Inflation over the last few months and years

[steveinbsas]

Excellent advice.

I'm sure glad I didn't follow this kind of advice.

I am selling (now) after owning my present apartment for less than a year and will net a 17% return on my investment.

Now that's profit.

Had I rented for the past four years (I sold my apartment in Recoleta last year), I would have also depleted my capital (cash reserves) enough not to be able to purchase the fabulous quinta I am buying near Punta Alta...or anything else for that matter.

And had I not doubled my investment in five years (only realizing a profit) when I sold my house in Mexico in 2006, I would not have been in the position to come to Argentina (four years ago tomorrow) and continue to raise my "standard" of living.

Instead of paying rent I was also able to buy a truckload of antiques and art that I will soon move to the country. ...and I'll be following the moving van in the car I'll buy next week.

 

[STElmoFranco]

What I don't understand and would appreciate knowing, is why isn't everything collapsing with the high inflation rate? I'm not an economist, but it seems like if wages are not even close to keeping up with inflation than people aren't going to be able to afford rent or food etc. While the economy has obviously collapsed in the past it doesn't seem very imminent right now.

 

[gouchobob]

Well I don't think anybody would accuse me of being a shill or a tout for real estate here or anyplace else. Viajero Mike's rules are the same as what the professionals use. I would simplify this a bit and reduce this to saying price that equals 10 times annual rent is a fair price. If the price is beyond 10 times annual rent you should rent and when below buy. Some people put this out higher at 15 times but I am more conservative. The whole idea is that the rent a property can generate is the best indicator of its value. These rules have been widely violated in many places around the world in recent years and I believe the reckoning is at hand in many markets. People who ignore these rules do so at their financial peril.

 

[gouchobob]

What I don't understand and would appreciate knowing, is why isn't everything collapsing with the high inflation rate? I'm not an economist, but it seems like if wages are not even close to keeping up with inflation than people aren't going to be able to afford rent or food etc. While the economy has obviously collapsed in the past it doesn't seem very imminent right now.

My guess is the rate of inflation is going to accelerate over the next year. Whether this will lead to a collapse or not I don't know. However, I don't know of any instances in history where high inflation hasn't led to serious problems in an economy.

 

[Viajero Mike]

You make your profit when you buy because that is your starting number. That is the number that all of your percentages will be based on. You do not have control over the selling price. You can always say no. Now as long as you do not sell when your home is upside down you have not lost any money. Once you sell now the transaction has been completed. You have bought and sold and now u have to figure your profit or loss. If you bought low and sold high then you have a profit. If you bought high and sold low, u have a loss. Hence you make your profit when you “BUY”.

Another easy way to figure market value just off the top of your head is to take the rent and add two zeros. Hence a $1000 a month condo is worth about $100,000.

To see if a deal makes sense you can work it backwards. A place selling for $200,000 should rent for $2,000 per month. Take off two zeros. If you are sure you can consistently get $2,000 a month in rent then it is probably a good or ok deal.

Here is the states you had a lot of people buying $300,000 homes that would rent for $1,300. That is where the formula comes in real handy. Obviously these homes are way over priced. Never pay more than 100 times the monthly rent, and try to pay less.

 

[Viajero Mike]

Goucho Bob is correct here. I am sorry I did not explain it as well as he did.

Steve I would be interested in seeing your numbers. Buy price out of pocket expenses for less than a year sales price. It sound like a good deal for you. Congrats. But 17% profit in less than a year with banks paying .25% interest on savings account is excellent.

Could it be that you bought very wisely? Got a good price when you bought? Hence made your profit when you bought?