Multi-Family Properties Might Be The Way To Multi-Millions

In the current commercial real estate market, investing in multi-family homes should be on the radar. Multi-family properties don’t always have to be 20 floor sky rise apartments in a big city. They can be smaller duplexes, town homes Read more

New Real Estate View: Why The Homeless Are Big Business In New York

It's a grim scenario: In New York, there are more than 50,000 homeless. Of that number, 21,000 are children, an increase of 21 percent from last year, according to a report by the Coalition for the Homeless, a New Read more

Red Is the New Green – Chinese Investors Eye US Assets

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty*** American fund managers should be aware of current and future trends that may make the Chinese account for a more significant portion of overall foreign Read more

Gimme Shelter - Foreign Investors Seek Returns and Safe Haven in US Real Estate

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty*** Foreign investment has been a significant driver of the US real estate market recovery. Investors from across the globe have been responding to negative stimuli Read more

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Multi-Family Properties Might Be The Way To Multi-Millions

In the current commercial real estate market, investing in multi-family homes should be on the radar. Multi-family properties don’t always have to be 20 floor sky rise apartments in a big city. They can be smaller duplexes, town homes or small condos. These smaller properties are recommended for startup investors.

Investing in multi-family homes is a great way to enter the real estate market. As opposed to investing in single family homes, the cash flow of multi-family homes is increasing due to lower property values, mortgage cost and rent increases. This can lead to many advantages for an investor. There is also less risk and less cost as opposed to owning five single family homes where you have to maintain five different properties. With all five families in the same building, there is only one roof to maintain and the tenants are in the same location.

With many unable to afford homes in the suburbs, the demand for multi-family homes is increasing. Also, the construction on new multi-family apartments is bouncing back. Many are having trouble finding stable jobs so they are leaning toward renting apartments as opposed to buying single family homes. The baby boomer generation is starting to live more frugally because they realize that they don’t have enough saved for retirement. As a result, they are spending less and recognizing that they can’t live their current lifestyles. They are working longer and see renting as a more cost efficient option. With the overall increase in demand, this inevitably leads to an increase in rent which makes investing in multi-family homes very attractive.

Now speaking of rent, if an investor is going to rely on rent to cover the property’s debt and operating costs, it is necessary for the investor to choose an area where the rent demand is high and the vacancy rates are down. Depending on the right location, a larger apartment can rent faster than a smaller one. Location is critical for a successful multi-family home to reap high rewards.

As new investors, starting off investing in multi-family properties is a good foundation for a strong and diverse portfolio. It is important to know all the “ins and outs” of the market. Evaluating past transactions and possible properties for transactions is essential. A small investment in a multi-family complex can be the outlet for a cash flow gaining investment. The right multi-family properties are income producing assets that provide great long term returns.

 

Posted on by Jacob Frydman in Commercial Real Estate, Guest Blog Post, Housing Market, multi-family, News, Residential Real Estate Comments Off

New Real Estate View: Why The Homeless Are Big Business In New York

New York Residential BuildingsIt’s a grim scenario: In New York, there are more than 50,000 homeless. Of that number, 21,000 are children, an increase of 21 percent from last year, according to a report by the Coalition for the Homeless, a New York advocacy group. Even worse, the numbers haven’t been this high since the Great Depression. But some landlords have managed to find a lucrative return from a commercial real estate angle.

Though the methods differ, and opposing views persist, the goal – more homeless individuals and families housed – is aligned, to a degree. Landlords can use their real estate to offer shelter to the percent of New Yorkers who need a place to stay. As reported by the New York Times, landlords can receive up to $3,000 (from the Department of Housing Services), and some are offering tenants up to $25,000 to move out of their current homes to make room. Somewhat problematic, these are often rooms without bathrooms or kitchens. The conditions, as reported by some, are worse, due to drug use, violence, and even prostitution.

Meanwhile, the Department of Housing Services (DHS) has been critical of Mayor Michael Bloomberg’s handling of New York’s homeless population, and recently claimed that the homeless shelter population under his administration increased by 61 percent. Additionally, the shadow of Hurricane Sandy looms rather large, albeit the numbers are not included in the report, it can be inferred that a number of displaced New Yorkers affected by Sandy are likely in the system. The DHS concludes that “for the first time since modern homelessness began, the City now provides no housing assistance to help homeless children and families move from shelters to permanent housing.”

According to the Wall Street Journal, the budget for adult shelters has gone up 43 percent to $317.2 million since 2008, while family shelters now cost $464 million a year, up 15 percent from 2008. And in the past two years, the city has added nine single-adult shelters, six adult family shelters and 11 shelters for families with children. Two hundred and thirty-nine shelters are in the system. So, a shortage of shelters, means opportunity for some land owners. Whether it takes advantage of the system (and displaced New Yorkers) is another matter best left for politicians and newspaper opinion pages.

The facts are this: in January, an average of 11,984 homeless families slept in shelters each night, which was a rise of 18 percent from the previous year. And advocates on both sides have valid arguments. Is it morally gray to offer less-than-favorable apartments to individuals and families in transitional housings? Possibly. But when the shelters are more crowded, and the options for moving from transitional housing has stalled, other solutions should at least be examined.

A policy in response to court settlements in 1979 and 2008, pushed for every homeless person in New York to have some type of housing that would be provided by the city. Landlords willing to house the homeless were given freedom to set their own rental prices and terms. In 2005, Bloomberg’s administration ended the  policy, which had up to that time allocated a share of federal public-housing apartments and federal housing vouchers to homeless families.

The action plan outlined by DHS points to ending “the so-called cluster-site/scatter-site shelter program (i.e., apartment buildings used as temporary shelter at enormous cost),” and phasing out the use of commercial hotels and motels as temporary shelter for families. New mayoral candidates have already started their stump speeches to include this issue. But, really, where does the discussion on this really begin? True, you will possibly have a number of landlords who will use the plight of the homeless as a way to make a profit. However, the idea, if properly implemented with at least a modicum of oversight, could allow for positive results to surface.

When transitional housing and commercial real estate converge – or collide – in New York, there’s bound to be a passionate response. At best, we should be able to find a middle ground. One where real estate thrives, and more people have access to a higher quality of life, moving outside the homeless system, and into independence. It’s good business for everyone.

Posted on by admin in Commercial Real Estate, Housing Market, Residential Real Estate Comments Off

Red Is the New Green – Chinese Investors Eye US Assets

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty***

New York SkylineAmerican fund managers should be aware of current and future trends that may make the Chinese account for a more significant portion of overall foreign investment in United States real estate. A variety of economic and political conditions in China are making investing in US real estate increasingly attractive to Chinese investors; these include a newly wealthy segment of the population looking to find a safe haven in which to deposit wealth, the threat of an economic slowdown, and the economic policies the government is implementing to liberalize the economy.

China’s impressive economic growth in past decades has enriched many who now look to invest funds abroad. Government policy strengthening manufacturing – along with an artificially weak renminbi and investments in infrastructure and housing – transformed China into the economic power it is today. The country’s rapidly developing economy has been unique in that it has been able to move hundreds of millions out of poverty, while simultaneously forming a wealthy oligarchy. Developments in recent years, however, threaten to undo past trends, encouraging wealthy individuals to make relatively safe investments in US real estate.

A number of changes are likely to come about with regard to Chinese investment in US real estate in response to the threat of economic slowdown and subsequent action by the Chinese government. Although a healthy dose of skepticism about the historically conservative Chinese central bank enacting widespread economic reforms would be appropriate, a recent economic slowdown in China is pressuring Chinese policymakers to adapt, lest limited economic growth lead to political turmoil. To stimulate the economy, the Chinese central bank will likely loosen restrictions on foreign investment and allow the currency exchange rate to fluctuate. Fewer regulations hindering the flow of capital will provide Chinese investors more opportunities to invest abroad, while a more volatile renminbi will prompt Chinese investors to look for a safe haven. Both policies will increase the likelihood that Chinese investors will choose to deposit funds in the US.

Any economic policy changes, however, might be too little, too late. China has for decades relied on an export driven economy. To achieve growth, state sponsored projects have drawn on a cheap supply of labor to minimize expenses. The cost of labor has, however, risen, limiting China’s comparative advantage. As the economy continues to mature, the Chinese government will have to enact reforms to allow domestic consumption to drive economic development and achieve sustainable growth. It is still an open question whether or not the Chinese government has power or even the political will to alter the course of the economy fast enough. If the government cannot sufficiently address a number of underlying weaknesses in the economy, subsequent instability will also likely motivate many Chinese investors to move wealth abroad. As it stands, it seems that Chinese investors will eye assets abroad, whether or not government reforms manage to stimulate growth.

Keeping the risk of US government action against those seen as threats to national security in mind, American fund managers should seriously consider the benefits of attracting investment from Chinese investors. Current trends are making acquisitions of US real estate enticing to the Chinese. American fund managers should also not be thrown off by Western names adopted by investors from East Asia. It cannot be denied that they mean business. If the current trends aren’t convincing enough, perhaps American fund managers should consider that China is looking to invest $3.4 billion of foreign currency in safe, inflation protected assets.

Posted on by Jacob Frydman in Commercial Real Estate, Foreign Investors Comments Off

Gimme Shelter – Foreign Investors Seek Returns and Safe Haven in US Real Estate


***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty***

Foreign investment has been a significant driver of the US real estate market recovery. Investors from across the globe have been responding to negative stimuli abroad by investing in US real estate. Investing in US real estate provides foreign investors protection from economic

instability and foreign government corruption, while offering significant returns compared to low performing bonds. Such benefits have led foreign investors to favor direct investment in US properties and shy away from funds that may lessen risk.

Japanese investors have historically had confidence in the benefits offered by investments in US real estate. Often close partners with US businesses, Japanese investors have in the past sunk billions of yen into acquiring US assets. Recent fear about future depreciation of the yen has made investment in US real estate increasingly advantageous. Investing in US real estate allows Japanese investors to protect their wealth against the negative effects of Japanese monetary policy. Assuming that the dollar remains strong, investments in US real estate enable foreign investors to strengthen the value of their holdings. The advantages of US real estate as an inflation hedge coupled with the current high rates of return have motivated Japanese investors to continue to transfer wealth to the US.

While traditional foreign investors in US real estate have recently had a significant impact on the market’s recovery, less traditional foreign investors are increasingly likely to drive future growth. Brazilian, Russian, Indian, and Chinese investors have been eyeing the US real estate market as an opportunity for investment. Each responding to local conditions, BRIC countries have taken note of the benefits offered by investing in US real estate.

Enriched by the rapid growth of the Brazilian economy, a growing number of Brazilian investors have worked to protect wealth from the negative impact of local instability and earn profits from safe investments. While impressive returns are offered by Brazilian real estate investments, inflation and government corruption in Brazil motivate many Brazilian investors to prefer less risky US real estate investments. A fulminating public has made many Brazilian investors fearful of future political instability and economic fallout, giving another incentive to transfer wealth to the US.  Like many wealthy Central and South Americans, Brazilians have flocked to Miami, purchasing stakes in local assets.

A recent spree of acquisitions by Russian investors has surprised American real estate experts as Russians have been providing a more significant portion of capital for US real estate acquisitions. Apparently dissatisfied with the benefits of investing in art and other luxury items that fail to yield desirable returns, Russian investors have begun purchasing trophy properties in Manhattan and Miami to gain more appropriate returns and shield wealth. Following the economic crisis in Cyprus, Russian investors have been seeking an alternative safe haven. Along with the advantage of keeping wealth out of reach of the Russian government, investments in US real estate provide Russian investors with significant returns and residence in attractive locations. It is becoming increasingly possible that Russian investors will be a consistent source of capital for investment in US real estate.

Considering the volume of foreign investment in US real estate, one would think that domestic funds investing in US real estate and catering to foreign investors would raise capital with ease. On the contrary, a number of major funds have been forced to exit the market. While such funds offer the services of managers with expertise in US real estate and opportunity to diversify, many foreign investors have avoided such investments. It would seem that communication difficulties have prevented foreign investors from realizing the advantages such investment funds offer. A variety of conditions motivate foreign investors from different countries to invest in US real estate. Perhaps, foreign investors expect American funds to cater to each of their disparate needs when encouraging foreign investors to trust them with their wealth. It will be interesting to observe whether or not foreign investors remain convinced that direct investment is the optimal strategy as foreign investment continues to drive growth.

Posted on by Jacob Frydman in Commercial Real Estate, Foreign Investors Comments Off

Is Two Really Better Than One? Fannie and Freddie Work Together to Find Out

United Realty Discusses Fannie Mae and Freddie MacIt’s barely spring, but the housing market news is starting to warm up. The recent announcement by Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), that Fannie Mae and Freddie Mac will consolidate functions by starting a securitization firm, has the industry buzzing. This new firm would presumably cast a red hot beam on home loans as they are processed today, easing some of the government involvement in the process. It’s reconstruction on a grander, reasonable scale, and it might just work. Speaking to the National Association for Business Economics, DeMarco outlined a scenario that would be built on cooperation, sure, but more importantly, an aggressive consolidation whereby the company would have its own chief executive and board, jointly owned by Fannie and Freddie.

As the natural step, a sort of quantum leap from the pessimism of 2008, when the Federal Government bailed out numerous companies including Fannie and Freddie, the ground seems almost poised to produce a future harvest, or at best, the beginnings of a more stable and robust market. What are the broader implications? Less government should result in less strain on the U.S. Treasury (both companies have drawn nearly $190 billion to stay in business), at least in theory. Additionally, the goal is to shrink Fannie Mae and Freddie Mac down by 10 percent in the loan market for multifamily homes. According to Reuters, Fannie Mae and Freddie Mac collectively finance about two thirds of the loans in the U.S. Reuters also reported that Fannie and Freddie will aim to complete $30 billion in single-family credit guarantee business in 2013, in effect, sharing some of the risk with the private market. Transactions could include mortgage insurance or other types of debt securities. The Chicago Tribune reports that by next year, both companies will be required to reduce the less liquid portion of their portfolio of mortgages by 5 percent.

The offspring of Fannie Mae and Freddie Mac may share some of the junk DNA inherent in today’s mortgage loan guidelines, but tougher regulations and a new outlook could be enough to make this firm a successful up-start (if you could call it that). The housing turnaround – a rebound, if you’re closing watching the numbers – is poised for yet another collection of positive headlines, as the general climate moves from pessimistic to cautiously optimistic. It won’t happen today, and it certainly won’t happen tomorrow, yet the cogs of the machinery are getting pushed into motion. Springing forward, just took on a whole new meaning, especially if you’re on the right side of commercial real estate.

Posted on by Jacob Frydman in Commercial Real Estate, Housing Market Leave a comment

The Virtual Reality of Commercial Real Estate and Mobile Technology

Real Estate and Mobile Technology
The commercial real estate market is rebounding, and with that bounce-back, comes the increased use of mobile technology.

Commercial real estate used to rely on newspapers, magazines, radio and television ads to carry the message to the consumer, but those methods simply aren’t as effective in the 21st century. A “direct line” is more often than not facilitated by satellites in space, GPS towers, and apps downloaded onto a smart phone. To reach people where they truly live, you must slip into the virtual reality inherent in cloud computing, social media, and viral Web content. In a very real context, change has indeed come.

A recent report by inMotion Real Estate cited that mobile usage in commercial real estate is up 61 percent. And we can reasonably expect an increase this year if the trend holds. The report lists the iPhone, iPad, Sony Ericsson LT 15i Xperia Arc, HTC EvO 4G and the Motorola Droid X, as the top mobile devices of last year, with 25 percent of Internet consumption in the U.S. derived from mobile devices. In short, we carry the future of commercial real estate in our pockets. And more people are taking advantage of this technology.

Last month, the BE-Mobile app (from Building Engines), marked 1,000 downloads, and this should come as no surprise. The app helps the user to manage key operational tasks including work orders, preventive maintenance, incidents, and inspections – it’s all paperless.

And here’s something else to consider: Google Maps can now host your property with its Google Maps Floorplans app, which allows tenants or investors to better understand a building’s accessibility, suite layout, parking field and more. Additionally, it can be combined with Google Maps in 3D and a 360 Panorama by Occipital and you have a real virtual reality tour.

See? The future is truly occurring in real time. Mobile technology is the great equalizer at play in today’s society. How we capitalize – and innovate – within this seismic shift will depend on our ability to embrace this new present for a profitable future.

It’s a reality, however virtual, worth pursuing.

Posted on by Jacob Frydman in News Leave a comment

The Fiscal Cliff and Commercial Real Estate

The Fiscal Cliff, or more appropriately, the reason we are dealing with the Fiscal Cliff, will undoubtedly impact our economy in such a way that opportunities will abound in commercial real estate.

The reason Congress has been dealing with the fiscal Cliff is because our nation’s $16 trillion in debt. Worse, we have $60 trillion in unfunded government pensions, Medicare, Medicaid and Social Security obligations. In other words we are a $76 trillion debtor nation.

The Fiscal Cliff is Congress’ way of dealing with the increasing deficit necessary to service our debt, it does not address the debt itself. Our real issue is the debt itself. We can only solve our debt problem by increasing taxes or cutting our spending. Since Congress is obviously not inclined to do either, our government needs to find an alternative way of solving this problem. I believe they have.

The Federal Reserve, which historically has dealt with interest rate policy on a quarterly basis, announced in an unprecedented move that it intends to keep interest rates at the Fed discount window at 0% through early 2015. This has created an artificial cap on interest rates. At the same time, by virtue of the Fed’s QE3 policy, the Fed is effectively printing $85 billion a month—without end. Undoubtedly this devaluation of the currency will help us pay our debt off in cheap dollars. It should also have an upward pressure on interest rates. But, by virtue of the fact that interest rates remain artificially low, we will not feel the effects of this printing of money until the Fed removes its cap on interest rates.

And when that happens, watch out. Interest rates should increase dramatically. Rising interest rates will have a significant impact on commercial real estate. Rising interest rates will bring with inflation. They will also bring with them increasing rates. Properties, such as triple net lease single tenant assets which have very nominal rent increases, typically lower than CPI, will start to act and look like bonds, diminishing in value with rising interest and capitalization rates. By contrast, inflation-protected real estate, those assets with underlying leases that adjust for inflation, should be able to maintain or increase in value.

Adding to the opportunity,  we’re approaching a time when many properties can be purchased at below replacement costs, and financed at historically low interest rates. Investors are able to acquire real estate assets at below replacement cost prices, finance them with long-term low-rate financing, and protect them with inflation-protected leases will benefit from the inflationary cycle we see coming.

While the drama on Capitol Hill is certainly causing headaches for economists around the world, those in the commercial real estate industry should see opportunity amidst the frustration.

Posted on by Jacob Frydman in News, United Realty Leadership Leave a comment

Preparing For Coming Inflation

Whenever you turn on the news, you hear about our country’s $16 trillion of national debt which we cannot pay off.  Unfortunately, that’s just a small portion of our country’s financial problems.  Did you know that we also have more than $60 trillion of unfunded government pension obligations, unfunded Medicare and Medicaid and social security liabilities?  And that this debt is increasing at more than $1 trillion per year?

Just think – the US owes more than $76 trillion that iInflation Hits Real Estate Investments In Philadelphiat can’t pay off.  Worse, none of our politicians are willing to raise taxes or cut spending to deal with that problem, because if they raise taxes or cut spending they get booted out of office! As expected, they are more concerned with holding on to their jobs.

So how is our government going to deal with this problem? The same way governments have dealt with this problem throughout history – they print money.

By printing money they inflate the currency, and pay off the debt with cheap dollars, and while that may be good for the government, it is terrible for investors.

When the government prints money, people who saved their money and people who invested in fixed income, bonds and other liquid assets get hurt badly.  In some cases they can get wiped out.

And what’s worse – this time around, the government is artificially keeping interest rates at zero until early 2015 so they can keep inflating our currency without much backlash.

Ask yourselves a few questions:

  • When was the last time you remember not being able to get any interest on money in savings accounts?
  • When was the last time you remember the 10-year treasury at below 1.5%, or corporate bonds at 3%?
  • When was the last time you remember the Federal Reserve printing $40 Billion a MONTH, without end, (which they are now doing and calling it “QE-3”)?

So how do you protect against inflation?  — WITH HARD ASSETS – and frankly, there is no better hard asset than real estate.  Unlike gold or commodities, real estate can generate current income and grow in value with inflation – it has historically been used to generate cash flow and capital appreciation, and is also considered a hedge against inflation.

We are living in unprecedented times, and these events will create risks for some, and opportunities for those who prepare.

 

Posted on by Jacob Frydman in Commercial Real Estate, United Realty Leadership Leave a comment

Foreign Investors Pour Capital into New York Commercial Real Estate Market

Real Estate Investment BankMany New Yorkers have the view that their city is the capital of the world. Recent commercial real estate trends indicate they might actually be on to something.  Investors from Russia to the Middle East are pouring capital into Big Apple real estate in record amounts.

Indeed, foreign investment in the U.S. real estate  market has been increasing for the past 12 consecutive quarters. Overall foreign investment in the U.S. is also surging.  According to the Commerce Department, the U.S. attracted $28.7 billion in foreign direct investments between January and March 2012. The investment trend has been led by Europeans seeking a safe haven from their own debt crisis and uncertainty about the Euro’s viability as a currency.  In 2011, foreign investment in the U.S. totaled $234 billion, a 14% jump over $205.8 billion in 2010. Two-thirds of that cash came from Europe.

In the real estate sector, foreign investment has about $82.5 billion in the 12-month period ending in March 2012—up about 24% from the $66 billion they spent the year before — but only 9% of all residential real estate sales come from international buyers, according to a recent report from the National Association of Realtors.

The Americas as a whole experienced a 1.5% increase in its Capital Value Index in the first quarter of 2012, while the rest of the world saw flat growth, according to the global real estate advisory firm CB Richard Ellis. That growth was concentrated in prime properties in Central Business District (CBD) areas, such as New York City. Others CBDs that saw investor focus included Washington, DC, San Francisco and Boston. Foreign investors are coming in with cash looking for assets that are tied to the value of the US Dollar in order to shelter their investments from the riskier European currencies. The New York City commercial real estate market has become an attractive investment for those foreign investors worrying more about wealth protection than income generation.

Several Real Estate Investment Trusts (REITs) and private fund offerings are attracting capital from foreign investors searching for a safe haven. That trend is expected to continue as long as yields on U.S. Treasury securities remain low and Europe continues to struggle.

Posted on by Jacob Frydman in Commercial Real Estate, Foreign Investors Leave a comment

Real Estate Thoughts: Hotel Markets

The hotel market is one that remains in a state of flux.

Hotel Room in Hotel Real Estate

Over the last several years there has been a significant lack of new construction of hotel properties, primarily due to the financing markets, as well as a decline in tourism nationwide. As our economy begins to recover there will a need for additional hotel capacity. At the same time, while the European economy suffers, this may result in a reduced demand for US hotel rooms from European tourists who will be traveling less frequently, creating a forecast for a relatively shaky market. The best opportunities appear to be in larger central business districts of major cities where occupancies are at or exceed 75%.

New York is a unique market, given that the cost of hotel rooms has risen to be generally unaffordable, except at the very top of the market. Therefore, the opportunity in a city such as New York is to convert non-hotel properties that lie outside of the central business areas but are connected by transportation hubs, so that tourists can find affordable hotel rooms close to but not in Manhattan. A current example of this is Brooklyn, a good bet for new or converted hotel rooms, especially with the construction of The Barclay’s Center. In other markets, one might wish to consider a prime location with an older property that has fallen into disrepair or lack or high vacancy. Buying those hotels both on “the cheap” and repositioning them, or renovating them and “putting a flag on them” (i.e. Marriott, Wyndham, etc.) could be an opportunity as well.

 

 

 

Posted on by Jacob Frydman in Commercial Real Estate, Hotels Leave a comment