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Old 10-19-2005, 08:03 PM   #18
secondcurve
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The following is an example of why I am starting to feel there is an overheated RE market. Help me understand how these economics make sense.

There is a slip in Meredith for sale on the Winni forum classifieds. The asking price is $69,000 and it will accomodate a 22 foot boat. Assuming a 30-year loan at 6% (not sure if this type of finacing is even available for a slip) I get a monthly P&I payment of $414.00. I then assumed property taxes of $500 a year and condo fees of $500 a year. This brings my annual carrying cost to $5,968 a year to own this slip.

Alternatively, I can rent this slip for about $3,000 a year. Why would anyone buy this slip with almost a $2,000 annual negative cash flow? If you say because it will appreciate, please explain why, since rental slips are readily available and assets with negative cash flows don't usually appreciate. Yes, tech stocks did for a while but then.............
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