Ignoramus8246 wrote:
On 2010-03-29, John R. Carroll wrote:
Ignoramus8246 wrote:
I keep hearing that commercial real estate is in bad shape. At the
same time, valuations of stocks are up 70%
...

There are many ways to lose money. One way is by becoming financially
overextended and then hitting a "snag". Another way is to have money
in cash and lose due to inflation. Yet another is pay too much for
assets due to public optimism, compared to their true income producing
ability.

What I am getting at, is that even not investing has its own risks, as
does investing where such troublesome things as you outlined, are not
anticipated.

Consider current Greek troubles. I hear that Greeksw stocks are
down. Imagine a Greek company that sells chewing gum to Greeks and
enjoys substantial market power. Question: how much does the default
of Greek government, impact the earning power of that company? The
answer is, of course, not by much.

I am not really concerned about the possibilities that you mentioned,
if I can buy warehouse space at a price that allows good return from
good renters.

You make good points but I guess what I was trying to say goes to your last
comment.
It's straightforward to adjust rents when you aren't leveraged.
Otherwise, you are dependent on renters and rents. Those two might be
adversly impacted.
I'm becoming increasingly convinced that this is the case and just went back
and reread a short volume about these markets that Ed Gramlich wrote shortly
before his death to refresh my understanding.

One example is that there is considerable supply side support in the US for
rental properties.
Everyone knows about the big demand side programs like Section 8 but not the
supply side stuff.
Yes Ig, the feds, states, and local communties actually pay landlords to
create rentals and not just single family or multi unit residential
properties.

You might also be able to discern rents and the extent to which your market
is both subsidized on the supply side and also leveraged from CRA, HMDA and
AHS databases. The CRA data might be the first place to begin. Talking with
a loan officer at a local regional bank would also be productive. He or she
will know all of this stuff and they have to disclose it to you.

As I originally stated, what you are considering is just like any start up
and that means you have to know both the business you are entering and the
lay of the land where you intend to operate.

--
John R. Carroll