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Why Your Clients Should Be Investing in Commercial Real Estate Right Now

By Jim Gillespie | August 26, 2009

In today’s economy many of your clients are looking for security, and it’s not easy for them to be certain about which investments will really provide this security for them. So because many investors own both stocks and commercial real estate, which of these two types of investments is the better one for your clients to be investing in right now? 

And in looking at this, before all of these government bailouts began we had much more of a free market economy going on. But these bailouts have been very kind to both Wall Street and to the banking and financial industries, while at the same time leaving the commercial real estate industry for the most part completely on its own. And these bailouts have definitely been masking how the stock market would have really been performing without the bailouts, too.

In a recent article in The Wall Street Journal, former hedge fund manager Andy Kessler may have summed it all up best when he said: 

“By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn’t put money directly into the stock market, but he didn’t have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn’t go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.” 

In addition, stock market analysts have done the calculations and have discovered that a recent $2.7 trillion jump in the value of equities in the stock market, corresponded with only a $400 billion drop during the exact same period in money market accounts. So where did this additional $2.3 trillion rise in the value of equities come from? From the bailout money being given to the U.S. banks and financial institutions, and the reinvestment of that money by these institutions directly back into the stock market! 

So the stock market is on much shakier ground than what most people believe right now, and these bailouts can’t keep this game going on forever. So there will come a time when the market will correct for all of this, and you don’t want to be holding your investments in the form of stocks when that time gets here. 

And since major, reputable companies aren’t paying much in dividends these days, the primary investment play in the stock market is in betting that stock values will be rising. And with the information we’ve just been discussing, that’s looking like a very risky bet for your clients to be making over the coming months. 

On the other hand, when your clients buy commercial property with tenants in place who will weather this economic downturn, their income from these properties will solidly beat any dividends they may be receiving from the most reputable companies. And when you combine this with knowing that the public will be waking up to what’s really been the underlying cause of the value of people’s stock portfolios rising…your clients will definitely want to be owning commercial real estate when that time gets here.

If you’re interested in producing even better results in your brokerage business by working with me one-on-one as your commercial real estate coach, send me an E-mail at JimGillespie2@Roadrunner.com


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