Skip to content

Posted over 14 years ago

The Real Estate Cycle

Over the years I have been watching the cycles of the real estate market. In
1979 the interest rates went sky high and real estate took a real dive.

There has been other down turns in the real estate market since then and the
same psychology seems to apply each time. Ride the wave while you can
and not worry about the outcome.

Just at the start of the housing market boom my company bought a
mortgage company which was doing residential mortgages and not commercial. With
our business model we knew that the cycle would eventually turn and
there would be a bust. So we changed the company to commercial funding.

Déjà vu all over again and now we are in an economic bust. So where do we
look for the best long term investments that will provide a steady return on our
investment with the least amount of time and energy? I believe it is the
commercial real estate market for a few of the following reasons.

1.      If you invest in a multi-tenant property income producing property then
you have spread your risk should you lose a tenant.

2.      There are always investors who are looking for commercial properties
because when they sell they have to look for another property.
these investors utilize a tax benefit called the 1031 exchange.

3.      In commercial investing there are fewer regulations dealing with tenants
as opposed to residential in most states.

4.      When you look at the great wealth that has been accumulated in
real estate in this county you will find that it has been in commercial real estate and
not residential. Even Ray Kroc of McDonald’s fame said it best when he
said that we are not in the hamburger business but in the real estate business.

These are just a few thoughts about the future and where you can be when the
cycle starts it upward march. I believe it is time to start thinking and planning
so you will be ready for the next boom.

Curtis William Lee, Sr.  www.cwlsr.com


Comments (2)

  1. Guys, Here's another way to look at it... commercial properties are great for cash flow and residential properties are great for appreciation. Investors should build the cash flow to a comfortable level 1st as a baseline and then start focusing more on appreciation for fast big chunk gains. If you get busted from residential props, then you always have the commercial props to fall back on.


  2. Curtis - I wholeheartedly agree with you. Many have gotten rich in residential real estate, but those who have made the real money in real estate have done so with commercial properties.