Tag: investment

Apartment Buildings are the classic Value Investment

With today’s stock and bond markets overrun by insiders and the volume of options, futures and other derivatives dwarfing actual investment in good companies while driving wild swings in their prices what is a traditional value investor to do? What about the accounting trickery that happens when CEOs raid their own companies for the short term results their huge bonuses are based on? Should you shrug your shoulders and be patient, very patient hoping eventually value will be recognized? What kind of income will you live on while you are being so patient? With interest rates so low and the Fed trapped into keeping them that way how can you earn decent current income without taking unreasonable or unknowable risks?

There is an alternative for conservative value investors: Apartment buildings.

  • What if you could find good value stocks in a market where the price was dictated by the financial results, not market ‘sentiment’, momentum traders, short sellers, high frequency trading programs or what a butterfly did in Shanghai?
  • What if you could find good value stocks in a market where the cycles were observable and understandable?
  • What if your favorite value stocks paid annual cash dividends of 7, 8, 9% or higher while at the same time increasing their equity like clockwork?
  • What if you could walk into the boardroom of your favorite value stock and dictate that they improve their performance? What if you could fire boardmembers who didn’t perform?
  • What if you could buy a second stock with funds from your first stock without having to sell it or pay taxes on the capital gain?
  • Plus Inflation Protection: What if the dividend went up when inflation did? Continue reading Apartment Buildings are the classic Value Investment

The Apartment Building Investment Triple Opportunity Is Right Now

For value investors, Demand, Supply and the Cost of Acquisition are the three factors affecting the apartment building investment decision and all are saying the time to buy is now.  There is a tidal wave of new renters coming into the market and there has been little apartment construction to meet this growing demand. Outside of the gateway cities the prices of existing apartment buildings remain below the cost of building new.  Fixed rate financing is available for apartment buildings at rates lower than we will see again for years if not decades.

“The multifamily sector is probably the only commercial real estate sector that has very positive fundamentals behind it,” said Jeffrey Baker, managing director at Savills LLC, a real estate investment bank that raises capital for multifamily owners and developers. “You’ve got a demographic that is producing more households that want to rent an apartment. You’ve got virtually no new supply that’s been added over the last several years.”1 Continue reading The Apartment Building Investment Triple Opportunity Is Right Now

What to do about the economy.

In a comment to my FB post about the video on QE2 Sean DeButts asked what my solution would be for the economy. It’s an important question that deserves a detailed response.

Jobs are the number one thing we need to get the economy moving and jobs require capital and the willingness to put that money to work. Now …there is plenty of money around, billions and billions sitting on the balance sheets of banks and companies but it is not being put to work. Why not? Let’s look at companies first.

Companies will only invest if they think they can get a return on that investment and are confident that the rules won’t change before they can earn that return. Right now everyone knows that the deficits the US is running will lead to collapse if something doesn’t change but until what those changes will be is decided companies (and individuals) are worried that they might be singled out to pay for those deficits. That’s why I believe the National Commission on Fiscal Responsibility and Reform’s deficit reduction plan must be put into law by Congress and signed by the President. See: http://bit.ly/h1tILt for the Charley Rose interview with the co-chairs of the Commission. Continue reading What to do about the economy.

It’s painful, it’s ugly, it’s what a real estate bottom feels like.

Does the market feel like you are in the opening sequence from Terminator II?  Are you fighting amidst the wreckage of the previous boom? Surrounded by foreclosures, scarce money, economic gloom and doom? Real estate going into nuclear winter? That’s what market bottoms feel like and as investors we need to get comfortable with that feeling because this is our time to make solid, reasoned investments that produce good results on improving fundamentals. Conditions like this create the opportunities for savvy investors who were patient through the bubble and have waited for the speculative, greater fool market to come to its inevitable end.

Many great real estate investors got their start in rough times like Sam Zell of Equity Residential for instance. He started out buying properties from distressed owners in the late sixties. Tom Barrack of Colony Capital waded through the carnage of the S&L meltdown to buy properties at a discount. Barry Sternlicht of Starwood Capital also started in the wake of the S&L crisis buying multifamily properties. What will your story be?  It’s time get to work and seize the opportunities. Put on your hardhat though because it’s about to start raining real estate, and while not every distressed property is worth pursuing  if you stick to your niche and learn your market good deals will surface. Continue reading It’s painful, it’s ugly, it’s what a real estate bottom feels like.