Don't Believe Everything You Think

Don’t Believe Everything You Think

This is part of a series that is being posted to my website because blogs read backwards and this item needs to read forward. You may read everything published to-date at http://www.segrestrealty.com Hit the “Investment Guidelines” link.

Just because we have studied markets and real estate and finance and investing doesn’t mean we know anything; because we are in a brave new world. The lawyers talk about “the prudent man”. Economists assume that markets (and the people who comprise them) will always act in their own self interest. All of this is junk. Markets are subject to mass hysteria. The prudent man does not know any more than you or I. The new rule, at least in the near future is chaos.

Fractal geometrists tell us even chaos is predictable. I am not a fractal geometrist. Are you? What those of us who lack either that skill or crystal balls, we need to be prepared for anything. The old models show predictable rental income over years and a “reversion” that is usually higher than the purchase price. Now we need to be more conservative. We need to factor vacancy and credit losses into single tenant net leased properties. The reversion should, even best case, be the same as the purchase price. Perhaps we should be willing to accept lower yields, at least in the short term.

Real estate is still the most permanent asset there is. But the old adage, “they ain’t making any more of it” has been negated with condominiums, fractionals and Dubai.

This is too late now; but a professor from NY University once said Real Estate operates on a 14 year cycle. Real estate investors have a 9 year memory. We can learn from our friends in South America. They have dealt with rising and falling prices over the years. They know how to prosper in any environment.

David Segrest is a REALTOR® in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com He is also a contributor on Argentina to: http://realestatebloginternational.com/