How are things going out in nowhere, George?

It seems George has abandoned us.

I don't know about where George is, but we have a friend who is actively trying to buy in Charlotte, NC, and everything he is interested in goes into contract right after the Open House with multiple offers at price well above last sale.

George was pretty awful.

Charlotte is hardly nowhere. Seems like a booming mid-size city.

Does anyone have a list of clues George left as to where his "Nowhere" is?

Awful George here. Glad you missed me. I missed most of you too.

Market in Nowhere is still very strong. Apartment/condo/multifamily inventory is up a lot because there has been a lot of construction of this product. Just saw a place that sold a year ago to a flipper go into escrow at an ask of +10% but listing discounts are running +6% so it seems the market has settled into a modest upward trend.

SFH inventory is still as tight as it has been since 2020. New renovations and new builds are in huge demand and commanding 2-2.5x pre-covid, nearly always going into escrow in less than 30 days. Older properties that were overpriced are sitting for months on end. Nobody wants to do any renovation.

Ps, everywhere beyond 9th Ave is "Nowhere". The Queen City is absolutely Nowhere.

Similar story here in North Palm Beach county, George.

A good real estate strategy is to buy in supply constrained areas where rich people will want to live. Their numbers are growing and the supply of great locations isn't.

Come to think of it, that was the idea behind buying in Manhattan from the early 1900s till about 2006.

Re: "Ps, everywhere beyond 9th Ave is 'Nowhere'. The Queen City is absolutely Nowhere."

Agree w/r/t United States.

>> A good real estate strategy is to buy in supply constrained areas where rich people will want to live.

How do you do that? Not something I’ve ever really thought about, so I’m curious to understand. I’m also wondering how you know if/when it’ll end, as you say happened in Manhattan circa 2006.

Sounds very good in theory, I was thinking along the lines that you are nada. Having that crystal ball could lead to great wealth across many markets!

Having a crystal ball is difficult. A common thread is people thinking they have crystal balls because they call a coin toss correctly three times in a row. This is not to say that people can’t have insight that puts them above 50/50. Just curious what that insight is that George believes takes him to 60/40 or whatever.

FWIW, I don’t think you need a crystal ball to achieve great wealth across many markets. A 60/40 ball suffices. Some such balls are hard to find, but some are readily available. The issue that gets most people, IMO, are expectations of 100/0 balls (which don’t really exist) and no framework for identifying 60/40 balls other than “This coin came up heads 3 times in a row!”

"Prediction is very difficult, especially about the future."
Niels Bohr

Good one, 30.

George, Would love to hear your thoughts on a few picks which meet this criteria. I realize that the predictions don't have to come true as there are many local moving factors such as a big company going bankrupt, local governance changes, acts of nature etc. Thank you.

---
"A good real estate strategy is to buy in supply constrained areas where rich people will want to live. Their numbers are growing and the supply of great locations isn't."

Couple of years ago I called Syracuse/Clay, and that area had some of the highest appreciation in the US recently. My hunch was due to 1) Micron's new factory plans https://www.newyorkupstate.com/business/2024/06/see-microns-latest-timeline-for-building-all-four-fabs-in-clay.html 2) super low prices 3) good /improving long term location due to global warming 4) a state college in Syracuse and an airport.

I did not purchase there because it was a bit far for a summer house, I didn't want to be a landlord anywhere in tenant-friendly NY State, and I have no skills/time to be a developer.

I did purchase a rental property elsewhere in a landlord-friendly red state in a town with a decent/improving economy and still pretty low prices. That property has appreciated about 15% since, and I have a 3.5% 30yr fixed loan vs a high single digit cap rate, so I think I have done okay.

Both places are NOT where rich people want to live.

Rich people places lately are very overpriced. I am bearish on any place where median home price is >10x median HH income, which is most of them.

As an exception, Palm Beach in FL has been a great place to buy recently. It still had some properties for middle/upper middle class families at decently attractive prices last year, with an influx of rich people before and after the election pushing prices up.

My criteria/crystal ball:

1) Areas where homes are cheap relative to incomes (less than 5x local HH income)
2) Decent economy / growing population (no upstate New York shrinking population situation)
3) Long term support from some existing good public infrastructure like airports, universities, etc
Bonus: constrained supply due to geography or a catalyst event in the form of a large employer commitment to add jobs in the area

What fits these criteria:
Some areas of NC, TX, TN, AZ
Syracuse, NY

Note: it turns out that areas where homes are very cheap relative to incomes do have an issue with vacancy as tenants typically rent for one-two years, and then buy their own. In comparison, in NYC tenants stay in place for multiple years as they often cannot afford to buy

Krolik, One take on FL I have heard is that insurance cost have killed single family market (prices don't show it yet unlike Austin TX), maintenance costs have killed condo market (prices show it), and covid movement WFH is over. Is that not the case in West Palm Beach?

And sun-belt now has inventory build up in Multifamily rentals which is finding its way to single family prices.

That is why seeking opinion of George.

Agree, on FL big picture but not few nuances. I don't think the condo market has capitulated yet. Asking prices still too high, I think.

West Palm Beach and some areas in Miami are the exceptions.

Here is Austin chart for reference. To be viewed from a computer not mobile device.
https://www.zillow.com/home-values/10221/austin-tx/

Agree but there is clearly sign of softness and price declines in the old condo market in FL. Capitulation wouldn't happen without economic downturn. That is why I find Austin rather interesting. Many other areas saw the boom similar to Austin but Austin down 20% plus with expectation of another 10% being discussed in the market. Other boom towns haven't seen the decline. May be they will.

"I don't think the condo market has capitulated yet."

I think Palm Beach is the exception, and West Palm Beach is at risk. Where "rich people want to live" (in Palm Beach and parts of Miami, like Brickell) are the insulated/appreciating areas. Basically, FL is very neighborhood dependent right now.

I see. So Palm Beach and part of Miami as one pick for limited supply and rich people wanting to live.

Here is another covid price boom like Austin but without decline. There is no job growth or tech in Charleston I know of. What gives?

https://www.zillow.com/home-values/4054/charleston-sc/

Historically, small towns where "rich people don't want to live" are more susceptible to economic turndowns.

>>>I see. So Palm Beach and part of Miami as one pick for limited supply and rich people wanting to live.

Yes, for sure. However, to inonada's point, I wouldn't be able to tell you how long that might continue and when the right time to sell is. I am just not rich enough myself to be able to predict rich people's tastes, or what happens after Trump's term, etc.

Whereas I think my value-oriented crystal ball works fairly reliably and is entirely data driven. Sorry, it might be too middle-class for some on this board. :-)

>>>Here is another covid price boom like Austin but without decline. There is no job growth or tech in Charleston I know of. What gives?

Airbnbs
https://rabbu.com/blog/best-short-term-rental-markets-in-south-carolina

Krolik, What would be your top picks in NC, TX, TN? I looked at Texas, except Houston it is really not cheap any more. Especially Dallas.

---------------
My criteria/crystal ball:

1) Areas where homes are cheap relative to incomes (less than 5x local HH income)
2) Decent economy / growing population (no upstate New York shrinking population situation)
3) Long term support from some existing good public infrastructure like airports, universities, etc
Bonus: constrained supply due to geography or a catalyst event in the form of a large employer commitment to add jobs in the area

What fits these criteria:
Some areas of NC, TX, TN, AZ

My research is a year or two old. I have not been keeping super up to date since baby. But real estate does not move quickly so expect the below to still hold

NC: research triangle; areas in Charlotte suburbs near new train stops (not sure if this has been overdone)
TX: El Paso; areas of Austin near recently constructed new employer campuses
AZ and TN: affordable areas near recently announced new factories / corporate campuses; avoid overpriced and Airbnb-heavy areas

“Note: it turns out that areas where homes are very cheap relative to incomes do have an issue with vacancy as tenants typically rent for one-two years, and then buy their own. In comparison, in NYC tenants stay in place for multiple years as they often cannot afford to buy”

This is not necessarily a bad thing, depending on if there is rent control or eviction control. A new tenant can allow you to raise rent and if there is strong eviction control, it means it maybe difficult to “force” a tenant out, if for example, you want to sell. Selling a tenant occupied property is very challenging. Basically this why I recommend to people to never consider being a landlord in California, unless you’re doing Airbnb (which is what I do now). Surprisingly, NYC is less draconian than California. In our Hells Kitchen condo, we rented it out to a tenant fir 18 months then moved back in with proper notice, nothing the tenant could do to stop us. We made sure of the laws before buying that condo. As far as Florida condos, there is a huge difference between fairly new condos and older ones, having owned both. New, modern condos built in the last 5-10 years are much better off since they are simply built much better to withstand hurricanes, wind and floods. Prices are still very competitive. Stay away from older condos. I had the misfortune of owning an condo built in the 1940’s in Miami Breach. Every year there was a major assessment that had to be paid and my insurance costs were skyrocketing. I imagine the market for those type of older condos is cratering.

Flooding in particular would be the big problem.

If I had to drop $$ today into RE, I'd look at the upper Lower Peninsula of MI. From Traverse City up through Charlevoix and on to Harbor Springs. The lower regions might work too but prices have been bid up in the area just around the corner from Chicago.

Upper Michigan has multiple seasons if you're near the Lake and skiing, which SW Lower Michigan doesn't. There are already summer colonies in areas like Harbor Springs. There are great historic properties in areas like the Old Mission Peninsula. The local wines aren't good but are getting better. It's an area that is exceptionally climate resilient, in part due to unlimited fresh water and only rare severe storms. Insurance is cheap.

The supply isn't as constrained as I'd like. The lake is huge but properties with lake access are scarce. Historic properties are very scarce. Many were bid up during covid.

There are some decent companies in Traverse City and I would not be surprised to see more move there. There's no anchor corporation but it's not totally a recreational area.

There's no real estate on Palm Beach Island that upper middle class buyers could afford, with maybe the exception of older condos on the far south end of the island. Although this part of Palm Beach Island is not really considered proper Palm Beach. And those condos have outrageous carrying charges.

When referring to West Palm Beach, you need to be much more specific. Downtown West Palm, near clematis and the new ly reimagined City place is awash in new development, office towers, rental buildings and new condos. It's become a viable option, especially along the intracoastal to Palm Beach Island. You have one new development on Flagler that's getting $10 million plus per floor for a residential condo for the privilege of overlooking Palm Beach across the intracoastal.

Palm Beach county encompasses quite a few communities, I'm more familiar with real estate in the Northern Palm Beach county area. Here you have places like North Palm Beach, Jupiter, Juno Beach, Jupiter Island and Palm Beach gardens. In my particular neighborhood, new construction homes, approximately 3,000 ft are selling for the low 2ms. Homes on a canal are selling anywhere from 4 million to $10 million. That said, you confined real estate in Palm Beach gardens for $600,000 for a small house, or you can purchase a home in a community like Old Marsh, and pay 8 million. I live in a neighborhood with homes that start at about a million dollars, but I can ride my bicycle 10 minutes and be at a trailer park (a cute one at that for snowbirds).

There's so much new development in Northern Palm Beach county. It'll make your head spin. And it's all selling. Look up the Ritz-Carlton residences on PGA boulevard, starting at 4.5 million. Or a new condo community called Caretta living In Juno Beach, great location and homes there are starting at about 1 million, not bad.

Old Palm... Not marsh

https://www.echofineproperties.com/communities/old-palm/

@George - We definitively do not want new entrants in Harbor Springs. Sshhhhhh. Look over there! Traverse City is the place to be! and Charlevoix is very special.

In WPB, I heard good things about the town of Jupiter. Upper middle class town with good schools is what I heard. Also heard great things about Coconut Grove and Coral Gables near Miami. Me in NYC hearing things about FL is indicative of hype / desirability.

It is a very neighborhood specific situation in FL In WPB as well as in Miami.

Where are the high paying jobs once you are out of commutable distance from Miami? Just local Doctors.

And in the 'developers just gotta make money', the issue of homeowner association fees and amenities in homeowner associations in FL seems to be back on the agenda:

https://jasongarcia.substack.com/p/a-homebuilding-giant-is-lobbying

(probably illegal in NY, otherwise we'd have seen it here in condos some time ago)

Coconut Grove and Coral Gables are great. I know nothing about the schools, not having kids, but we spend a lot of time in those areas, lovely older homes, nice parks, great farmer markets. I remember doing many long runs along tree lined streets with many majestic homes, but they weren’t impersonal “mega mansions “. I think buying a single family home in these areas is not inexpensive, but compared to NYC and affluent NJ towns, like Summit, then i think Coral gables and Coconut grove are very reasonable. Mind you, you have to be ok with mind-numbing heat and humidity for 75% of the year. It’s not for everyone. And although you don’t have to deal with huge monthly condo dues or assessments, I would imagine securing reasonably priced home insurance will be very, very challenging especially if you purchase an older home. I also really like the areas near the Mimo district in Miami, Shoreline, Morningside, basically the Upper East side of Miami, but these areas are pricey. Not sure about schools. But very beautiful if you tolerate the weather and constant risk of hurricanes. As I write this, I am somewhat surprised how much I miss certain aspects of Florida…

2% insurance cost even for post 2005 construction. $1mm modest home is $15-20k. Older homes 3% plus. That is why I am terribly confused about prices in Miami. I get that there are hedge funds who moved these and there is money from Latin America.

https://clovered.com/homeowners-insurance/florida/miami/

People rave (or used to rave) about cheap Florida is relative to NY and CA. Lower home prices, no state income tax. But what they don’t tell you is many other things are not so cheap and possibly more expensive, namely home and car insurance. We also found food is no cheaper, including fruits and vegetables which I found odd given the climate. Although I never used any doctors and hospitals, my partner said the quality of medical care in Miami is much worse than either NYC or Bay Area. As I recall, our utility bills were also higher, mainly due to having to blast the AC pretty much 24 hours a day. I do really miss Miami and Florida in general but it’s not as inexpensive place to live as all the brochures would have you believe

Coconut Grove is beautiful! Sounds like you like to run 911, I prefer the beaches of Northern Palm Beach county as I can also surf here. And I would say it's exceptionally hot here in Northern Palm Beach county about 40% of the year. November through May. It's absolutely beautiful.. currently 80° with beautiful breezes. A little secret about this area, It's the closest point that the Gulf stream gets to the east coast of the United States, has a moderating effect on the weather. The hottest months being June through the end of September, however, being near the ocean is key. During those months you basically go from your house to your pool, and then to the beach where it's 10° cooler. For my money it beats 5 months of winter.

I love to run! Still very competitive in my age category in races from 5K to marathon. You’re absolutely right about the moderating effect of the ocean. We lived in Brickell and with all the concrete, it felt like an oven many a day. But if we took a short drive to Miami Beach, it was still HOT but you could definitely feel the effect of the breezes off the ocean. It was definitely more tolerable….

Turbo, Florida being cheap is history as prices are up 40-50% in the last 5 years. Insurance cost more than makes up for cheaper property taxes and part of no state income tax.

“Turbo, Florida being cheap is history as prices are up 40-50% in the last 5 years. Insurance cost more than makes up for cheaper property taxes and part of no state income tax.“

Yes, in my very modest income bracket, the lack of no state income tax really was not a significant saving. If you’re a professional golfer or hedge fund king, I can see how no state income tax would be a significant draw. If i were to move back, I would almost certainly buy a single family home so I’m not dealing with an HOA and potentially other owners who can’t afford assessments and HOA dues increases to pay for repairs. I’d make a decision about having home insurance, or I’d take the gamble with no home insurance and just maintain a slush fund to cover repairs, as I’d almost certainly pay cash and not have a lender requirement for insurance. And just roll the dice that my home won’t get destroyed by a Cat 4 hurricane

Turbo, Thank you for your insight.

Nada/George, When does Florida fever go down for the reasons above? Miami at least had new (increasing number I don't know) finance/cypto jobs and Fort Lauderdale is easily commutable to Miami and has some good private schools.

We also spend a lot of time in Fort Lauderdale as well. We definitely liked it, it has a nice beach and boardwalk like Miami Beach but less touristy. Our favorite restaurant was in Fort Lauderdale, huge portions and very reasonable prices. Too many tourist traps in Miami, Miami Beach when it comes to dining. I briefly toyed with the idea of buying a multi unit property and prices definitely seemed reasonable compared to Miami. And of course you have FLL airport very close by. FLL is pretty useless for international travel but as hub for Sprint, we almost always found domestic flights cheaper from FLL vs. MIA. Again, not sure about public schools. Also not sure what is the major industry/employers in Fort Lauderdale other than tourism, fishing? But yes, if you’re looking at Miami, you’d be foolish to not at least consider Fort Lauderdale due to their close proximity

I like Fort Lauderdale just fine but OMG that airport is like a nest of methheads.

I am the rare bird that loves flying Spirit so I love Hollywood/Ft Lauderdale airport!

Spirit's Big Front Seats are the best deals in the sky.

And it doesn't seem anyone is going to bother the denizens of Harbor Springs, Michigan. The secret is still safe.

As for Miami, there's a big spike in inventory in the neighborhood I watch (Fisher Island) but prices are not coming down there (yet) - still 2x and even 3x pre-covid. Fortunately insurance prices are starting to moderate so at least they have that in their favor.

Fort Lauderdale airport have been completely redone, but it's still kind of crazy. The traffic is absolutely insane and there's no such thing as an easy commute, even from fort Lauderdale to Miami. I have a friend in commercial real estate that commutes from Palm Beach gardens to Miami and what should be an hour and 20 minutes. Commute can take 2 and 1/2 hours in the morning.

If your work from home or maybe only have to go down to Miami a few days a week, the secret is living in Northern Palm Beach county. Not many people are familiar with places like Juno Beach, North Palm Beach, Palm Beach gardens, Jupiter and of course beautiful Jupiter Island. The West Coast is where you really have to be concerned about the hurricanes, and it's not so much about the wind it's about the insane flooding. If you look at the insurance statistics you'll see the flooding is the main cause of catastrophic damage. Also, because the Gulf of Mexico is so shallow, the circulation of the hurricane just pushes all that water miles into the coast. You don't have that effect with the Atlantic Ocean, although Miami is a different story. You see a decent amount of flooding there after a big rainstorm. For the most part, modern homes can handle the wind, or homes that have been renovated to meet the new Dade county hurricane standards. We've owned a home in Palm Beach county for almost 14 years, So far zero damage from hurricanes. What you will see is an absolute mess as it just destroys all foliage etc. and if you don't have a whole house generator, the inconvenience and uncomfortableness of losing electric for a week or more in July or August is no fun. We have a natural gas powered whole house generator that runs everything and kicks on the second we lose power.

There are also some interesting neighborhoods in the West Palm Beach area like flamingo Park with classic old homes and Northwood. This area is also starting to develop with new restaurants, art galleries, breweries, etc. and if you haven't been to downtown West Palm Beach in a few years, it will be absolutely unrecognizable as Stephen Ross has been remaking the entire community with a new development company he runs.

And don't forget about absolutely wonderful Palm Beach international airport! Which was basically created to accommodate all the wealthy Palm Beachers. Never any traffic to get there from the northern Palm Beach communities or West Palm Beach with plenty of flights to New York City. The new brightline train with its very comfortable and clean stations and lounges at each stop has also been a great way to commute from Miami to Orlando! It's a modern new train with connecting buses as well as electric bikes available at each station. It's not cheap, but a great way to get to Miami from the Northern Palm beaches or West Palm Beach. I think a lot of you are still attracted to City Life and that's why the talk is always about fort Lauderdale or Miami.

This is another cool neighborhood, not very well known in West Palm called El Cid. But I sort of guessed the disconnect here, Northern Palm Beach county is about the sort of laid-back Beach lifestyle, which is what I'm all about! Miami and fort Lauderdale are bustling cities, not my cup of tea these days. The communities I reference are about golfing, fishing, kayaking, surfing and boating.
https://www.redfin.com/neighborhood/56186/FL/West-Palm-Beach/El-Cid?utm_source=google&gclid=Cj0KCQjw8cHABhC-ARIsAJnY12yQsixCPPUkvvL5d7myaAXkuRiiy-_T21bgfYopk4Zy5ZYsXCkidn4aAmp_EALw_wcB

>> Nada/George, When does Florida fever go down for the reasons above?

I have no clue. I don’t live there, I have zero interest owning a place somewhere I don’t live, and I have zero interest investing in RE (doesn’t pay and/or doesn’t scale).

Even if I did, I’d still have no clue. Mass fever is not a thing I have any skill in calling. Even if I did, my best guess on prices would be “nothing interesting”. I’ve long believed Manhattan prices are unsupported by fundamentals. Unlike some bears, I never thought I could call a crash. I’ve pretty consistently guessed that prices stagnate in such RE situations, so people bleed money slowly. Either in real dollars, or in opportunity cost. People are very averse to “selling at a loss” relative to whatever they paid, and the mass effect of this tends to be “sideways”.

Are Florida prices supported by fundamentals of price-to-rent? I’d start there. If the answer is “yes”, buy away. If the answer is “no”, move on. A very simple and easy 60/40 call to make. Rinse & repeat. Most of the time, you’ll be saying “no”. But when a rare “yes” opportunity shows up, load up.

George has the interest & motivation to do this in RE. He put it to good effect in 2020 after what seemed to be years upon years of study. It was interesting to watch. I, on the other hand, have zero interest or motivation. The “upper Lower Peninsula of MI”, for fuck’s sake I didn’t even know such a place existed.

The Florida fever has definitely broke. However, if you're in the right place down here, it's an absolutely wonderful Paradise to live in, if tropical living is your thing.

@nada - re "The 'upper Lower Peninsula of MI', for fuck’s sake I didn’t even know such a place existed."

I just spit out my coffee laughing at that. If you ever want to check it out, let me know; we have more than one family place up there, and I can tell you it is some of you most beautiful real estate on the planet.

MCR, it looks lovely. And I understand why you know about it, growing up in MI. But how come George (and to a lesser extent, you) have an opinion about RE in NY, and MI, and NC, and TX, and CO, and …??!??? You guys rattle off opinions about the prospects of RE locales like Kramer does stocks on Mad Money. Clearly, your interest & expertise far outstrip mine.

Keith, in the 2010’s I definitely recall thinking (on short getaways to Miami Beach, of course): “You know, I could see myself living here at some point”. Once the Carbone crowd went on a fever pitch, I think I lost interest. Besides, NYC becomes its own urban tropical paradise of sort for ~3 months a year.

>> I think a lot of you are still attracted to City Life and that's why the talk is always about fort Lauderdale or Miami.

That’s self-selected on this board, no? We probably live in NYC for a reason.

Yes, makes sense.. but there is also a lot of talk of other 'locations' in nowhere ; )

>>>there's no such thing as an easy commute, even from fort Lauderdale to Miami.

Take the train! Also, a good RE investment is an early purchase next to a new train station. Its a game changer not only for Fort Lauderdale but also WPB.

>>>Where are the high paying jobs once you are out of commutable distance from Miami? Just local Doctors.

And wealth managers.

>>>But how come George (and to a lesser extent, you) have an opinion about RE in NY, and MI, and NC, and TX, and CO, and …??!???

For me personally, I researched NC and TX because we were trying to think through the question of cost of living if my partner and I were to get jobs there. Similar math to what I tried to do with Scarsdale NY and Summit NJ. In North Carolina, I have never been to Cary, but suspect I might like living there or in Raleigh.

For FL I have not done the math because I am less interested in living there, but a few friends moved there so I can rattle off few neighborhoods where they settled / I visited.

Nada, Cap rates in Florida for long term rentals are 2-3% at 1.5-2x median prices home from my small sample set research. Smaller homes are and historically have been higher cap by 1 to 1.5 vs larger more expensive homes. It is more or less the same story in most of the country where prices are up 30%+ pre-covid.

Some places I calculated cap rates for a few properties.

Austin $1mm price. 2x median. 2-3% despite large price declines from 2 years back.
Nashville $1mm price. 2x Median. 2-3% without price declines.

Austin cap rates made no sense few years back and still now for the most part.

A bit more tolerable are the cap rates in small enclaves outside of the city next to newest corporate parks or factories, priced at 2/3 of a median house. These are good starter rental homes for people relocating for jobs and not wanting to have a long commute.

Below median price homes are mostly higher cap rates. That is why the corporate home buyers have invested in median or below priced smaller homes.

Here is a good rationale for buying on Beekman Place - that 2nd Ave subway will make its way to our neighborhood any day now: "Take the train! Also, a good RE investment is an early purchase next to a new train station."

With respect to NC and Texas, my mother and her husband are professionals in this realm and have done very well. They cashed out of NC a few years ago (their entry point was the mid-80's), and they are cashing out of TX now (lake country, San Antonio and Austin).

What is your estimate of the cap rate for 6700 Colina lane, Austin, TX?

For almost 40 years my commute to the office has been on foot.

P.S. - My mother and her husband's cashing out of TX now is simply a factor of age (mid-80's); we have been encouraging them to retire for 20 years now, but they like what they do. I will believe they are cashing out of TX when I see it; I suspect they just told us they cashing out to keep us from pestering them to retire.

6700 Colina lane, Austin, TX
I will speculate. 3k rent. $36k minus $20k in property taxes $10.5k, insurance and upkeep/expenses. $16k per year on $550k. Sub 3%.

What do you think?

Pre-covid this was $400k going by city assessments which are not that bad in Austin. And taxes and insurance etc were $15k. Rents probably $30k per year. $15k on $400k was 4% ish.

>>>With respect to NC and Texas, my mother and her husband are professionals in this realm and have done very well. They cashed out of NC a few years ago (their entry point was the mid-80's), and they are cashing out of TX now (lake country, San Antonio and Austin).

Where are they buying now?

>>With respect to NC and Texas, my mother and her husband are professionals in this realm and have done very well. They cashed out of NC a few years ago (their entry point was the mid-80's), and they are cashing out of TX now (lake country, San Antonio and Austin).

Good for you. When I lived in Staten Island I commuted by boat. Now I like to take buses. Or by foot.

>>6700 Colina lane, Austin, TX
I will speculate. 3k rent. $36k minus $20k in property taxes $10.5k, insurance and upkeep/expenses. $16k per year on $550k. Sub 3%.
What do you think?

I calculate higher, 4-5% as I see taxes of $11k per year, not $20k. Will taxes be adjusted higher after the sale?
Anyway, that particular location is better than other spots in Austin, in my opinion. Close to tech employers, good school district and not outrageously priced.

But I would not want to live in Austin. We have family in TX though.

$20k is the sum of property taxes $10.5k, insurance ($3-5k) and upkeep/expenses ($3-7k; periodic repairs covered, tax filings, rental cost etc).

--------------------------
I calculate higher, 4-5% as I see taxes of $11k per year, not $20k. Will taxes be adjusted higher after the sale?

@krolik - My mother and her husband hopefully are not buying anywhere now because they are in their 80's and no longer capable (IMO, though they get very angry when I say this) of being as hands-on as necessary.

They have been reluctant to cash out because previously they have always done 1041's to roll capital gains into the next investment; they just can't stomach the tax bill. It is a mindset they can't get out of; gains after taxes are awesome and would satisfy most investors, but I guess when you have been at it as long as they have, they just can't imagine not investing in what they view is the next up and coming area.

They used to make lengthy trips to the areas they thought might be good for investment. Given that they have not left home base since before COVID, I cannot imagine they have any idea where the next real estate bonanza will be.

@mcr: "they have always done 1041's to roll capital gains into the next investment;"

Would purchase/construction of a suitably stately mausoleum in Greenwood count? They could have a permanent real estate investment.

Ha - I like it!

How big is the portfolio? Up to $20M, or far beyond? If they’ve been rolling 1031 exchanges this long, seems silly to pay taxes so close to the endgame. As I understand it, this is part of the infatuation with accepting sub-par returns in RE. A whole lotta effort for a mediocre rate of return, but you win on the taxes!

They agree and want one of us (the next generation) to just take over the portfolio, but none of us have the time/skillset/interest. And to the extent they are concerned about maximizing any inheritance they leave us, we are all fine and just want them to enjoy life. We want them to spend their hard earned gains on themselves.

They should then perhaps:

1) 1031 into one large piece of RE that is pretty hands-off to sell, so you can get rid of it easily after the step-up
2) Finance a portion of it with a loan from you, so they can “enjoy life” with the freed-up cash
3) Rent it to me for cheap!

Maybe a key way they “enjoy life” is to avoid the tax man, have you ever thought about that?

good plan

Fwiw I watch resi real estate bc it's my largest single expense (though private school tuition is now almost tied), my largest single asset, and where I spend half my life. And when I travel the country, the local housing market is often a way to connect with people since I don't watch every baseball game or see every movie when it comes out. Lots of people that I interact with are up for a discussion of Sonoma vs Sedona or Bar Harbor vs Bal Harbor. For a while I worked in resi real estate (and sort of still do) so there's that too.

@nada - you identify the property and we may be able to implement that plan, which is quite genius, except I fear that any property you would be interested in renting would be beyond the capital the portfolio would yield.

With that said, given all the variables, I am still going to explore it because the plan you outlined is genius, except that I will say that I do think renters at your income level are not common in my experience, so I am not sure we'd be able to find a tenant.

@george - Please keep sharing your perspective on real estate (global, nowhere and local) flowing. Always interesting.

@george, makes sense. And you clearly enjoy it too.

@mcr, I think my “plan” has holes. Finding a renter may be difficult, won’t pay well, and in the end the sale price may not be great. But the general idea holds. Another way to structure it is as follows (but of course verify with an accountant). The next time there’s a piece of RE you & Mr. MCR would like to buy, do this instead. They buy it via 1031 exchange and rent it to you. You set the rent to whatever you agree upon (within reason), which goes to them to “enjoy life”. You are willed the place, so it eventually transfers to you with basis fully stepped up. You sell the place when you’re good & ready.

Full disclosure: I’ve thought about such optimal ways of handling estate with my own mom for fun, but have never bothered. For one, it’s all on the edges. For two, she’s not really inclined to think/act in these ways. You need to meet your parents where they are, not where you would be if you were them. So that’s why I made the suggestion: it might be closer to where they’re at.

https://nypost.com/2025/05/02/business/ex-new-yorkers-dish-on-why-they-moved-to-florida-for-good/

Interesting article, though obviously one sided. You can find just as many people who moved to Florida in search of a better life and left after several years for a variety of reasons (me included). I much prefer SoCal which has even better weather year round, albeit it’s more expensive place to live. Some of the comments in the article are ridiculous though:

“I can get on the phone with the Miami Beach mayor at any time, and so can any of my neighbors,” he added

Maybe if you’re a tech millionaire or exceptionally well connected, you can get on the phone with the mayor of Miami Beach any time, but I can assure you this statement does not apply to the vast majority. We had issues getting permits for some investment properties in Miami Beach. I had an incredibly hard time getting anyone from the city to take my calls. You call the city and go through and endless stream of menus and options before finally being asked to leave a message. Of course no one called me back. I’m 100% sure the Mayor himself would not have answered my calls. We had to hire a permit expeditor who had “connections” to get shit done. I’m pretty sure for 95% of the residents, you can get the Mayor of Miami Beach on the phone as easily as the average New Yorker can get Mayor Adams on the phone

Turbo,
What I find interesting is that the data only goes till 2022. Clealy an agenda article. FL property ownership cost for the same property if buying now is up almost 2x since pre-covid assuming same financing cost for simplicity. Rough numbers: 50% due to property prices increase and other 50% due to increased taxes and insurance (similar to property price increase). NYC is probably up 10-15% mostly due to taxes and insurance as the prices are flattish.

While NY and CA have lost residents since pre-covid primarily due to high cost of living including taxes, it seems like trend is back to pre-covid and may go below pre-covid to cost arbitrage reducing.

https://www.resiclubanalytics.com/p/net-domestic-migration-which-states-are-gaining-and-losing-americans

"Indeed, Florida saw net domestic migration of +64K in 2024, compared to +314K in 2022, while Texas saw net domestic migration of +85K in 2024, compared to +222K in 2022."

I still predict Florida and Texas and the like will continue to grow at the expense of NY, CA, NJ, MA, IL, etc…albeit at slower rates. Why? The aforementioned blue states have, frankly, bone-headed leadership at the top that think they can continue to increase taxes and the wealthy will stay. There is only so much people will take. High net individuals are much more mobile than the working class. While in terms of culture, Miami will never compare to NYC no matter what a NY post article says, everyone has a breaking point. Also, many of these red states are better governed. Florida is starting to get a handle on home insurance. Both Texas and Florida realize how big a failure many public schools are and are working to allow more charter schools. It will be interesting to see the population trends over the next 5-10 years. But yet, I yearn for SoCal despite how much I bash the state. I have a love-hate relationship with California. I love the weather. I hate everything else! I’m very fortunate I can swallow a high cost of living in exchange for 12 months a year of gorgeous weather for outdoor running

Turbo, I think Texas can grow as they have real job growth, a base of established large companies / industries, and innovation. There is "can do" in Texas DNA and FL is still more of retirement beach capital despite hurricanes. Obvioulsly both states need to spend more on education. They both do have good public universities but nothing compared to UC quality.

No doubt 911, I also love Southern California. Was lucky to live in Malibu for most of the winters in the 80's, Father in law had a little place there on the beach. You're a runner, I'm a surfer, certainly good for both of us. And Malibu was a much different place then, very interesting and eclectic community.

I chose Florida simply based on economics this time around, and then we wound up falling in love with the little beach communities in Northern Palm Beach county.

Keith, Which place would you pick today after factoring in price changes?

In my opinion, you can't really compare Malibu with any part of Florida. And initially when I saw your question I thought hands down it's Malibu. But I have to say I've really grown to love Florida, especially the little community that we live in. But if I put that emotional component aside, I think I would take Malibu, and let that become my base. That said, there's nowhere else in Southern California that I would pick, Malibu is a special place. Okay wait, maybe Santa Barbara or Ojai! As 911 loves too run, I really love to surf, and that keeps surfacing up when I think about the two places, I know that probably sounds silly to many of you.

Thanks Keith. Posting WSJ article on price changes in various parts.
https://www.wsj.com/economy/housing/home-prices-2025-charts-housing-market-391e10cf?mod=wknd_pos1