Real Estate Investment - When is the Bottom Really the Bottom?

The real estate market continues to spiral downward on its way to bottom. Every day, the press continues to report more and more bad news. Foreclosure rates are up and home sales are down over last year. "Short sale" has become an all-to-familiar phrase in the industry. The question that is being asked is, "When will the value of real estate stabilize?" Can anyone accurately predict when the market will actually will reach bottom?

The press and most others are not asking the right questions. The real estate market should not be considered as one giant ocean without tributaries, but rather as streams and rivers representing local markets that flow together to form that larger body known as the real estate market.

In some small towns, the local market can be made up of an entire town. It doesn't matter whether the house is located on "A" Avenue or clear cross town on "P" Street. Relative value would not be affected by location. In larger towns or small cities, neighborhoods would govern "locational" values. While in larger cities, two perpendicular streets may each have different value.

The type of real estate investment also reflects what market a property is in. A single family house, an office building or a mall are all different markets even if they are in the same town or neighborhood. Each property's value will depend on these factors. Is there any wonder why it is so hard to predict when the nation will hit "bottom"?

Real estate is a unique form of investment. As I have written, it takes many different forms when considered as an investment. If you consider income producing properties, then the value can only ultimately increase as much or as fast as the income it produces. The market corrects relatively quickly because the income of the property can not sustain the debt service on the borrowed funds at the inflated price. Investment real estate is a business, i.e. income must be more than expenses in more years than not to be sustainable. Consequently, you can only hype that product for so long before the bubble pops.

The home market is a different story. It takes longer to correct because it is farther away from a "perfect" market. Primary or secondary residential properties do not produce income from tenants. However, they do have expenses such as real estate taxes, insurance and debt service. As prices for these properties escalate, so do the expenses, especially the debt service. However, as prices escalate, fewer and fewer people can afford to buy the asset since, in a perfect market, they would not qualify for financing. As we saw, though, this controlling mechanism was abated by banks and government lowering lending standards, reducing down payment requirements, and having low initial interest rates on loans. These artificial mechanisms allowed more and more people to qualify for homeownership which then consequently bid up the value of homes to an unsustainable high. When the inevitable downturn occurred due to the combination of oversupply, the price of oil and higher interest rates, the boom turned to a bust and we have a falling market.

Many factors will influence when the bottoming of the broader market will occur. That question, like others posed by the press, is irrelevant to the investor. You can not time the real estate market any more than you can time the stock market. Each purchase or sale must be evaluated through the unique prism of the time, place and circumstances when it is occurring. If, after thoughtful analysis, it doesn't make economic sense, then the investment should not be made or a current holding should be sold. Too often we see what we want or hope to see rather than what is actually there.

Thomas F. Campenni CPM, CCIM has more than 35 years of experience as a broker and is licensed in Florida, New York, New Jersey and Connecticut. Since 1992, Tom's focus has been working with a smaller client base so that he can provide the kind of individualized service that results in greater return for his clients and, consequently, greater client satisfaction. In addition to his real estate brokers' licenses, Tom also holds insurance licenses in New York and Florida and has earned the CCIM (Certified Commercial Investment Member) and CPM (Certified Property Manager) designations. Please visit http://www.thomascampenni.com or email him at Tom@thomascampenni.com for additional information.

Triple Bottom Line and One Human World on the Same Page

Triple Bottom Line is a concept that has been floated that would take into consideration "People, Planet and Profits" when assisting emerging nations and as the World grows closer together. Environmental issues and capacity on the Planet are a serious issue with 10 Billion humans expected to inhabit the surface of the planet in the next few decades.

Not long ago a graduate student approached the Online Think Tank to become a member. He is preparing for his PhD paper now and is an International Law student, as well as a volunteer in philanthropic endeavors. The Triple Bottom Line Concept is of interest and yet we have a few questions to ask about this plan. Indeed, the world should also be asking these things of those who wish to run human civilizations, or who wish to work with those who plan on using this strategy. Here are the questions to ask them:

1. Have you ever created a law for any nation-state, civilization or society that was made mandatory?

2. What are your thoughts of lawyers eventually hijacking the law, have you seen examples of this?

3. Do you believe that laws are created to maintain the status quo, increase wealth for those who run things or to help people?

4. What do you think about "pollution credit" trading schemes?

5. Do you believe in Global Warming (caused by mankind's CO2 output)?

6. What are your thoughts on property right laws for African Nations, Indonesia, Outback Australia, to increase economics?

7. What are your beliefs on Micro-Loan Programs?

8. If the Humans are to have one set of laws on such things as human rights, environmental issues, monetary flows, and property rights then do you believe that these should all encompass a basic fundamental set of principles in your 3TBM theory?

9. When you say 3BM at the unit level or individual human, do you mean "responsibility- do what is best for all concerned including the environment" or actual law, how will you enforce this? Withholding of money, food, status or thru some sort of social control mechanism or mob mentality respect scheme?

10. Can you explain in your own words how you see the integration of People, Profits and Planet? Marketing issues, to get everyone on the same page?

11. Have you read Ayn Rand and considered the reasoning against the 3TBM strategy and how to overcome human nature?

12. Would you advise to withhold WTO participation, EU joining, use of a one-world currency, banning of certain capital markets if a nation-state failed to comply with minimum environmental requirements? If so have you considered the damage to the individual citizens of those countries? If the citizens overthrow the government for non-compliance, deaths will occur, is this justified?

13. If every nation attempts to become a knowledge based society, in an effort to curb pollution, will the supply of knowledge and technology (clean industries) be so competitive artificially, that it will not be worth anything, thus price points will not support a positive quality of life?

14. If the nations who do not comply make things, without consideration of environment or discharge themselves from the rest of the world, will the black market for those products they make, make these nations so wealthy that they do not need capital anyway, thus holding it back will be irrelevant?

15. There is nothing wrong with making a profit, indeed Triple Bottom Line states this, however if some nations now are making a profit partly thru lax pollution mandates, will they comply or will they crumble during the change-over?

16. Who will pay the costs of upgrading the polluting factories, energy making companies, transportation items? Will these costs act as an overall cost and increase inflation artificially?

17. How much inflation can the industrialized nations take, how much can the third world endure?

18. Does Triple Bottom Line have a scheme or plan for reducing the production rates of human beings - will people be paid not to procreate?

19. What are your thoughts of setting up the Triple Bottom Line concept as part of a "nation-state Franchisee Package" which included benefits upon signing of capital, legal system and government set up, with expertise for infrastructures - Education, Transportation, Distribution, Communication, Water, Sewer, Security, Health, Common Currency, Energy.

20. What happens to a country, which fails to comply with a World Wide Triple Bottom Line agreement? Do you repossess it? Who would do this? Do you discharge it? What happens when all the rogue nations get together and have political impasse with the Triple Bottom Line member nations in good standing.

21. What are your thoughts on the collapse of the league of nations? What are your thoughts on the UN in the present period? Is it time to upgrade? Are we doomed to repeat?

22. What Triple Bottom Line policies do you feel are needed for environmental protection in the Nano-tech manufacturing of materials or in Bio-tech?

23. How does Triple Bottom Line view nuclear energy and the long-term storage of depleted material?

24. Who will decide how much a nation's "Natural Capital" is worth? What is the scheme or actual numbers of this, more importantly who gets to decide and Why?

25. Will leaders of a nation be held accountable for some law that depletes social capital? If so, does that mean all nations have no choice but to be democracies? If so, who controls the media? Will the media be held accountable or controlled by the system? Who runs the system? Since they will be running all human civilizations at that point, will they be held accountable to the society? If so what will be their penalty, who decides, how can we trust who decides? If the media is controlled to control the minds of humans in justification of the Triple Bottom Line plan, then what are your feelings of freedom of the press? If someone goes against the social control, how can they be penalized? Will they be dismissed from society and be forced to join the rogue nation state block?

26. So that we understand you points in these questions, would you call your perspective coming from that of a Communist, Socialist, Capitalist, Anarchist, or some other hybrid label?

27. If the Kyoto could not be ratified, why does the Triple Bottom Line have a better chance?

28. Will the Triple Bottom Line concept pay for the people in the nations who are forced to stop producing, since their production pollutes, until which time they can be switched over? If the switch over takes 20 years due to training and generational issues, will that now welfare nation-state ever be able to produce at optimum in the future? Is the total GDP for the entire world enough to pay for 50 nations that produce little or nothing for the next 30-40 years while their upgrades take place, in order to prevent them from clear cutting, over fishing, strip mining, etc.? How much money is committed already to this Utopian plan? Since the number is Zero, where do you propose we get it? Will you make laws on some nations to foot the bill? Will this tax on those nations hurt their quality of life?

29. Do you believe that those who live well in the first world are willing to give up what they have built to pay other nation's people to re-train, stop polluting, etc.? What do you base this belief on?

30. Being a good corporate citizen is indeed a Branding issue, which means some social control is exerted thru purchasing power, voting with their money, but when some corporations do not care, they might choose to benefit by lower costs and increase market share over "good" competitors?

These are questions that our Online Think Tank would like to ask them about the Triple Bottom Line plan. Perhaps they might ask themselves the same thing? What questions do you have for them today? It is important to plan ahead and it is paramount not to fail. Sincerely, Lance.

"Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/. Lance is an online writer in retirement.