The smart money is leaving real estate

4 Replies

I put no confidence in the article whatsoever. "Real Estate" is absolutely a local market. I can show you around half a dozen localities in a 100 mile radius of where I live where real estate prices rose during the "crash" of 2007-2009. One of the reasons I like real estate is the local influence on prices that at least buffers some of the outside effects of recession & monetary policy. Further, to suggest that a small-time flipper or landlord should divest themselves of their properties because conglomerates holding 6 figures worth of units are selling off some/all assets is crazy talk. I paid so little for my properties that the world economy would have to crash, with Mad Max gangs roaming the streets, before I couldn't continue renting and making a profit. A conglomerate that buys 10,000 units at a time can afford to make $50/month/door because of the multiplier effect, but becomes that much more exposed if there is any kind of generalized downturn. 

With CAP rates in the large apt and office building space below 6%, I don't blame some large players for taking profits. The residential market and small plex/ apt market, to me, is quite different. We are staring at the largest wave of 20-somethings our nation has ever seen. They will form families and want to buy. In the meantime, they are renting. We are not at the residential cliff by any stretch. Good article @Vincent Crane !

I do agree that there is high demand for SFR's and a lack of inventory. I think the multi family space though, particularly apartments, could take a big hit. There's a lot of building, and quite possibly over building happening in many major markets

Agreed @Steve Vaughan and JD. Not only is RE local, your portfolio performance will vary with types of assets owned, quality of management, and your local market. We had 12% appreciation over the past 12 months in our market. Where can we go to find those returns elsewhere? Furthermore, investors get excellent tax treatment that aren't possible in mutual funds, etc.  Show me a better investment and I would consider it. Even when the market cycles, if you are not overleveraged you should do well. RE will pay you till the day you die if that is your exit strategy:)

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