Quote:
Originally Posted by jrc
There is a 12 x 38 foot slip at GYC in the forum classifieds for around $65K, possibly that price is negotiatable. Last year a slip like that rented for $4000. Who knows what this year will bring.
If you dig through the nhdeeds or call a friendly realator, you can find recent transactions.
The condo fees are $600 and the taxes are $1100. I don't know what rates you would get through a bank. It's an unusual purchase for them.
All I'm saying is that you can't judge the value of a slip on cash flow. With any luck, three years from now, all the slips will be filled up and supply and demand will work the prices back up. It's very hard to build new slip on the lake.
The prices of slips took a long time to come down. Many slips are owned by old money and they are in no hurry to sell. That's why you still see some really out-of-whack prices. These people have no need to sell. If they can get a good price they sell otherwise they hold. Now there are people that need to sell, they are hit by the recession or otherwise need to liquidate. They set the real current value. I think most current transactions are the latter.
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Thanks JRC. At $65,000 things are moving in the correct direction. That being said, at a $4,000 rental there still is an annual $3,000 negative cash flow after a 20% down payment, assuming a $65,000 purchase price. I disagree with your point about cash flows not being important. Yes, in a credit fueled rip roaring economy like the one we have been in for 7 or so years, you are correct that asset values depart from cash flow streams (see Florida housing, Winnipesaukee slips, etc.) However, when credit dries up and the economy swoons asset values begin to behave much differently. Yes, there will always be folks with money, but the value of assets like homes and slips are determined by the marginal seller. Unfortunately, we are starting to see, and the process will accelerate in my opinion, lots of high-end folks lose their jobs. And guess what, if you are a hot shot attorney or mutual fund manager you will likely be out of work for a long time. As a result, there will be lots of sellers and many of them will be folks that
appeared to have lots of money.
The real question is are we at an economic bottom? If we are and things start to turn up in a year or two then you will be correct in your thinking. My fear is that after a short pop in the economy (maybe through mid to late 2009) driven by heavy government spending the economy will tank again due to the realization that the US can't spend its way out of this mess. Time will tell. In the meantime, stay cautious and remember cash flow absolutely matters when determining asset values; I think the norm that everyone got used to for the past number of years will ultimately be determined to be the outlier. I hope I'm wrong, but I don't think so.