Which investment strategy?

Asked by George, Norwalk, CT Sun Sep 30, 2007

I'm building a house in Norwalk, CT that should be worth $525k upon completion in Feb assuming no market crash. I also have about $300k in securities and cash. I have a chronic illness that precludes a lot of exertion and stress like running around chasing down deals constantly. Given those facts I'm wondering what would be a good investment strategy for me. I'm thinking tax liens, foreclosures, buying notes at discount. I'm pessimistic about the US economy so I'm not averse to investing in Canada or Mexico.

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Holly Grigai…, Agent, Cottonwood, AZ
Thu Nov 15, 2007
Canada has some very interesting dynamics right now....definitely something to look into!

Notes- I work in a retirement area where there are a lot of investors/individuals who are at a place in life where they just do not want to deal with the hassles of renting, remodeling or developing.....so they become the "angels" (originating loans instead of buying existing ones) of the younger generation of area investors through private notes. It works great...the real estate is local, so there is a much greater level of comfort because they already know the market, are familiar with the area or neighborhood, and they have the ability to watch a project progress... Arizona also has a streamlined foreclosure process which only takes 90 days...and costs are usually only 1000-2000...., which makes recovery of an investment gone awry much easier to recover from. If you are investing in discount notes, know the state laws of foreclosure and lending...and give the area a through once over by cruising MLS listings in the area, but notes, whether you buy or originate them, would be a nice armchair investment occupation.
Tax liens...You need to check the property carefully and sometimes the interest rates at the auctions are bid so low, you may do better with a bank savings acct! Even though your chances of acquiring a property via a tax foreclosure are very slim...many times the land acquired has been deemed worthless or has some major issue (people sometimes get rid of "worthless land" by purposely letting it go to a tax sale). I have seen people acquire 12 ft strips, river bottoms and brownfields. but I have also seen people acquire a home for 1% of it's value and those who acquired worthless land for 150$ in back taxes...sell it for 12-20K 5-10 years later. But you will have to constantly buy new liens, because most of them will be redeemed long before they go to sale.
Whether or not foreclosures will make sense or not, depends on the market they are located in, but in my experience, they are more of a hands on investment in order to be profitable. This may not be the best option for you.
Hope that helps!
0 votes
Ginger R., Home Seller, Massachusetts
Thu Nov 15, 2007
If you have $525K in real estate, and $300K in securites and cash, you may want to leave the $300K in securities and cash, for diversification purposes. You need to talk with an overall financial advisor, who will look at total assets and income stream, as well as your objectives, and can make recommendations.
Personally, I am bullish on real estate but non-diversification in a volatile market is a high risk (albeit possibly high reward) strategy. And if you do decide to go long further in real estate assets, pay close attention to cash flow. You may need it.
0 votes
Linda A. Cap…, Agent, East Norwalk, CT
Wed Nov 14, 2007
Hello George,
Buying and selling real estate still seems to be a good investment and with the internet at your fingertips, it really is quite easy to shop from home (so to speak). With the aid of a good Realtor, who has an in-depth knowledge of the local market place and a good computer, and a sharp real estate attorney, you can buy and sell properties. As far as foreclosures, they are plentiful for sure, however, you really should do a lot of research to uncover any and all debt owed and know the area well enough to determine what the market value is. The other down side to foreclosures these days, is that in many cases, the debt exceeds the value. Sadly, a result of too creative, creative financing.
If I can be of further assistance, please feel free to contact me directly (203)515-0277 or by email.
Kindest regards, Linda Cappello, Realtor, GRI, ABR, Notary
0 votes
Brandie, , San Francisco Bay Area
Sun Sep 30, 2007
Hi George,

Sorry to read of your illness.

I'm sure you will get many real estate related answers given this site. Mine would be one of them. First, are you looking for short term or long term investments? That could change some of the answers.

Personally, after consulting a diverse group of non-biased professionals, I might look for an opportunity fund - what some may call a 'vulture' fund - to make investments in real estate, specifically single family housing. Regardless of the swirl, real estate will remain a great long-term investment (people will always need housing, right?) I would bet you can count on ~10% gain per year if you were to stay in for ~10 years. Also, I would shy away from commercial investments right now due to the compressed cap margins.

Housing in Mexico is also doing well. Financing can be tricky and rates a bit high, but with the the Mexican Government creating the fideicomiso you can own property. Speculators seem to have driven the market up over the last few years, so I'm not sure what appreciation you would see moving forward - but I'm happy to refer you to some people I know that can give you deeper information if you like. I can also refer you to trusts I know of, if that is of interest.

Hope that helps!

Brandie
Brandie@northpointgroup.com
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