It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.
Given the news, it may be natural to “head for cover” just now with your savings and investments. But where’s the cover? Financial advisors and brokers will suggest U.S. Treasuries and other government securities and that’s likely sound advice. Cash in the Bank won’t hurt, but as an investment, that’s never really paid off. As for your securities-backed pension funds... Oh, dear.
Regardless how hard you’ve been hit by the plummeting stock market, whether you pull out now or wait and see, it’s hard to know what to do. As I see it, it’s no time to look back. What is needed now is an investment strategy for the future that offers the prospect of regaining lost ground. I believe that opportunity is in Affordable Housing. Let’s think about it...
• The cost of rental housing (rent) supports the value of real property for both landlords and property owners.
• Government programs like Section 8 set the “floor” on rents and provide a benchmark gage for market rents; and government sanctioned rents are slow to adapt to change, either up or down.
• For now and the foreseeable future, foreclosures are defining the market, sending settled, good quality tenants – and many victimized former homeowners – out on the street, looking for new rental quarters.
Why is this interesting? Well, the economics for landlords improve absolutely when Income and Operating Expenses stay the same, while capital costs go down by, say, a third or more. Capital costs? That’s what we’re buying and financing our properties for in today’s “distressed” market.
I’m not being a broker here. I’ve got nothing to sell you (well, maybe a seminar or two). But we will lead by example. The opportunities are greater today than than at any time in my career. You will find real estate is a great way to make up for today’s stock market losses. But, as always, only if you know what you're doing...
- Philip Elmes