat Nov 24, 2018 1:53 pm
41southchile wrote:
Sat Nov 24, 2018 1:42 pm
Baltimore wrote:
Sat Nov 24, 2018 1:00 pm


Is it that a bunch of rich people with a tons of cash sitting around that don't give a damn about their return on investment?
Your getting warm there, right i had better go and do my Laundry
😏
They do get their return in appreciation though. Look up price increases in Providencia over the last five years for example. Renters come with their own set of problems, so...
Dont need to look them up I know what the have done in the past, but does anyone in the future? Look at price increases in Auckland, Sydney, London, Hong Kong, Munich, Amsterdam, Toronto, Paris, San Fransisco and many many more and now look up what they are currently doing, stagnant or slightly falling , the peak has been reached over many places around the world already.

People that think prices will do what they have done over the last 5 years in the next 5 years should seriously re think their investment if they are basing their decision on one of the most unusual times in recent history. A time where there was trillions of dollars washing around the world looking for a home that would return some kind of return with interest rates at near zero.

Like always it's the johnny come latelys that will lose out.

Wheres all those YouTube videos now of kids that became millionaires through bitcoin? If you bought in January things are not looking too rosy now.

Stockmarket is the same principal, why are things so overvalued? That stimulus money had to go somewhere.

Real estate will probably go back to fundamentals , location, location, location , with slight increases as economy grows, not some speculative bubble like we have seen in the last 5 to 7 years that has made housing severely unaffordable for nearly all the populations that have seen huge increases around the world, when average house prices are 9 times average annual income then you seriously have to ask where to from here. Bubbles only work as long as new people keep coming in .
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