Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Zero Overhead Real Estate Investing- Right Now

Housing-Market / US Housing Jun 03, 2008 - 11:22 AM GMT

By: Steve_Selengut

Housing-Market Real estate investing is not nearly as complicated, financially burdensome, or time consuming as you might think. In fact, Its easy to add raw land, shopping centers, apartment complexes, and private homes to your portfolio without brokers, bankers, attorneys, and handymen on your payroll. Even better, the zero overhead approach allows you to blend your real estate investments into your securities portfolio for ease of management, income monitoring, diversification, and analysis.


I know you think that the entire real estate market is in a shambles, and that it is far too dangerous to get involved now, what with all the nasty uncertainty that has decimated property values. But where did the real damage take place, and why? Without having mega millions to work with, or a line of credit that goes around the block, you can have positions in various forms of Real Estate without accumulating debt, paying insurance, or leaving your PC--- and you can get it done on the cheap!

All of the basic types of real estate are available through CEFs (Closed End Funds) and REITs (Real Estate Investment Trusts), and both can be purchased in the same manner as any common stock. Additionally, you can own a piece of the action without the big commitment of time and resources. Finally, you can take advantage of changes in the real estate market cycle in precisely the same manner as you can deal with the volatility and fluctuations in the stock and fixed income securities markets.

CEFs and REITs are obviously safer investments than outright purchases of shopping plazas, condominiums, and private homes. They are also considerably less risky than owning the common stock of individual real estate companies. The size of the numbers may be less exciting, but the net income and capital gains potential are comparable on a percentage basis, and the turnover rate can be much more impressive. Both types of real estate based security belong in your investment portfolio--- but in which asset allocation bucket?

I've always included REITs and real estate CEFs in the income bucket of my portfolios because their primary purpose is to generate cash flow. And, as with any interest rate expectation (IRE) sensitive security, I expect prices to fluctuate with changing conditions in several areas: IRE, credit market conditions, economic cycles, stock market cycles, etc. After a huge rally in any market, investors need to be more selective than they generally are. Common sense isn't real common when it comes to investing.

All financial markets, all investment securities, and all economies are cyclical. Equities, real estate, gold, and pork bellies--- it doesn't matter. If you buy too high, you will only get lucky if you know how (not when) to sell, and if you have a plan for doing so. Up side selling disciplines are scarce in most investment strategies... pity, they work so well with bargain hunting during crashes.

The income bucket of the investment portfolio is different in both purpose and content from the equity side. Real estate is an important diversification tool that may add some pizzazz to an otherwise boring collection of securities. We don't need to own the real estate to benefit from both the yields and the cycles. Unlike other fixed income assets (corporate, government, and municipal contracts), rents generally rise over the course of time. Mortgage interest is almost always higher than bonds provide, and we don't need to be mortgagors or landlords to get a piece of the action.

The speculators whose properties became termite infested as the latest real estate bubble burst were owners of mortgaged properties that could neither be sold nor afforded. The other losers were lenders to unqualified property speculators and, of course, the wizards of Wall Street who regulators allowed to turn simple mortgage debt into multi-tiered financial quagmires. Every bursting bubble produces two things: pain and opportunity. When the going gets tough, the smart investor goes shopping.

There are dozens of REITs and managed income CEFs that are worthy of your confidence and attention. Some detailed analysis will reveal lower than normal prices for higher than usual yields based on monthly payouts that have not been reduced throughout the tailspin in the real estate and financial sectors. Read that again--- monthly payments and higher yields throughout the downturn--- hmmm.

Now don't just run out and buy all of these things you can find, and stay far away from new issues for all of the usual reasons. Make sure that you look at a lot of REITs and even more CEFs of various kinds to get a feel for the levels of income they produce. Most of these securities are "leveraged" to a certain extent, which simply means that management may choose to borrow some of the money that they invest.

Leverage is not a four-letter word when used properly, and (in my opinion) it is more likely to help your results than it is to hurt them. But it's always a good practice to stay within the normal income range, assuming that there is either a risk or a management reason for the highest and lowest yields, respectively. Be careful not to create a poorly diversified income portfolio. Bonds, Preferred Stocks, Royalty Trusts, etc., all deserve income bucket representation.

The major distinction between the two types of investing needs some re-emphasis. When purchasing stock in a real estate company (or any other company), your main objective should be to sell the stock for a reasonable profit as quickly as possible. You will then select some other stock and repeat the process. When purchasing a REIT or an income CEF, you are depending on the managers of these entities to generate income and capital gains that they pass on to you.

You buy these securities for the income, but always recognize that you have the bonus capability of selling your shares when they rise to an acceptable profit level. Similarly, be prepared to add to your holdings during market value downturns, thus increasing your income and reducing your cost per share at the same time. The benefits of this form of real estate investing vs. ownership of the properties themselves should be clear. It's a whole lot easier than flipping properties.

So when it comes to Real Estate, think: no attorneys, no debt, and no maintenance equal no problem.

By Steve Selengut
800-245-0494
http://www.sancoservices.com
http://www.investmentmanagemen tbooks.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

Disclaimer : Anything presented here is simply the opinion of Steve Selengut and should not be construed as anything else. One of the fascinating things about investing is that there are so many differing approaches, theories, and strategies. We encourage you to do your homework.

Steve Selengut Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules