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Post by mufelzika on Oct 19, 2015 5:07:08 GMT
I want this place to work out, so I guess I have to become a content creator. Here goes
One thing I learnt very quickly that I know a lot of people do not understand is that the price of a property and the rent it returns are driven by completely different factors. When it is suggested that the property market is overheated or in a bubble we are talking about house prices, but rents do not fluctuate in the same magnitude or even nature. That is because rental returns are driven by incomes in the region.
If you invest like I do, this makes it very easy to find under-priced houses; cash flow positive is key.
Trying to make money from fluctuating house prices is a form of investment very similar to buying shares in a company; you are gambling on the random walk of the world. Rental return, however, is far more grounded in the economy of your region and will be unaffected by changes in international investment behaviours (thank you china).
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scandinaviabrah
New Member
Oh hi! Didn't see you there, wagecuck.
Posts: 20
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Post by scandinaviabrah on Oct 21, 2015 0:27:07 GMT
So incomes and house prices are not correlated?
I would also argue that house prices are not a random walk. the price trend is up going (clearly).
But real estate is always a sure winner in the long run
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Post by mufelzika on Nov 3, 2015 4:49:33 GMT
Income and house prices are correlated (sometimes), sure. But in no way perfectly.
Random walks can have positive trends, in economics it’s mostly because of inflation. What is left is caused by lots of things including income. Hence the occasional correlation.
The rest? Variables upon variables all clashing to create what we see; a random walk.
Depending on who you ask real house prices (with inflation taken out) have gone up, down or remained the same in the US for the last few decades. That is because Inflation calculations are debated fiercely.
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