Is it a good time to invest in real estate? Good question. Is it a good time to invest in equities? How about in GE, Wells Fargo, the S&P 500? I don’t like pat answers to these questions and I don’t like seeing, for example, a real estate broker in Florida telling me it’s a great time to buy a home in Florida or a broker in the mountains telling me what a value residential lots in the mountains have become. If I could answer these questions with certainty then I’d probably be in Florida fishing. The truth is we don’t know, timing the market, any market, is nearly impossible. It’s really simple, when you need to invest you need to invest and there are many options each with its own risk profile. Is now a horrible time to invest in real estate? For some real estate asset classes it is a bad time yet for other property types it’s a fine time to invest. If, if you are able to achieve the desired risk and return objectives, which are unique to each investor. This takes careful analysis and consideration.
We recently looked at a failed townhome development. The project is in a dicey neighborhood. One-third of the units are complete, one-third are partially completed, and one-third have not been started. Is it a good time to acquire this asset? For the passive investor I would say definitely not. For the developer-investor who can deliver the balance of the units cost effectively and if he can buy the busted development at the right price then it may be an excellent time. The key lies in the risk-return relationship. The cost must be right in order to price the units at a level that they can be readily sold into a distressed market. Our current economic environment is no different than the boom environment we experienced in 2004, 2005, and 2006. Was it a good time to invest in real estate then? Most thought it was an excellent time. My point is this, whether its boom or bust if you have funds that need to be invested, invest them but spend the time to understand and analyze the risk-return relationship and work hard to mitigate the risk.
No comments:
Post a Comment