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Originally Posted by Ed O
I agree with you about it being only worth what someone will pay for it, but that goes to the assertion that there aren't many wealthy purchasers in the Portland area.
As for whether it's "pie in the sky": I have little notion of the Portland real estate market, but it doesn't seem to be a ridiculous price to me.
If they purchased the house for $875k in 1999 and invested $100k in restoring it each of the years 1999, 2000, 2001, 2002, 2003 and 2004, the average rate of return would have to be just over 9% to get to $2.35m... certainly better than inflation, but not ridiculous.
Just something to chew on. 
Ed O. |
There are lots of multi-million dollar house in Portland metro.
My proposition was 3 fold:
1) they overpaid initially - that affects the "correct" rate of return.
2) they over-invested in the rehab - that too affects the numbers.
3) they aren't in a "hot" neighborhood generally, and specifically that neighborhood isn't even on the radar of rich buyers. - in many markets there is a glass ceiling of price, past which it is extremely difficult to obtain a higher price, no matter how much money you sunk into "restoration". If you do the wrong thing to the wrong house in the wrong neighborhood, that puts a cap on you possible rate of return.
Like I said, current buyers don't give a hoot about their rate of return and weather it is good or bad.
Real Estate is Location, location, location.
That house is in an ok location. Not terrible, but not a primo spot in town. Now, change the parameter to location for multi-million dollar homes - and it goes for ok, to a bad location. Just a fact of life that most high-end home buyers want to cluster around other high-end homes. This is the current fashion in most of the U.S. Homes like that become hard sells. They have to find the rare buyer. In bad markets they are white elephants.