Zeev's Turnips Patch-No Politics (ZEEV)

[Newly2b]

What area is that duplex in? Were improvements made to it over that time period?

I have been a Realtor in coastal Los Angeles for 20 years, and I doubt many other places have had much greater price appreciation (with the possible exception of Las Vegas and Miami), and here the average price rise from the '89 peak on a property in substantially the same condition it was in in 1989, has been roughly 118%. The duplex I currently own I bought in 1999 as a fixer, and that, like yours, has gone up about 250%, mainly due to the fact that 1) I bought it under market, 2) It was the worst property in the best area of the city, and 3) I did a lot of the work of fixing it up myself, and spent only about $50K on things I couldn't do (replumb in copper, refurbish furnaces, exterior painting, etc.).

As to the Cap Rate you mentioned being out of line, the rate of homeownership has increased tremendously during this same time period, so there are fewer renters, thus higher vacancy levels, thus lower rents. Using Cap Rate to estimate an appropriate sales price does not work in these circumstances. Applying that measure, and using a high Cap Rate of 20 (the average Cap Rate an investor looks for when buying a property is around 9-12) the value of my duplex would be only $1.2 million, yet the price a buyer is willing to pay is $1.8 million.

So I do not believe the statements in my original post are out of line in regard to the average property. Your personal experience, and mine with my duplex, are IMO atypical.

Newly