Have we already forgotten the Great Recession and the lessons learned?
It seems that money is flowing all around us, like oil gushing out the top of Spindletop- one of the most famous wells of the Texas oil boom.
It’s easy to see that the economy has indeed recovered nicely, with the Dow up to 17,151.60 from 6,547.05, oil at a profitable $100.97 per barrel yet not terribly painful for the consumer, the unemployment rate down to 6.1%, and 30-year interest rates of 4.29%.
With all the money made over the last few years it can be easy to forget about the money lost during the Great Recession and even repeat the same mistakes that got many of us into trouble in the first place. In the Great Recession, many investors did not understand the complex financial products they purchased and were devastated to find out that many of the “safer” products they purchased ended up being some of the most toxic. This was because the bond credit rating agencies allowed “C” rated investments to be pooled together then sliced, diced, repackaged, and then come out with a portion of that pool to come back out with an “A” rating.
Now once again eager for a return on their money, investors are chasing yield and buying financial products with no idea about the underlying asset or derivatives of the pooled assets in which they have invested.
Do you know actually know what comprises that emerging debt fund or that high yield fund you invested in? Hopefully you do not have any Argentinean bond exposure.
Get active about managing your money and know what it is you are buying. As a real estate professional, I am biased about real estate investing
. However, I know that when the real estate market goes south, as all markets do, I can make changes as needed to weather the storm. This is compared to having no control with a foreign government defaulting on their bonds in a fund one unknowingly invested in as part of a “diversified portfolio”.
I recommend buying properties in an area
that you are familiar with. Talk to brokers about what is going on in the area and about potential investments. Make sure that it is in an area where there is demand for this product and there is not an over-supply of properties available for lease. You will have a variety of product types to choose from ranging from residential, office, industrial, and retail. Properties may be purchased already leased with tenants or empty ranging with returns verifying greatly upon lease term, tenant credit, property type, age of asset, building condition, and location.
Richmond Collinsworth is a Vice President for Bradford Companies and specializes in Office Project Leasing. Office Leasing, Corporate Office, 9400 NCX, Suite 500, Dallas, TX 75231, Ph: 972.776.7041
August 4, 2014