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Real Estate? Really.

May 5, 2009

The past year has played out like a bad movie. I knew it was going to suck from the opening credits and neither the actors nor the location shots nor the soundtrack failed to underwhelm me. In my nearly 30 years in real estate, I have never experienced anything so devastating for so many.  I used to do what’s called middle market commercial mortgage lending for major banks. Basically, lending money to small businesses secured by mortgages on their commercial properties. Good business. Solid business. The stuff that made the economy strong instead of lining the pockets of the greedy with quick profits and placing the economic stability of the nation in the line of fire. Starting in the fall of 2007 and early 2008 I noticed the loan volume I was handling start to shrink. Something was changing, but I couldn’t tell what or why or whether it was a hiccup or the economy choking. Turns out it was the latter.

Today, unemployment is skyrocketing. Small businesses are failing. Tenants are behind on their rent or worse. Real estate taxes are rising (aren’t they always?) but Landlords can’t cover with rental increases or they drive their own tenants out. Homeowners are defaulting on their mortgages and the homes they own are worth less than the money they owe on them. Are there opportunities for savvy investors? Sure, but they need to have cash on hand or a bank willing to extend credit to them on terms that make sense and aren’t changing every 5 minutes. In short, the market has handcuffed itself and it’s going to take some very positive thinking and concerted effort to turn it loose so recovery can begin.

There are many areas across the country which have seen real estate values fall from 20% to 30% since 2007. Even metropolitan New York hasn’t been immune. Often, the properties affected are not distressed (or “challenging,” as they say). Rather, selling prices in good neighborhoods have slipped simply because buyer’s and financing have evaporated. In this type of market wise investment possibilities abound. I’ve counseled everyone I know that this is the best real estate environment they are ever likely to see and that they should drive around with their eyes open because real value opportunities are everywhere. I recite the mantra a very wise client once told me, “The place that you make money in real estate is when you buy it.” I’m convinced he had that right, but folks are just plain scared right now.

So here’s my pitch for today: If you have cash on hand (or know someone who has) and at least a passing interest in investing in something that can’t blow up like a derivative portfolio, consider acquiring some good quality real estate. Do it in your own hometown. Get some friends together and create your own private real estate holding company. The advantages are that you will be investing in something real, something that has intrinsic value. You will be giving your local economy a boost in the arm. You will be setting yourself up with what will be the closest thing to an assured growth investment that exists and you’ll be a part of the recovery that our economy so badly needs. This won’t make you rich quick, it isn’t like the infomercial you see on late-night cable, but neither will a savings account or money in the freezer. Like my client says, “I’ll always buy a good value in real estate … they aren’t making it any more.”

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2 Comments leave one →
  1. Sasha Eisele permalink
    May 7, 2009 3:09 pm

    That’s my dad. And I happen to agree with him. If anyone is looking for incredible opportunity check out Berlin, NH. Think Portsmouth NH, Portland ME, Newberry Port MA before they were revitalized.

    FYI: A real estate holding company bought a former school and three adjacent properties to convert into an assisted living facility for $16,000 last week.

  2. May 7, 2009 1:12 pm

    Did you know that The Seed, nursery school in Yorktown Heights has a special room in honor of Friends of Karen?

    It is timely to start supporting some local charities…organizations that need help for food, shelter and even some of the smaller animal shelters as well. I can easily give up a $25. lunch for this cause as well as donating some quality time.

    You are starting to touch some important places in each of our hearts and heads C… rock on!!

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