Real Estate Update: National Trends

I heard this morning that home sales transactions are up and average home values down. I suggest that the gap between buyer's and seller's is narrowing.

Real Estate Strategy: Should I Partner?

I get this question a lot as I help "investors" in real estate. You see, I believe whether you are a user of real estate or a hands-length investor, if you are buying real estate, it is an investment -- therefore, you're an "investor". Some transactions could use more capital than what one party has or desires to use for the purchase. If more capital is needed, then the options are more leverage or more equity.

Sometimes even if the deal is leveraged to the max, one single investor just cannot come up with the required equity. Then his or her option is to raise more money through additional owner/members. When dealing with other investors you might want to consider the following:

How much do I know about my partner?

Do they have experience in dealing with real estate?

Does he have the financial strength to back up his obligations?

Are our goals in alignment?

Who makes decisions? How are they made?

What if there is a conflict? How is it resolved?

That is not a conclusive list of questions, and frankly in most cases you and the partnership will draft a business operating agreement. The operating agreement spells out in some detail the processes that the partnership should follow as they own the investment. Basically, it is important to not enter into a partnership relationship lightly. Partnerships have opportunities for conflict. However, if operated properly, partnerships offer a way to buy larger properties or diversify a portfolio.

Today, investors are facing very difficult lending conditions and partnerships offer some benefit to the lender. For example if the loan is issued joint and severally, then the lender is secured by all parties who sign the note. Additionally, loans are typically not leveraged as high today as prior, so more equity is required. If you are like me, my pockets only go so deep.

Real Estate Facts: Industrial, Manufacturing Index Update

The manufacturing index compiled by the Institute for Supply Management (shown below) shows an improving industrial climate since just before the turn of 2009. This index can be used to show future need for industrial real estate like office/warehouses, distribution centers, and manufacturing facilities.

While the chart shows a national perspective, the climate here in Birmingham, Alabama does not see to have fared as poorly up to the 2009 point. According to the Graham Report, Birmingham's industrial buildings and service center buildings had an increased occupancy where bulk distribution and office/warehouse products showed decline.


In spite of continued negative media space, there is hope of improvement in the near-ish future. If the demand for space in Birmingham keeps with the national upward pace and developers don't rush to oversupply, the industrial market should firm up and create opportunity for conservative new development within a reasonable time frame. I am hesitant to call a time yet since the national curve has just made the turn, but once we get twelve or so months of positive demand, we should be able to better predict supply opportunities.

How to be an underdog.

"He wasn't even on the radar!" I thought after reading about the number one seeded Rafael Nadal's defeat against 23rd seed Robin Soderling. I am not an avid tennis follower but I know this shouldn't have happened. After all we're not talking about college basketball where a "Cinderella story" is commonplace.

After reading about the unexpected match, I began to think about attributes that contribute to an underdog's success.

First, you need to believe. Believe in your abilities to win. Not necessarily the whole match, but one stroke at a time. Focus on the task in front of you that is accomplishable. After all, great success is merely many smaller successes that reach a collective result.

Next, the underdog is unaware of his underdog-ness. He isn't listening to the media, fans, or even a teammate who is talking about "reality". The reality is either you will win or lose, and you might as well try to win.

The underdog is a student of his game. He finds a weakness in competition that no one else has found or validated. He exploited the weakness for wins.

Finally, he just hits it over the net. A few weeks ago, I heard an interview of world renowned tennis coach Nick Bollettieri. When he was asked about the best thing an amateur player can do to improve his or her game, he instructed to worry about getting the ball over the net and in the back court time after time. Eventually, your opponent will mess up!

If you are a practitioner in real estate these days you might feel like an underdog. It doesn't matter if you're a broker, manager, or equity investor. You are pounded with folks telling you about the severity of the market. I confess, I have been a Debbie Downer myself. In spite of the broad brush of negativity, you must believe. Really? We are talking about real estate here... In America... Real estate is probably one of the oldest industries since we always use it even in agrarian times and America who is even still one of the best economies in the world.

Be aware of your surroundings, but don't give in to being an underdog. If you are a broker, find the "value add" that you offer and tell your story. If you are an investor, find a deal. The deal may look different than it did a few years ago. That's okay, you learned something about qualifying a good deal; now implement it for success.

Study your client and find out what his or her needs are. Then as mentioned above, add value to their business. Don't get stuck thinking that you can promote or complete a deal the same way you did before. Times change and it's time to be agile. Learn from history and innovate the future!

Finally, "hit it over the net". Show up and keep playing. There are deals to be done, do you want to be included? Folks, I am speaking to myself here. Some days I don't want to show up, I would close a deal for a warm lunch! Keep playing. If you don't try, you know what you will get. Investors and brokers this is for you both; KEEP HITTING THE BALL!