Earning interest at the rate of 3% on your savings and carrying credit card debt at 19% seems to indicate a financial disconnect. If this were to happen for a month or 2 it may have some rationale, but certainly not long term.<\/p>\n
The same reasoning can be applied to buying a property using what is known as negative leverage. That is, buying a property at a 5 cap rate and financing it at 7% interest. It’s going to be real tough to make a return on investment until the net operating income grows substantially.<\/p>\n
Buyers are suddenly reacquainting themselves with the concept of cash flow. It’s been a few years since that has dawned on them. Frankly, I’m not sure why that concept seemed to vaporize around 2002 or 2003 but it did.<\/p>\n
I know, I know property values shot up faster than a rocket and one only had to buy and sell a property in the space of a few months to realize their gain. But still, why did we collectively lose our basic principles when dealing with hard assets such as real estate.<\/p>\n
Why did losing money become fashionable? Why did it take the tanking of the entire mortgage market and eventually the credit market to wake us up?<\/p>\n
Won’t it be nice when Sellers all wake up too?<\/p>\n","protected":false},"excerpt":{"rendered":"
Earning interest at the rate of 3% on your savings and carrying credit card debt at 19% seems to indicate a financial disconnect. If this were to happen for a month or 2 it may have some rationale, but certainly not long term. The same reasoning can be applied to buying a property using what […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[33,39],"class_list":["post-17","post","type-post","status-publish","format-standard","hentry","category-buying-parameters","tag-buying-property","tag-cash-flow"],"_links":{"self":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts\/17","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/comments?post=17"}],"version-history":[{"count":0,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts\/17\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/media?parent=17"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/categories?post=17"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/tags?post=17"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}