|
|
|
|
            |
|
|
Money Panel
with Chris Murray, Catharine Fairley, Brad Young and Shabri Moore
Have a financial question? Ask the experts. Send your question to business@newspost.com
With today’s volatile markets, would real estate or a real estate investment trust be sound investments? Even though property values are down, real estate, like investing for retirement, is all about the long haul.
|
RESPONSES:
BRAD YOUNG (Contact: 301-663-5454)
Investing in real estate is usually a good addition to any investor’s overall portfolio. Investing in real estate, just like investing in stocks, must be approached as a long-term proposition. One major difference between investing in real estate verses stocks however is the illiquidity of real estate. As many have seen, sometimes it is not easy to move real estate when the market is down. Investors that have the capacity to wait the cycle out will be rewarded for their patience. Those that are forced to sell often are punished by accepting low prices in order to get out from under the property. For those that need more liquidity, real estate investment trusts (REITs) may be a better option as they have much more liquidity. It is important to understand that they also face volatility in price as real estate prices and interest rates move. Many REITs hold commercial real estate as opposed to residential. Commercial real estate is valued as a function of the long-term leases that are held on the properties and thus tend to be more stable in price. Because the income is set by the lease and often times locked in for long periods of time, these REITs tend to trade like bonds in that they have an inverse relationship with interest rates. As rates go up, their prices go down and as rates go down, their prices go up. Real estate is an asset class that should be looked at for every portfolio. You with your financial advisor can determine how much if any is right for you!
CATHARINE FAIRLEY (Contact: 301-694-7411)
Real estate can be an appropriate investment for many people, depending on their specific circumstances. Real estate is a particularly attractive investment right now because of low market values. There are bargains to be had, especially for first-time home buyers, with the recent reduction in 30-year-fixed mortgage rates. Investors looking to diversify their portfolios, or add income streams to their retirement plans, can also find some great opportunities with rentals or REITS. The key is, indeed, the length of time you have to generate return on your investment. Those seeking to buy rental properties should look for property that will generate enough rental income to cover carrying and rental costs for at least five to seven years without having to worry about selling during that period. Note that “flippers,” those buying houses to fix and sell quickly (hoping for appreciation on the house value) were among those hardest hit with the real estate down turn. Why? Because they were banking on selling quickly and getting rid of those mortgage carrying costs. Instead, they were left with a mortgage greater than the value of their investment. The economics of most of those deals made holding on and renting the property not possible. REITs are a way of diversifying risk and buying pieces of large real estate portfolios that will generate cash flow (i.e. dividends) immediately with opportunities for long term appreciation. As always, consult your financial advisor for some sound REIT choices.
SHABRI MOORE (Contact: 301-631-1207)
Any investment, whether it is in real estate, the stock market, colleciables, etc., can be a sound investment if it is appropriate for you. Real estate investments or real estate investment trusts (REIT) can be a nice addition to most portfolios. REITs are a good option for those who would prefer not to be landlords and/or do not have the funds to purchase individual pieces of property, or would like to purchase certain types of property such as large commercial buildings or an interest in timberland. With any investment diversification is always key. If a particular investment is selling at a bargain price it may be well worth investigating. Today, real estate certainly falls in that category.
CHRIS MURRAY (Contact: 301-682-9876)
There are some good real estate deals to be had right now because of the extra inventory on the market. I would make sure you are clear in your own mind as to why you want to buy a property. Is it a second home for you and your family to enjoy, or is it an investment that you will rent out? The latter will mean that you are willing and prepared to be a property manager who doesn't have a problem getting a call to change a light bulb at 9 p.m. Of course, if the numbers work, and you are fortunate enough to have good renters, you may find yourself with a big smile on your face. As you mentioned, you can also go the REIT (Real Estate Investment Trust) route if you want exposure to the real estate sector without any of the responsibilities. REITs have been around for about 50 years and can be either publically or privately held. As always, make sure you research the tax ramifications for your personal situation and understand the risks involved before jumping into a new piece of property or a REIT.
|
|
|
|
Advertisements
|
|
Home | Sitemap | Customer Service | Electronic Edition | Subscribe
Please send comments to webmaster or contact us at 301-662-1177.
351 Ballenger Center Drive • Frederick, MD 21703
Copyright 1997-09 Randall Family, LLC. All rights reserved. Do not duplicate or redistribute in any form.
The Frederick News-Post Privacy Policy. Use of this site indicates your agreement to our Terms of Service.
|
| |
