Technology Investor 

Newton's In Search Of The Perfect Investment. Technology Investor. Previous Columns
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 terribly.

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.

The downtowns 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.

Ms. Corcoran, 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.

Ms. Corcoran 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," she said.

Ms. Corcoran 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 in Queens.

"I'm a rather timid investor," Ms. Corcoran said. "I'm always trying to buy for a bad market."

Ms. Corcoran 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 here.

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.

My 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.

Reading 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:

Supervised Chinese Food
A 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 reputation!"

Morris replied, "Rabbi, did you see me enter this restaurant?" The rabbi nods yes.

"Did you see me order this meal?" Again he nods yes.

"Did you see the waiter bring me this food?" Again he nods yes.

"And did you see me eat it?" Nods yes.

"Then, rabbi, I don't see the problem here. The entire thing was done under rabbinical supervision!"

The Ten Commandments Do It Yourself Kit. Coming soon to a Home Depot near you.

Today is a perfectly, beautiful day to look at some real estate. Put on those walking shoes.

Harry Newton

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, click here and here.
Go back.