The Right Spot in the Lineup

By Stan Sonenshine in Real Estate Investing

9 years ago

9 years ago 0 0 3065

An investment portfolio is a little like a baseball lineup. Smart managers know where to place batters with different skills in the right spot in the batting order. Similarly, when a portfolio is properly constructed, each investment plays a different role and they all work together to maximize team performance. Cash and government bonds are the “contact hitters” of a portfolio. They may not have a lot of flair, but they rarely strike out and will consistently do the little things to help the team, like legging out an infield single—or delivering a safe, moderate return. You want them near the top of your order. Stocks and mutual funds tend to “hit for average.” At any given moment, they may perform great or they may disappoint. But over the long haul, they consistently deliver opportunities to score. And then there are the “power hitters” of the lineup, the ones that

Borrowing to Invest in Real Estate? Lend Your Ears First

By Stan Sonenshine in Real Estate Investing

9 years ago

9 years ago 0 0 3283

According to an April report from industry giant CBRE, global investors poured $835 billion into real estate in 2014, and they show no sign of slowing down any time soon. What relevance do global trends like this have on individual private investors? The answer is that, when so much money is chasing a single asset class, prices inevitably rise, making competition for assets fierce and the pressure to generate strong returns that much more intense. This usually results in aggressive borrowing. In market conditions like this, debt financing can be a powerful tool to for investors, especially when interest rates—the cost of debt—are historically low. As any homeowner knows, borrowing increases purchasing power. It can also limit the number of partners needed for a deal, keeping things nimbler. And, as long as the rate of return is higher than the interest rate on the debt, it gives investors a greater

On Doctors, Lawyers and Real Estate Consultants: Why You Need an Expert

By Stan Sonenshine in Real Estate Investing

9 years ago

9 years ago 0 0 2893

If you are an attorney or a physician, or if you have friends in these professions, you are probably acutely aware that they spend a lot of time doing things that are not quite so glamorous as a weeknight television drama would suggest. For every “Matlock moment” in a rapt courtroom, attorneys file dozens of motions, type hundreds of memos and research thousands of cases. Similarly, most doctors spend more time writing prescriptions, reading X-rays and sewing up incisions than they do performing life-saving procedures. If the mundane is such a big part of being a highly specialized professional, why do we tend to value them so much? The answer is expertise. When faced with a legal or medical problem, we need motions and prescriptions, and we turn to qualified professionals for those things. But more than this, we need counsel: Someone to assess (or diagnose) our situation, and then

Sell high? Not so fast!

By Stan Sonenshine in Real Estate Investing

9 years ago

9 years ago 0 0 3344

One of the truisms of investing is that you should always sell high — in other words, when the market is at its peak. With values for commercial properties approaching, and in some cases surpassing, “all time highs,” one might argue for aggressive selling. Not so fast! Pause, take a breath, and consider the following decision pathway: 1. A primary consideration should be “What will you do with the money from the sale?” In this market, virtually all asset classes are very expensive, and cash is yielding close to nothing. This leads to question #2… 2. If the current property is financially sound and producing a good return, why replace it for another? Unless… 3. If the current property is not performing well, no longer meets your objectives, has changed fundamentally, or has fulfilled the objectives for which it was purchased, it may be time to sell. 4. Are the

Four questions you must ask your deal sponsor – and one for yourself

By Stan Sonenshine in Real Estate Investing

9 years ago

9 years ago 0 0 3092

In the world of private real estate investing, it’s important to KNOW the sponsor. That individual or group will determine if the deal being considered will be good for you. Ask these four questions of any deal sponsor with whom you are considering investing. Then ask yourself the last one. “What is your track record?” A deal sponsor may claim success with his or her last few investments, but what does the long-term track record actually look like? Have there been failures and what were the circumstances? Has there been consistency in the profile of the properties purchased? Or are they just chasing what’s hot? “What is your proclivity for borrowing?” Deal risk stems from several areas, one of which is the extent of the financing. High loan to cost ratio, short-term loans, and high interest rates raise the risk substantially. Aggressive terms can boost returns, but jeopardize the deal

Loans mature, but cost basis is forever.

By Stan Sonenshine in Real Estate Investing

9 years ago

9 years ago 0 0 3185

In the last 24 months, we have seen the demand for real estate investments increase dramatically. Investors can’t get decent returns on “safe” or “core” investments, which makes 5-7 percent unleveraged returns on real estate quite appealing. Fund promoters and private sponsors of these deals increasingly are able to “juice” the returns by utilizing cheap debt. This trend becomes more pronounced as lenders competing for deals become more aggressive, which enables property purchases at higher prices while maintaining returns on equity. While there is a school of thought that we are in a stable, long-term low interest rate and low return (by historical standards) environment, investors should pay close attention to how returns on any individual opportunity are generated. A good real estate deal can be jeopardized by a sponsor’s willingness to borrow aggressively to “win” a deal at a price that is too high. Remember: Loans mature, but cost

‘Tis the Season to Consider Family Owned Real Estate Assets

By Stan Sonenshine in Real Estate Investing

10 years ago

10 years ago 0 0 3029

What better time than the winter holiday season to talk about avoiding conflict and maximizing value for family-owned real estate assets? Family gatherings are upon us, tax season is just around the corner, and the real estate market is once again bustling with opportunity. Whether inherited, directly acquired, or held in a partnership, family-owned real estate can be a source of generational wealth and opportunity. Or they can cause considerable heartache today and for generations to come. Here are four tips for harmonious, profitable management of family-owned real estate: 1. Hire an unrelated, independent professional who will give you an unbiased and unemotional evaluation of the real estate owned. Whether you’re incorporating real estate into an estate plan or you have received individually or jointly inherited real estate, an objective professional evaluation is essential. The emotional investment, if you will, that many people have in family owned real estate, combined

The Right Spot in the Lineup

Borrowing to Invest in Real Estate? Lend Your Ears First

On Doctors, Lawyers and Real Estate Consultants: Why You Need an Expert

Sell high? Not so fast!

Four questions you must ask your deal sponsor – and one for yourself

Loans mature, but cost basis is forever.

‘Tis the Season to Consider Family Owned Real Estate Assets

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