Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Tuesday, April 19, 2005: Stocks
are homogenous. One share of IBM is the same as all the other shares of
IBM. The market in IBM shares is "perfect." IBM shares sell the same
everywhere. You can make broad statements about IBM. The corporate software market
sucks, enterprise etc. And those broad statements affect the price of IBM, lately
You can't make the same statements about real estate. (Except that real estate
hasn't lost as much money as IBM stockholders have.) The market for real estate
is not perfect. A four-story rental building sells differently in Chicago to New
York to San Diego. These differences give locals -- like you and I a big advantage.
Moreover, the "big" picture of the economy -- budget deficits, dollar
declines, trade mess -- are all irrelevant. What counts are two things: interest
rates, still staying low and what you can get for rents, rising.
of many cities are taking off (or have already in the case of New York, Chicago,
etc.). The trends are all there -- cheap real estate, charming buildings, good
location and, most importantly, a whole bunch of new people who are sick of
long suburban commutes and high gas prices. We write about downtown Tucson in
next week's issue of Personal Real Estate Investor Magazine and we're
very impressed with what we found. Click
here. I bought a great place in downtown Boston for my daughter and
her beau. I was there yesterday. I like what I see. I'm looking for more. And
even New York, there seem to be opportunities. The cover story on the New York
Times' weekend's Real Estate section talked about small investors buying apartments
and small residential buildings. Excerpt from the article:
"Barbara Corcoran is one person who has been adding to her real estate
portfolio despite the surging market, and in places she would not have considered
a few years ago.
who founded the Corcoran Group, the real estate brokerage firm, signed a contract
this month to pay $1.075 million to buy a fully renovated three-story building
at 293 Van Brunt Street in Red Hook, Brooklyn. It has two vacant apartments
and an unoccupied storefront, and her colleague and broker, Beth Kenkel, is
already trying to find tenants who can fill them as soon as the deal closes.
The projected monthly rent roll is $5,850.
She is also
negotiating to buy a $1.5 million town house in Harlem with four occupied apartments.
Her broker, another Corcoran colleague, Andre Rozzell, said the units bring
in about $8,000 a month in rent.
said investors can benefit from an "oversteamy" market like this one.
Because there aren't enough properties in the prime areas to go around, old
neighborhoods are reinvigorated. "It drags up the fringes along with the
fashionable, and that's great for people who want to find a new opportunity,"
already owns five small buildings - one in the East Village, one in the West
Village, one in Chelsea, and two on the Upper East Side - all but one of them
bought in the last five years. But rising prices in those neighborhoods have
led her to branch out, and she is looking for more properties in "up-and-coming
neighborhoods," like Red Hook and Harlem, and hopes to buy something soon
rather timid investor," Ms. Corcoran said. "I'm always trying to buy
for a bad market."
likes to buy small buildings, "usually three- or four-story town houses
with tenants in place." In a typical deal she gets financing for up to
75 percent of the purchase price and seeks properties where she knows that she
can cover her monthly costs, even if rents are low. If there is a little profit
left over after mortgage payments, taxes and other expenses, so much the better,
but enhancing cash flow is not the goal. "I'm looking for a retirement
fund so I can sell the building 10 or 20 years out," she said."
For the entire article, click
Some readers will
now be thinking ... BUT, Harry,
+ Real estate
is in a bubble.
+ Real estate takes too much time.
+ There's no one to help me -- like there are "professional" stockbrokers.
+ Real estate brokers are sharks and incompetents.
+ Rising interest rates are about to kill real estate.
All true. All untrue. Diversification is key. Different forms of real estate
belong in your total diversified portfolio.
dear friend Ken Fisher: Click on one of Ken Fisher's many web ads
and you'll receive a free report on the outlook for the stockmarket.
The report begins:
"In 2004, the stock market traded with an abnormally tight trading volatility
right up to the US presidential elections. Once uncertainty about the outcome
passed, the back-end loaded market rally we anticipated finally occurred. We
expect this momentum to carry into the first half of 2005 and provide additional
upside. Thus we believe equity exposure should be maximal."
I don't quote these words to ridicule them. They do that themselves. I quote
them because they represent what we see a lot of -- detailed "research"
reports from alleged gurus promoting the stockmarket in general and their investment
management services in particular.
stats, courtesy Rupert Murdoch:
+ Four out of every five Americans in 1964 read a newspaper every day; today
only half do.
+ 44% of news consumers between 18 and 34 use the Internet once a day for news,
compared to 19% who use a printed newspapers.
+ In the future, he said, 39% expected to use the Internet more, compared to
8% who expected to use newspapers more. He also said only 9% describe newspapers
as trustworthy, 8% as useful, and 4% as entertaining
The News Corporation
chairman said. "In the face of this revolution, we have been slow to react.
We have sat by and watched while our newspapers have lost circulation."
I love the top headline on this wonderful magazine:
rabbi was walking home from the Temple and saw one of his good friends, a pious
and learned man who could usually beat the rabbi in an argument.
The rabbi started
walking faster so that he could catch up to his friend, when he was horrified
to see his friend go into a Chinese restaurant (not a kosher one).
Standing at the
door, he observed his friend talking to a waiter and gesturing at a menu. A
short time later, the waiter reappeared carrying a platter full of spare ribs,
shrimp in lobster sauce, crab rangoon, and other treif (non-kosher food) that
the rabbi could not bear to think about.
As his friend
picked up the chopsticks and began to eat this food, the rabbi burst into the
restaurant and reproached his friend, for he could take it no longer."Morris,
what is this you are doing? I saw you come into this restaurant, order this
filth and now you are eating it in violation of everything we are taught about
the dietary laws, and with an apparent enjoyment that does not befit your pious
"Rabbi, did you see me enter this restaurant?" The rabbi nods yes.
see me order this meal?" Again he nods yes.
see the waiter bring me this food?" Again he nods yes.
you see me eat it?" Nods yes.
I don't see the problem here. The entire thing was done under rabbinical supervision!"
Ten Commandments Do It Yourself Kit. Coming soon to a Home Depot
Today is a perfectly,
beautiful day to look at some real estate. Put on those walking shoes.
This column is about my personal search for the perfect investment. I don't
give investment advice. For that you have to be registered with regulatory authorities,
which I am not. I am a reporter and an investor. I make my daily column -- Monday
through Friday -- freely available for three reasons: Writing is good for sorting
things out in my brain. Second, the column is research for a book I'm writing
called "In Search of the Perfect Investment." Third, I encourage
my readers to send me their ideas, concerns and experiences. That way we can
all learn together. My email address is .
You can't click on my email address. You have to re-type it . This protects
me from software scanning the Internet for email addresses to spam. I have no
role in choosing the Google ads. Thus I cannot endorse any, though some look
mighty interesting. If you click on a link, Google may send me money. That money
will help pay Claire's law school tuition. Read more about Google AdSense,
here and here.