Robert G. Yetman, Jr.

The New Home of Buy & Hold: Direct Real Estate Investing

In the same way that individual stock investors have likely seen the last of the “buy and hold” strategy for a long, long time, it appears that the very same approach to investing has become the only option for folks looking to make money from the direct purchase of real estate here in the U.S.  While the alternative to “buy and hold” in real estate has never been frenetic, exchange-based trading, real estate’s closest cousin to that, flipping, is something that is now largely a thing of the past, even with the great bargains available nowadays.  This leaves the investor seeking to make a larger asset allocation to directly-owned real property with some serious considerations.  While the real estate market has presented a bunch of opportunities to investors, they are not the “no-brainer” opportunities of so many years past, and at the very least, demand the investor serve as landlord, with all of the trappings that go with that position, for many years to come in order to see a worthwhile resolution to the initial transaction.   

By all accounts now, not only is the market currently flooded with a number of properties that will keep values in the doldrums for the foreseeable future, but that number will absolutely continue to grow; while many dispute the likelihood of the broad economy entering a second recessionary dip, that eventuality is all but certain within the real estate market itself.  Prices are expected to drop another 5 percent over the next year and a half, and even if they stayed flat, they certainly wouldn’t be going up.

According to the National Association of Realtors (NAR), only 4 percent of real estate transactions this summer are for homes with title seasoning (i.e., owned) of less than a year.  In other words, the process of short-cycled buying and subsequent selling is now so rare that it’s practically statistically insignificant.  In our opinion, anyone seeking to enter a real estate transaction on that basis would have to be, well, out of his mind.

Complicating matters are the infectious problems associated with the meltdown that have made the buying process infinitely more difficult, even for investors with a lot of cash.  The vastly-tightened underwriting standards, particularly for Non-Owner Occupied (NOO) residences, have become all but prohibitive for the vast majority of borrowers out there right now, even for those with a pile of cash to put down.  Banks, despite what we have all been told and supposedly “know,” seem just fine with vastly-growing Real Estate Owned departments.  Even title issues, once regarded as incidental to the buying process, have become major factors in transactions; many investors are finding that, other than in the case of an all-cash deal, lenders will not touch properties with title seasoning of less than a year.    

So where does this leave the prospective real estate investor?  In a good position, or in a bad one?  Well, it depends.  For the RE investor with a pile of cash on hand to make the lender happy (or preclude the need for a lender outright), as well as to put into the property in an effort to add value, along with a willingness to deal with people (renters) in the way we need not when trading stocks, it is a fine time to consider the portfolio addition.  For those on behalf of whom that profile does not fit?  Stay away.    

Agree or disagree; please register your comments below.

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Bob Yetman, Editor-at-Large at Christian Money.com (www.christianmoney.com), is an author of a variety of materials on personal finance and investing, as well as on topics of fitness and self defense, to include the recently-released book Investor's Passport to Hedge Fund Profits (John Wiley & Sons, Inc; www.investorspassport.com)  and the new unarmed combat training DVD Thunderstrikes - How to Develop One Shot, One Kill Striking Power (Paladin Press; www.mikereevesonline.com).

 

 

Another Attack on the Necessity of the College Degree

Financial columnist James Altucher recently published a column wherein he challenged the conventional wisdom regarding the value of a college education.  He oversimplifies the argument to some degree and throws in a bit of hyperbole, but I believe his point is nevertheless made effectively.  Altucher points out that the college degree industry is just that, an industry, and has, in a very mercenary fashion, capitalized on the long-held cultural notion that anyone without a college degree is certain to be economically diminished as a result.  Altrucher trashes that idea in his piece, which you can read here:

http://www.dailyfinance.com/story/investing/seven-reasons-not-to-send-your-kids-to-college/19572537/   

While I don’t personally agree with everything Altrucher says, I applaud his effort at bringing attention to the very real financial challenges , both short- and long-term, facing the huge numbers of academically-average young people contemplating attendance at one of the thousands of mediocre colleges and universities that dot the countryside. 

vThose who view the value of a college education as something that exists in its own right, without regard to its role in career preparation, will always take offense at any hard-line approach to economically evaluating the worthwhileness of its pursuit, but the reality is that the number of people attending college principally for the intellectual and horizon-broadening benefits of receiving a well-rounded, liberal education is statistically insignificant.  Even those who sincerely cite that as one of their reasons for attending college typically do so as a subordinate reason to that of being better prepared for the career marketplace.

The issue, of course, isn’t exclusively the money…there are quality state schools that cost far less than practically all of the private institutions out there…but rather the matter of the money, combined with the quality of the school, as well as the student’s choice of program of study.  Depending on the totality of those considerations, a college education might make a lot of sense for someone, or it might make no sense at all.  It’s the latter group that Altucher is clearly addressing here.

I think that most sane people would agree that, as a general rule, having more education is preferable to having less, employment considerations aside.  However, I know of no one who has the financial luxury to pursue a college education exclusively on that basis, although I will concede that a few of those people are out there somewhere.  The real issue, for me, is the watering down of the quality of higher education that has occurred with the trend of putting a four-year school on every corner (that may be only a mild exaggeration; the community college located at the end of my street was recently “converted” into a four-year school).  Even if one agreed that a college education should be every bit as much about the less practical but still beneficial knowledge that comes with the effort, we’re still left to question the quality of even that part of the education, as well, given the unfortunately high number of poor schools out there now.

Agree or disagree; please register your comments below.

Follow me on Twitter at www.twitter.com/robertyetman.

 

Follow me on Christian Chirp at www.christianchirp.com/robertyetman. 

 

Bob Yetman, Editor-at-Large at Christian Money.com (www.christianmoney.com), is an author of a variety of materials on personal finance and investing, as well as on topics of fitness and self defense, to include the recently-released book Investor's Passport to Hedge Fund Profits (John Wiley & Sons, Inc; www.investorspassport.com)  and the new unarmed combat training DVD Thunderstrikes - How to Develop One Shot, One Kill Striking Power (Paladin Press; www.mikereevesonline.com).

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