In Times of Turmoil.... (PART III)

                                                                    Courtesy of  Mel Evans/AP

Welcome to PART III of this post in which I will cover a little about Real Estate Investments, which by the way is one of my areas of expertise and I make a steady and good living out of it. Let’s first separate an investor from a speculator by saying that our current financial crisis and real estate collapse was caused mainly by speculators with a big helping hand from our financial institutions that started offering quick and easy approvals for mortgages. We basically had for a while a rule that said “If you are able to breathe you’re approved for a mortgage”; I remember at one point in time seeing a product offered by a lender that was a 106% LTV (Loan to Value) NINA (No Income No Assets), which was totally ridiculous and suicidal...but let’s not get into it now and rather focus on what the core of this PART III is - Real Estate Investments- 

So, Speculators are those that are in for the quick buck versus Investors which are those who really analyze and study any particular opportunity, and by drawing numbers are able to make a sound decision on wether any particular investment will yield the return they are seeking or not, (perfect example of financial education versus lack of it)-

I cater mostly to investors that know what they’re doing, since I need to enjoy what I do for a living (otherwise I wouldn’t be doing it), it is crucial that they either know what they want with a solid argument about their needs and wants or that they let me guide them wisely towards what suits their needs and wants.

There is no such thing as good or bad when it comes to chose which type of real estate investment one person needs to buy, actually I think they are all good BUT, and there’s always a BUT, I have the opinion that it goes with the times. For instance, I strongly believe that at this time Shopping Centers and Strip Malls are not such a good investment because risk is too high, retailers are filing for bankruptcy left and right and the risk of having a 

50,000 Sq.Ft. plaza with no tenants is too greater of a risk; unemployment rate is still very high at 8.5%, even though it showed lower for the month of December of 2011 as shown on the January 2012 report, but remember that those numbers are affected by a lot of factors that I will not discuss in this post, nevertheless they are not accurate, bottom line is that unemployed folks do not have extra cash to buy an extra pair of sneakers therefore the footlocker store in that shopping plaza is at risk of filing for chapter 11 and eventually vacate that spot along with the ladies shoe store, the clothing and accessories boutique, the gym and the hair stylist, for now NO SHOPPING CENTERS- Another type of investment that I get asked a lot for is Multifamily apartment buildings 

Courtesy of Peter Conti & Jerry Norton

 I gotta tell you that I have mixed feelings about it, they do yield a 9% or 10% + which I like, but you have to deal with too many eggs in one single basket and any of those could brake at any given time therefore greatly diminishing that high CAP rate, so at this time I try not to sell any of those even though many people have done so which I think it obeys to the necessity of doing something quick with the cash at hand as we discussed in  PART I and II- (Poorly taken decisions obeying to a lack of financial education)- 

I can go on and on over all the types of investments out there but I am not going to do that, I rather tell you what at this point in time I really like as a safe investment and that is NNN single tenant buildings and GSA tenants-

The former are Walgreens, CVS, Fedex, AT&T , etc

and the latter are buildings where the tenant is the U.S. Government as in IRS, FBI, Social Security Administration, etc. 

On PART IV of this post I will be discussing more in depth these two and show you comparative examples to demonstrate why these are at this time the best way (aside from metal) of having your cash safely invested.

Cheers !