Why Real Estate?
The real-estate sector, for the first time in years, is serving as a beacon of relative strength in an otherwise weak economy. Things have definitely been looking up on the real estate front. Figures from S&P/Case-Shiller this week showed that home prices increased 1.2% for the 12 months through July and rebounded roughly 8% from their lows earlier this year. Meanwhile, existing home sales in August were up 9.3% compared to a year ago and the Zillow Rent Index showed that rents have risen almost 6% nationally over the past year. If you’re thinking about buying a single-family home, duplex or small apartment building for rental income and capital appreciation that’s like hitting a trifecta of favorable indicators.Many financial experts recommend that, for a diversified portfolio, real estate should be at least 20% of your portfolio. This can be achieved many different ways; through your personal home, residential or commercial rental property, or investments in real estate trust. With that in mind, here is how to play the real estate turnaround smartly in three main ways—investing in home builders, buying real-estate investment trusts and buying and managing individual properties.
The U.S. is in a period of sustained but very slow growth. Job reports are huge factors for real estate, because jobs create demand for housing, for offices, for travel and at retail establishments. We’re wary of things like retail and office, except in very unique circumstances. Multifamily real estate (apartment buildings) arguably had all the tail winds at its back to do the best of all asset classes. However, be careful. There is so much capital chasing multifamily, and that can lift prices beyond a point where your return is commensurate with risk.
We’re very cautious. You need to choose the right asset with the right manager with the right business plan. If you go and buy something because you think rents are going to go back to 2007 levels, that’s not a good strategy. Why invest in Charleston? It’s no longer a secret that Charleston is also one of the best places in the world to live and visit. Charleston has a diversity, sophistication, natural beauty and cultural richness that can be matched by few other U.S. cities. Vacationers,young professionals, retirees and investors from every walk of life from all over the world have taken notice. As a result, Charleston’s real estate market is one of the most robust markets in the U.S. and the investment potential is the strongest it has been in years. While some areas have recently seen a significant drop off in home sales, Charleston and its surrounding areas continue to grow and develop.
So we have established that everyone loves Charleston, and agents and investors will tell you it has remained one of the more stable markets in the country, but another crucial element in the Charleston investment model is its strict architectural review board. On the peninsula the city’s height restrictions, 50′ in residential areas and 55′ in commercial areas, and protected historic properties make the 365 degree investment area very tight. Using the basic economic rule of supply and demand when analyzing investment potential of a property, it’s simple: rare and desirable are key attributes of a successful portfolio. The third element of the Charleston investment trifecta is jobs. Charleston has traditionally had a somewhat limited job market. We are starting to see changes in the job market with large businesses such as Boeing and People Matter, a growing port, and an influx of entrepreneurs and creatives. We have a city where people want to live, access to cheap land in the surrounding areas, and a state that is lobbying for large businesses. Jobs are destined to follow. “Jack Chandler, global head of real estate, BlackRock "We’re very focused on cities we think are going to compete for jobs. As opposed to 2000 to 2006, when there was job growth everywhere, it’s much trickier. There is going to be a much bigger spread between the performance of winners and the losers. So the New York, San Francisco, Washington markets are pretty fully priced. Secondary assets in secondary locations — especially in areas that have not seen job growth resume — have seen a very small amount of interest from the capital markets.” It is also important to remember that every real estate transaction is an investment including your personal home. While people typically think of rental properties, commercial properties, or “fix and flips” as traditional investment properties your personal home also provides tax benefits and an opportunity to regain your “rent” (live for free) and often a great return on your initial investment. For every new construction property there is a historic home waiting to be restored to its former glory. There are also many historic duplexes and commercial properties restored or waiting to be. The number and variety of real estate opportunities in Charleston are endless and there is an investment to meet every buyers budget and needs.