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Time To Invest?

With interest rates at all time lows and rents stable on Nantucket, could be a great time to buy. Let’s say you purchase a $2mm property that would gross $150k in rent. You put down $600k and get a $1.4mm, 30 year fixed loan at 2.9%, so your payment is ~$6k/mnth., ~$72/yr. Deduct other expenses of ~$68k, including commission, and you cash flow $10k. Assuming the Nantucket real estate market trends very similarly to the S&P 500 over the long run, knowing the S&P 500 has appreciated 4.5x over the last 30 years and assuming that trend will continue over the long run, the $2mm property will be worth $9mm in 30 years, so you gained $8.4mm in equity on your $600k investment, a 14x cash on cash return. And, that doesn’t take into account appreciation in rents (yes, expenses will go up, too, but your biggest one, mortgage payment, is fixed) or other benefits like depreciation and use of the property. This is very much simplified, but sounds compelling.

The market continues to crank.

Year over year comparison of YTD total volume:

’09 – $37mm *Lowest total yearly volume.
’10 – $81mm
’11 – $57mm
’12 – $73mm
’13 – $61mm
’14 – $144mm *$1bn+ year.
’15 – $137mm
’16 – $156mm
’17 – $124mm *$1bn+ year.
’18 – $197mm *$1bn+ year. Highest total yearly volume.
’19 – $119mm *$1bn+ year.
’20 – $164mm