“Mumbai is a city of 12 million… but 5 million Indians come in and out on the train every day.”
Mark just returned from the other side of the globe. He attended a Wealth Builders Club summit in India. In the podcast below, Mark shares the insights he gained from this “country of contradictions.” (If you want to cut to the conference details, fast-forward to 12:10.)
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From Mark Ford: When son No. 1 bought an apartment in Brooklyn Heights three years ago, I was shocked at the price—about $700,000 for 700 square feet. At $1,000 per square foot, he was paying much more than I would for a property whose rental income potential was perhaps $70,000 per year. Using our Rental Real Estate 101 formula (8 x GRM, or eight times the gross yearly rent), the “correct” value of that property should have been $560,000. Since then, prices have gone up. He estimates he could get at least $850,000 today. Was I wrong? Is the GRM formula wrong? I don’t think so. My view is that his apartment was overpriced by about 20% then and even more so today. As you can see from this story, in order to buy the average home in Brooklyn, you would have to spend 98% of an average New York income. That does not make any long-term sense. Disclosure: I told my son he was probably safe to buy the apartment even though the deal was not economic because I was confident that, barring another 9/11, property values would continue to rise, as they have. But it made no sense then nor would it today to buy into that market as an income real estate investor. |