This week I will be writing about 3 asset classes: real estate, gold, and bonds. I’ll write general public posts and then have e-books ready within weeks with some more information. Today I’m going to talk about real estate in the United States.
To do well in real estate you don’t need a degree in economics or anything like that. What you do need is a good dose of common sense and the moxie to go with your gut instinct.
Bearish sentiment in real estate is unfounded in my opinion, especially in distressed markets. The naysayers claim that although rental yields suggest opportunity, there is way too much inventory for projections to be valid. Well the truth is ROI projections are legitimate; believe me, there is demand for rentals because although people lost their homes and have horrible credit, they still need a place to live. I am really not exaggerating when I say this is one of the best investment opportunities you’ll see in a generation.
What I like to call the “small time big-time investors” are getting active. These are people not on any Forbes list who have acquired a large amount of wealth by playing it smart with a good dose of common sense. I know for a fact that many of these investors are getting active in the distressed markets, which is why the distressed markets are starting to appreciate while real estate throughout the country falls. NYC was down almost 10% on an annualized basis in January while Phoenix and parts of Florida are starting to appreciate. This is what I expected to occur starting in 2012, and it is all going according to script.
The natural tendency of people is to stay away from the most distressed areas. But the best strategy is to jump into the fray and take “risks” others aren’t willing to take. If you can acquire a loan and be leveraged at 5% for 30 years, many homes in Vegas are returning about 50% cash on cash. That’s not a typo. And this is before appreciation, which is just icing on the cake. In my opinion, the bottom is in and appreciation should start this year.
There’s much more to real estate than general domestic economic conditions. There are currency considerations. There are demographic considerations. There are interest rate considerations. And there are foreign investor considerations. I’ll talk about all of these variables in depth in the coming e-book, and to an extent in my newsletter. If you understand the converging trends, it is a very simple thesis. The complexity lies in making the connections.Follow