This measure of value is no longer relevant. Short term rentals are the lucrative market segment now. Long term tenants provide stability, but much lower upside.
There are other factors at play.
Bonus depreciation rules from the tax cut and jobs act. Real estate investors can depreciate 100% of an investment within the first year until 2022.
Low interest rates. Borrow money cheaply now and secure cash flow later.
Interest only financing. Financing schemes that allow investors maximum leverage. More leverage means more buying.
All together the current market is tilted heavily toward real estate investors. Unless the tax law changes, I wouldn’t expect things to fundamentally change until 2025.
There are other factors at play.
Bonus depreciation rules from the tax cut and jobs act. Real estate investors can depreciate 100% of an investment within the first year until 2022.
Low interest rates. Borrow money cheaply now and secure cash flow later.
Interest only financing. Financing schemes that allow investors maximum leverage. More leverage means more buying.
All together the current market is tilted heavily toward real estate investors. Unless the tax law changes, I wouldn’t expect things to fundamentally change until 2025.