Investment Strategies for Real Estate Cycle Phases
Investment Strategies for Real Estate Cycle Phases

Investment Strategies for Real Estate Cycle Phases

4 months ago 0 1 229

Recently, I’ve taken an in-depth look at the real estate cycle and its phases. The first blog in this series defined the real estate cycle phases. The second blog described the unique aspects of the recent recession and recovery. And the latest blog described crosscurrents impacting the current recovery. In this blog, I offer investment strategies for the different phases of the real estate cycle. While I’ve said this before, it is worth repeating. Before making investment decisions, you must always consider: Your personal situation Your objectives Your risk tolerance Post Market Peak/Recession Strategy Stay out of the market. Fundamentals are declining, and although prices are starting to look cheap, you don’t know how bad it will get. Better to be a little too late than too early. Risk You miss out on some good buying opportunities. Early Recovery Strategy This is the best time to be a value-add buyer.

Read more

Altanta BeltLine Westside Trail

Atlanta BeltLine’s Westside Trail: Open for Business?

8 months ago 0 0 462

My partner and I recently looked at a property on the newly-opened Westside Trail of the Atlanta BeltLine. This got me thinking about one of blogs I wrote last year, “The Atlanta BeltLine: Will the Westside Trail Match the Eastside Trail’s Success?”. In that blog, I suggested the expectation that the Westside Trail’s success would equal the Eastside Trail’s success was unrealistic. With the Westside Trail now open for six months, it’s a good time to consider what’s happening in the area and whether it’s a good place to invest. Westside Trail: A Description On its website, the Atlanta BeltLine describes itself as “a transportation and redevelopment initiative.” The Westside Trail, a $43 million project, is the largest section of the BeltLine yet—it runs from University Avenue between Oakland City and West End MARTA rail stations up to Washington Park, near the Ashby MARTA rail station. The Atlanta BeltLine sees

Read more

Smart Real Estate Investing in 2018

10 months ago 0 0 505

It’s a new year, and we’re moving full steam ahead. It’s a great time to check in with current real estate trends and events shaping this year’s market and then decide how you will respond to them to meet your 2018 investment objectives. Current Real Estate Market Trends Money Chasing Deals: It will come as no surprise that demand for real estate still far exceeds supply. This results in peak prices, which equals lower yields, and makes it increasingly more difficult to “win” deals. Risk/Potential: With the market peaking, there is more downside risk and less upside potential. Hesitation: Current owners are hesitant to sell because opportunities to reinvest their money at acceptable returns just do not exist. Low Prices: Prices per square foot on existing properties seem low compared to replacement costs. Core Investment: Institutional investors now consider real estate a core investment, thus eliminating the need for a

Read more

Cap Rates: They Have Their Place

1 year ago 0 0 468

Here’s the scenario. You have money you want to invest, and you do not want to manage real estate, but you want an income stream. When considering your options, you find the following: U.S. Treasury bond—2.3 percent return with virtually no risk; Municipal bond—4.5 percent return (with some tax benefits), still with minimal risk; and McDonald’s ground lease—5 to 5.5 percent return, with a slightly higher risk and illiquidity. These examples demonstrate very low risk situations, but make a comparison between similar investment options. So, where do Cap Rates (short for capitalization rates) come in? Cap rates are the benchmark that enable investors to compare various investments. Here’s a straight forward definition: “A cap rate measures a property’s natural rate of return for a single year without taking into account debt on the asset, making it easy to compare the relative value of one property to another.” In most basic

Read more

The Pro Forma: Garbage In, Garbage Out

1 year ago 0 0 545

I clearly remember one speaker’s comments from a 1985 NAIOP conference. His claim was this: One of the worst things that ever happened to the real estate business was the personal computer. How Can This Be?  For those who can remember prior to 1980—before the personal computer and in the early days of the financial calculator—real estate pro formas were done by hand. Income-producing properties were evaluated based on current income, and development pro formas rarely went beyond three years. With the onset of high inflation in the early 80s, pro formas showing annual increases in income became common to achieve high future evaluations, so real estate could compete with high bond rates. Even then you had to get the numbers (rents, expenses, cap ex, etc.) right on the first try because changing them after the initial projection was cumbersome and time-consuming. Enter the Financial Calculator and the Personal Computer. With

Read more

Development: Unpredictability in the Process

1 year ago 0 0 426

Development: Unpredictability in the Process My last blog, “The Importance of Timing on Real Estate Investment,” focused on the unpredictability in investment, on what can happen over time once you own a property. In development, there is the added unpredictability during the process. For a broker selling a property or an investor buying a property, the complete process can be done in 90 days or less. But that is not the same with development, not even close. Process Derailment Developers have many considerations—they need time for inspections, site tests, neighborhood forums, entitlement or zoning processes, permitting, and soil boring tests, to name a few. While some of these can be controlled, others cannot. For example, everything could be moving forward smoothly and one ruffled neighborhood group at a zoning hearing or one difficult inspector could stop the project dead or at least create a significant delay, with the developer having

Read more

The Importance of Timing on Real Estate Investment

1 year ago 0 0 513

A dollar today is worth more than a dollar tomorrow. So, the farther into the future one expects income or a sale to occur, the less it is worth in today’s dollars. In my opinion, investors don’t contemplate this factor enough when considering a real estate investment. Factors that are commonly considered for real estate investments include location, market, available financing and current cash flow. But when you invest and how long you plan to hold can strongly impact how well you do. The Effect of Timing + Buying Let’s look at some examples: Those who bought properties at the market peak in 2006-2008 with 3- and 5-year loans know the pain of debt maturing in a down market. While it is always prudent to buy in a down market, it is possible to buy too early. This could result in debt maturing before the market recovers or in anticipated

Read more

Top Takeaways from GSU’s Views From the Top 2017

1 year ago 0 0 1081

Each year, I start the new year with an economic conference hosted by Georgia State University’s Department of Real Estate, and it rarely disappoints. This year was no different. Views From the Top 2017: “Connectivity & Atlanta’s Urban Transformation” delivered insightful viewpoints on a variety of economic topics. First up was Sun Trust Economist KC Conway. Here were his top comments: Real estate sector predictions: Housing and Industrial are real estate’s strongest sectors, with commercial storage and manufactured housing yielding the best returns. Retail is regressing, and Hotel is overbuilt with declining values. Cost for new or renovated Office space is extremely high. Atlanta + Southeast predictions: The Southeast region, including Atlanta, will outperform the nation in 2017. Atlanta will continue to be plagued by traffic This is a “Must Solve” problem. Millennials will move elsewhere if not resolved, resulting in stymied growth. General insights: Capital for commercial real estate

Read more

2017: A Mature Market

1 year ago 0 0 1105

Entering 2017, the investment community finds itself in a Mature Market. Gone are the days of distressed sellers, foreclosures and properties which could be purchased at steep discounts. Today, properties are cash-flowing, occupancies are high and rents have recovered to peak levels. Combined with cheap debt and investors flush with yield-driven capital, the result is fewer opportunities coupled with property values at pre-recession levels (or, in some instances, even higher). So, what happens when investment opportunities diminish and the market tightens?  Development becomes an increasingly attractive option for value-added investing. Historically, seven years into a recovery, speculative development has already begun, but that has not been the case. This cycle is unique for several reasons: The depth of the recession The impact of  new regulations on financial institutions The headwinds to demand created by online retailing and office-sharing concepts To be sure, infill, mixed-use urban retail concepts; mega, mixed-use projects

Read more

When Will Rising Interest Rates Impact Investment Decisions?

1 year ago 0 0 933

Here’s my response to the recent Globe St. article, “When Will Rising Interest Rates Impact Investment Decisions?” based on an interview with Real Capital Markets’ COO Tina Lichens. Interest rates are still low by historical standards. With so much capital continuing to search for opportunities, I see little impact on investment decisions for the short term. I do agree that good opportunities will outweigh a higher cost for debt in the long run. That being said, rising rates will have a greater impact on the small private investor (syndicator) who is organizing his capital for every deal and is more return-sensitive.

Seo wordpress plugin by www.seowizard.org.
/*-----------------------------------------------------------------------------------*/ /* Bouncepath 2016 Analytics /*-----------------------------------------------------------------------------------*/