Coming out of a journalism background (a million or so years ago), one of the things that drives me nuts is when business writers don't know what they are talking about.
OR, better put, when some low-level intern or general assigment reporter is told to put together a quick, bullet-itemed list of things you can do with an investment vehicle. Like, say . . . a 401(k).
But unsuspecting readers, who are doing their due-diligence (we hope), and trusting in websites that purport to be accurate are led astray. For example, here is a site on CNN (well respected as a business news vehicle, particularly when it partners with Money magazine) talking about 401(k)'s, with a notation that investors need to make sure they have the right mix of stocks and bonds.
But nary a mention of investment real estate. Could it be that so many of these writers, bombarded daily with news about the slumping real estate market think that the only thing out there is houses? Or are they lazy?
Cash on Cash readers know that investment real estate is a perfectly legitimate vehicle to place in this investment tool. Hmmm . . . MSNBC seems to understand this.
Just one of those things that bugs me.
Tuesday, November 18, 2008
Trending
Some trends for you to chew on and some thoughts:
Pricing and activity regarding multifamily investments is stable and trending slightly up, according to Real Capital Analytics Inc. This is being driven by attractive financing still available through Fannie Mae and Freddie Mac. In addition, building starts for multifamily are down across the U.S.
My observation -- New construction being way down (a more than 50 percent decrease in new starts, according to Reed Construction Data), combined with home foreclosures that have residents looking for alternative housing is pushing occupancy up -- good news for owners.
Warehouse and industrial properties are having a tough time right now, due to declining employment and an insecure economy, according to PPR. A lot of new warehouse space has come online in the past several months, into vacancy rates that are some 20 percent higher than expected.
My observation -- Don't look for improvements until late into 2009 and more likely in 2010. Developers will curtail new development for 18 months or so, and vacancy rates will improve toward the end of that time frame.
Liquidity issues are also preventing some developers from getting started on new projects they had in the pipeline. PPR's outlook suggests that this lack of new supply across the board (office, multifamily, industrial/warehouse) is a good indicator. The flip side would be oversupply in a down cycle, and as a friend of mine in the business likes to say, "that would be a bad thing."
The bottom line? There are still opportunities out there but you have to search them out. Plus, get the funding issue settled early on rather than waiting until a contract is in place.
My two cents . . .
Pricing and activity regarding multifamily investments is stable and trending slightly up, according to Real Capital Analytics Inc. This is being driven by attractive financing still available through Fannie Mae and Freddie Mac. In addition, building starts for multifamily are down across the U.S.
My observation -- New construction being way down (a more than 50 percent decrease in new starts, according to Reed Construction Data), combined with home foreclosures that have residents looking for alternative housing is pushing occupancy up -- good news for owners.
Warehouse and industrial properties are having a tough time right now, due to declining employment and an insecure economy, according to PPR. A lot of new warehouse space has come online in the past several months, into vacancy rates that are some 20 percent higher than expected.
My observation -- Don't look for improvements until late into 2009 and more likely in 2010. Developers will curtail new development for 18 months or so, and vacancy rates will improve toward the end of that time frame.
Liquidity issues are also preventing some developers from getting started on new projects they had in the pipeline. PPR's outlook suggests that this lack of new supply across the board (office, multifamily, industrial/warehouse) is a good indicator. The flip side would be oversupply in a down cycle, and as a friend of mine in the business likes to say, "that would be a bad thing."
The bottom line? There are still opportunities out there but you have to search them out. Plus, get the funding issue settled early on rather than waiting until a contract is in place.
My two cents . . .
Thursday, November 6, 2008
Now More Than Ever Utilize An Expert To Go To War For YOU
I don't often toot my own horn and say "hire me," or "you MUST hire a real estate agent" in these pages. Though I will admit I have urged readers to get qualified counsel (your neighbor or favorite uncle who sells real estate part time really doesn't count).
Today I am going to deviate from that general policy. I want to discuss the importance of partnering with a real estate agent who understands commercial/investment opportunities. It has been said that there are no problem properties, just problem ownerships. This is a fairly true statement. When a property isn't working out for the owner, chances are they bought it wrong (at the wrong price, for the wrong terms, etc.) or are managing it poorly. Those two bugaboos probably add up to more reasons than not why an investment does not work for its owner.
Some 15, 20 and 30 years ago, there were people who bailed out of the stock market and invested everything they had into real estate. Those who bought right, did well. Those who thought they knew it all, and did it on their own, did not, on average fare as well. And therein lies the rub -- with today's technology providing exponential increases in access to data, a lot of potential investors want to do it on their own. "I don't need a real estate agent," they say, believing that they can somehow save the money they would be paying an agent to represent them on the buy side.
Well here's a little secret . . . nine times out of 10, on the buy side, you pay no real estate commission. It comes out of the seller's side, funds that already have been allocated to pay commissions to get a property sold.
We are in that same climate today. People, smartly, are working to move money from other investment vehicles into commercial real estate.
But let's put that aside for a moment. Adversity most often creates opportunity. People and companies sell for any number of reasons -- death in the family, retirement, just cashing out, moving up to better properties, have used up depreciation and want a new property where cash recovery will start over, planned 1031 exchange, etc.
Buying "right" is the key. Moving out of stocks or moving under performing IRA or 401(k) money into real estate is likely a smart move at this time. But thinking that because Bill Gates or Google put lots of electronic gizmos at your fingertips and that you can go it alone . . . well, you can. But remember what I said about the folks from 20 and 30 years ago? Same potential for disaster. Only it might be worse because of a false sense of security that all the software tools available make it idiot proof to buy an investment property. There are far more pitfalls than you can imagine.
Here's one way to look at this discussion. I have told many people that I think Quicken is an incredible tool for accounting. But does using Quicken make me an accountant? No. So why would I try to do accounting on my own? Too many risks, for one.
So why do so many people feel they are at risk in the stock market, but then take the risk of buying "wrong" by pretending they have all the skills of a seasoned real estate agent? Not all, but many real estate agents will represent themselves in transactions, and that is because they understand the nuance, the negotiation, and the marketplace. Smart residential agents use experienced commercial agents to handle the former's investment purchases and sales.
But for regular folks, the potential for harm is astronomical. There are horror stories by the thousands of many who invested in far-off exotic locales, like Florida, because a neighbor did it. Did it themselves, they add. And now they are hurting. They are among the many who bought in because they didn't know what was happening with the market, bought in too high, and now are waiting for their bailout (don't get me started on that) if they happened to buy a house to use as a rental. Not all will be bailed out.
Bottom line. Find an agent who understands investment properties. Not sure how to start? Contact me and I will refer you to someone. My expertise is in Ohio. Not elsewhere, and I would not pretend to try to represent clients in other parts of the nation, but I am hooked into a network of smart, reliable people who can get the job done.
There are investment opportunities everywhere. Your comfort level is a key factor, but then there is always professional management who can take on a project and send you mailbox money once a quarter so you never have to worry about your investment. If you are looking at the millions of single family homes available as potential investment opportunities, the INCREDIBLE period of opportunity for investment at a rock-bottom price may only last another year.
Regardless of whether you are looking at an office building, a multifamily complex, or even a duplex or a couple of houses for rentals, I urge you not to blow it by trying to take on the task of buying an investment property on your own.
Please, please PLEASE do yourself a favor . . . Get someone who knows what they are doing to go to war on your behalf.
Today I am going to deviate from that general policy. I want to discuss the importance of partnering with a real estate agent who understands commercial/investment opportunities. It has been said that there are no problem properties, just problem ownerships. This is a fairly true statement. When a property isn't working out for the owner, chances are they bought it wrong (at the wrong price, for the wrong terms, etc.) or are managing it poorly. Those two bugaboos probably add up to more reasons than not why an investment does not work for its owner.
Some 15, 20 and 30 years ago, there were people who bailed out of the stock market and invested everything they had into real estate. Those who bought right, did well. Those who thought they knew it all, and did it on their own, did not, on average fare as well. And therein lies the rub -- with today's technology providing exponential increases in access to data, a lot of potential investors want to do it on their own. "I don't need a real estate agent," they say, believing that they can somehow save the money they would be paying an agent to represent them on the buy side.
Well here's a little secret . . . nine times out of 10, on the buy side, you pay no real estate commission. It comes out of the seller's side, funds that already have been allocated to pay commissions to get a property sold.
We are in that same climate today. People, smartly, are working to move money from other investment vehicles into commercial real estate.
But let's put that aside for a moment. Adversity most often creates opportunity. People and companies sell for any number of reasons -- death in the family, retirement, just cashing out, moving up to better properties, have used up depreciation and want a new property where cash recovery will start over, planned 1031 exchange, etc.
Buying "right" is the key. Moving out of stocks or moving under performing IRA or 401(k) money into real estate is likely a smart move at this time. But thinking that because Bill Gates or Google put lots of electronic gizmos at your fingertips and that you can go it alone . . . well, you can. But remember what I said about the folks from 20 and 30 years ago? Same potential for disaster. Only it might be worse because of a false sense of security that all the software tools available make it idiot proof to buy an investment property. There are far more pitfalls than you can imagine.
Here's one way to look at this discussion. I have told many people that I think Quicken is an incredible tool for accounting. But does using Quicken make me an accountant? No. So why would I try to do accounting on my own? Too many risks, for one.
So why do so many people feel they are at risk in the stock market, but then take the risk of buying "wrong" by pretending they have all the skills of a seasoned real estate agent? Not all, but many real estate agents will represent themselves in transactions, and that is because they understand the nuance, the negotiation, and the marketplace. Smart residential agents use experienced commercial agents to handle the former's investment purchases and sales.
But for regular folks, the potential for harm is astronomical. There are horror stories by the thousands of many who invested in far-off exotic locales, like Florida, because a neighbor did it. Did it themselves, they add. And now they are hurting. They are among the many who bought in because they didn't know what was happening with the market, bought in too high, and now are waiting for their bailout (don't get me started on that) if they happened to buy a house to use as a rental. Not all will be bailed out.
Bottom line. Find an agent who understands investment properties. Not sure how to start? Contact me and I will refer you to someone. My expertise is in Ohio. Not elsewhere, and I would not pretend to try to represent clients in other parts of the nation, but I am hooked into a network of smart, reliable people who can get the job done.
There are investment opportunities everywhere. Your comfort level is a key factor, but then there is always professional management who can take on a project and send you mailbox money once a quarter so you never have to worry about your investment. If you are looking at the millions of single family homes available as potential investment opportunities, the INCREDIBLE period of opportunity for investment at a rock-bottom price may only last another year.
Regardless of whether you are looking at an office building, a multifamily complex, or even a duplex or a couple of houses for rentals, I urge you not to blow it by trying to take on the task of buying an investment property on your own.
Please, please PLEASE do yourself a favor . . . Get someone who knows what they are doing to go to war on your behalf.
Saturday, November 1, 2008
Note Brokerage Expanding
An outgrowth of the commercial/investment real estate industry is the boom in note brokers, specifically those who find willing buyers and sellers of real estate notes.
I can't tell you how many times in putting together a deal that the seller has been asked whether they would, if the property buyer is financially strong enough, consider providing a second mortgage to help make the deal happen. The initial response is, "no." But they don't realize that note has value, and can be sold down the line to another investor who wants income.
The most fundamental job of the real estate note broker is to introduce the seller and buyer to each other. But not always. Often, a commercial real estate agent knows of investors who want to sell a note. In most cases, note brokers charge an introduction fee. One of the greatest advantages of real estate note brokers is that they provide and process all the paperwork required for a smooth transaction. In addition, real estate note brokers charge a small fee for doing the paperwork for you.
So for both investors and property sellers who have been waffling about whether to carry a second mortgage to make a deal happen, consider that there is a vibrant and healthy industry putting together buyers and sellers of notes.
I can't tell you how many times in putting together a deal that the seller has been asked whether they would, if the property buyer is financially strong enough, consider providing a second mortgage to help make the deal happen. The initial response is, "no." But they don't realize that note has value, and can be sold down the line to another investor who wants income.
The most fundamental job of the real estate note broker is to introduce the seller and buyer to each other. But not always. Often, a commercial real estate agent knows of investors who want to sell a note. In most cases, note brokers charge an introduction fee. One of the greatest advantages of real estate note brokers is that they provide and process all the paperwork required for a smooth transaction. In addition, real estate note brokers charge a small fee for doing the paperwork for you.
So for both investors and property sellers who have been waffling about whether to carry a second mortgage to make a deal happen, consider that there is a vibrant and healthy industry putting together buyers and sellers of notes.
Wednesday, October 8, 2008
The Financial Mess
Today, the world's banks -- in an unprecedented emergency global move -- lowered interest rates by 1/2 percent.
Markets are still jittery, and only time will tell if this effort helps ease uncertainty and fear.
In the meantime, Opinio Juris has a stellar analysis of the global financial problem. What started as an American problem is now worldwide. It is a no-holes-barred look at how it started, where it is going, and what may be around the corner.
A must read.
DON'T PANIC!
Markets are still jittery, and only time will tell if this effort helps ease uncertainty and fear.
In the meantime, Opinio Juris has a stellar analysis of the global financial problem. What started as an American problem is now worldwide. It is a no-holes-barred look at how it started, where it is going, and what may be around the corner.
A must read.
DON'T PANIC!
Tuesday, October 7, 2008
Retirement Stocks Down $2 Trillion
News outlets are reporting that retirement assets -- at least those invested in the stock and commodity markets -- are down some $2 trillion during the past 15 months.
And guess what, some guy will be sitting across the table from people thinking about retirement down the road and telling them . . . "buy stocks, they do great!" He will call himself an investment adviser, but in reality he will be a stockbroker. With only one investment to peddle.
Have you ever heard the term "sheeple?"
I will say it just one more time. Commercial/investment real estate makes money, it makes money reliably. And there has never been a better time to jump in. The people who are getting out are those who are trading up, or who are so over-leveraged in the stock market they need to raise cash fast. And are liquidating their real estate. In hindsight, I would be if you asked every one of them where they would rather be -- real estate or stocks -- they will say real estate every time.
Sigh . . .
And guess what, some guy will be sitting across the table from people thinking about retirement down the road and telling them . . . "buy stocks, they do great!" He will call himself an investment adviser, but in reality he will be a stockbroker. With only one investment to peddle.
Have you ever heard the term "sheeple?"
I will say it just one more time. Commercial/investment real estate makes money, it makes money reliably. And there has never been a better time to jump in. The people who are getting out are those who are trading up, or who are so over-leveraged in the stock market they need to raise cash fast. And are liquidating their real estate. In hindsight, I would be if you asked every one of them where they would rather be -- real estate or stocks -- they will say real estate every time.
Sigh . . .
Monday, October 6, 2008
Don't Panic...Markets Are Correcting
Don't panic!
The markets are cyclical. The bailout that passed the U.S. Congress, in my opinion, probably wasn't necessary from a fiscal standpoint (it was necessary from a public relations/feel-good standpoint for the world markets). But its done.
There is a lot of wealth being lost in the markets, sadly, but someone is buying stocks up. Warren Buffet bought a ton of General Electric stock. He hasn't been on a buying binge for a few years, but he buys when things are undervalued. Buy more if you can.
But if you want something more steady, something more reliable, seriously consider looking at investment real etate. There are a lot of great office, multifamily that make financial sense. A strong real estate agent who understands commercial/investment properties can show you on paper how they will benefit an investor each year, both in terms of income, as well as tax advantages. Single family homes as an investment can also work if you have an agent who understands "investment" properties -- not just understands "rental houses." There is far more to it than that...
But most of all. With the turmoil in the market, it is a time to be concerned. But don't panic. The credit markets, at least in the United States, were not allowed to police themselves. I wrote about this weeks ago, knowing it was politically incorrect, but lenders were forced to make loans they knew were dangerous. Risky. The PC term is "sub-prime." Then greed took over, and some lenders (some, not all) realized they could get away with fiscal murder and no one cared or would do anything about it. And they cleaned up. And the house of cards is now collapsing, and the problem that some in Congress and in this industry (myself in the latter category) have been warning for years would occur...did.
Markets were not allowed to correct themselves out of political considerations. It is correcting now.
The markets are cyclical. The bailout that passed the U.S. Congress, in my opinion, probably wasn't necessary from a fiscal standpoint (it was necessary from a public relations/feel-good standpoint for the world markets). But its done.
There is a lot of wealth being lost in the markets, sadly, but someone is buying stocks up. Warren Buffet bought a ton of General Electric stock. He hasn't been on a buying binge for a few years, but he buys when things are undervalued. Buy more if you can.
But if you want something more steady, something more reliable, seriously consider looking at investment real etate. There are a lot of great office, multifamily that make financial sense. A strong real estate agent who understands commercial/investment properties can show you on paper how they will benefit an investor each year, both in terms of income, as well as tax advantages. Single family homes as an investment can also work if you have an agent who understands "investment" properties -- not just understands "rental houses." There is far more to it than that...
But most of all. With the turmoil in the market, it is a time to be concerned. But don't panic. The credit markets, at least in the United States, were not allowed to police themselves. I wrote about this weeks ago, knowing it was politically incorrect, but lenders were forced to make loans they knew were dangerous. Risky. The PC term is "sub-prime." Then greed took over, and some lenders (some, not all) realized they could get away with fiscal murder and no one cared or would do anything about it. And they cleaned up. And the house of cards is now collapsing, and the problem that some in Congress and in this industry (myself in the latter category) have been warning for years would occur...did.
Markets were not allowed to correct themselves out of political considerations. It is correcting now.
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