From: "John A. Weeks III" 
Newsgroups: misc.invest.real-estate
Subject: Re: First time homebuyer
Date: Thu, 03 Feb 2005 01:54:40 -0600

In article ,
 "Tyrone"  wrote:

> > Are you saying if in the area that i am looking for houses the rent
> must be
> > atleast 1% of the
> > home value. The area i live in right now has townhouses ( 3br) selling
> for
> > 275,000 - 300,000 and i dont think
> > anybody will pay 1% of that value as rent.
> >
> >
> 
> Then, people are paying too much for those townhouses.

You could say that.  But then again, people are often buying
a lifestyle, and not making an economic decision.  Homes
that you buy are often 2 to 3 times bigger than an apartment,
so you are still getting a pretty good value when you look at
it from cost per square foot.  You would not, however, want
to buy a $300K townhouse to rent out.  Even the nicest town
homes here in the Twin Cities only bring $1500 a month, so
you are at half what you need.

Another factor in the $300K townhomes is supply and demand.
Here in the twin cities, sewer connections are highly regulated
and extremely hard to get.  The result is that it adds about
$50K to the cost of new homes.  That pushes up the rest of the
market.

Finally, there is the greater fool theory at work.  People
buy over-priced real estate thinking that there will always
be some greater fool coming behind them that will pay even
more.

-john-

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John A. Weeks III           952-432-2708            john@johnweeks.com
Newave Communications                         http://www.johnweeks.com
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