A Bigger Picture Look By William R. Gorman

A Bigger Picture Look

BY WILLIAM R. GORMAN REAL ESTATE BROKER/ OWNER/INVESTOR

As a real estate investor, you have to look at all of the trends, and that includes taking into account the economy and the prospects of inflation/deflation.

We are already seeing a rise in interest rates beginning to climb upwards as the Federal Reserve tries to curb the worst inflation in 40 years. We all know that higher interest rates tend to slow down real estate sales and cause a drop in prices.

On the other hand, real estate has long been considered a safe haven against inflation. But is that enough? What does the bigger picture look like? Are there other actions to be taken to further ensure our financial security?

Over 10 years ago I was introduced to a book that profoundly influenced my big picture thinking—Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown, co-authored by Robert Wiedemer, David Wiedemer, Ph.D., and Cindy Spitzer.

Now, in 2022, Wiedemer has coauthored a new book entitled, Fake Money, Real Danger: Protect Yourself and Grow Wealth While You Still Can. While this book’s focus is on stocks, I wanted to probe more deeply into other asset classes, especially real estate. So, I arranged for a conference call between him, myself, and my son, Tim.

The premise developed by the authors (Wiedemer, Dr. Wiedemer, and Spitzer) is that with the pandemic, our government has borrowed enormous amounts of money and engaged in unprecedented printing of money, aka “Fake Money.” This has served to inflate an already over-inflated market, thus putting us and the world economy on a path to significant future inflation and, ultimately, to surging interest rates.

When interest rates rise, this could pop the stock, bond, and real estate markets. In a very real sense, the bubble will burst!

The book explores the current financial predicament and offers a system for building wealth in a “Fake Money” bubble economy. Included are ways to continue to invest as the markets rise and how to identify growing danger signs.

One of the methodologies recommended by Wiedemer and his coauthors is to avoid picking individual stocks. Instead, consider an index fund that essentially leverages the entire market. Over time, these funds have been shown to have lower fees and better returns. With a bubble coming, you risk the chance of high losses in specific stocks. Plus, you could miss the rebound of the market when the market corrects.

In many ways, this is very similar to investing in a Delaware Statutory Trust (DST). The advantages include not only the ability to transact a 1031 exchange, but also the opportunity to diversify geographically and, if desired, into different types of income-producing properties.

Is this the only answer? No. However, it is an option and perhaps one way to mitigate risk should there be an economic meltdown, be it on a micro or a macro level.

No matter what you think about the prospects for the future, now is the time to take a look at your real estate portfolio and evaluate your options.

In my book, Cash In on the Myths of Real Estate, I listed first among my ways to grow as well as preserve wealth, the importance of having a real estate, as well as a financial plan. Both should be in writing, and both should be reviewed whenever there is the occurrence of such trigger events as rising interest rates and inflation.

Every property that you own should have a specific job to do. One may be your cash flow generator, while another provides certain tax advantages, and another has a significant upside sales potential. As the economic picture changes, you need to review and reevaluate each property’s ability to perform its assigned role and then quantify the outcomes.

This is the time, as well, to look at options and expand your horizons. Reading books like Fake Money, Real Danger: Protect Yourself and Grow Wealth While You Still Can, whether you agree with the authors or not, certainly makes you do some bigger picture thinking.

About the Author: William R. Gorman, MBA, CCIM, who founded WR Gorman & Associates in 1972, is joined by his son, Tim Gorman, who is a CPA and broker and Sonya Loera, Realtor, transaction coordinator and office manager.

Want to Hear More?

The “To the Next Level: Upping Your Resident Screening Game” session will take place from 2:15 p.m. to 3 p.m. on Friday, June 24, at Apartmentalize in San Diego. Amy Weissberger, Senior Vice President of Corporate Strategy at Morgan Properties, and Nikki Chambers, Director of Systems and Training at Hanover Co., will be the panelists. Chris Ramos, Director of Product Management for Experian, will moderate.

About the Author: Paul Willis is a Content Manager for LinnellTaylor Marketing.

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This Brea, California-based firm focuses on personalized wealth building through real estate. With a client-first philosophy, the firm serves as an expert resource for informed decision-making and transitioning that creates sustainable legacies for investors and their heirs. or below the ground such as the aquifer-rich region of central and coastal Orange County, Garden Grove, Santa Ana, Irvine, Huntington Beach, and Yorba Linda, to name a few.

Given these conditions, it’s clear that while earthquakes aren’t as predictable as fire season they still represent a significant threat of natural disaster. Each of us needs to do our part to ensure the safety of not only our property, but the economic and physical wellbeing of our community as well.

Are you concerned about the earthquake safety of your investment property? If so, contact Optimum Seismic to arrange a complimentary assessment of your building. This assessment by our team of experts will provide you with the information you need to make the decision that is right for you. Visit optimumseismic.com, or call us at 323-978-7664 to learn more.

About the Author: Ali Sahabi, a licensed General Engineering Contractor (GEC), is an expert in building resilience and sustainability. He is Co-Founder and Chief Operating Officer of Optimum Seismic, Inc., which provides seismic engineering, steel fabrication and retrofit construction services. Optimum Seismic has completed more than 3,500 seismic retrofit and renovation projects for multifamily residential, commercial, and industrial buildings throughout California.

Net Leases — continued from 32

charges from the Base Rent allows housing providers to effectively reduce their operating expenses, thereby raising their NOI and the value of their investment.

About the Author:

Please feel free to reach out with any questions to JD Property Management, Inc. (www.jdproperty.com) — Joe Decarlo, CPM, CCIM at Joe@jdproperty.com or (714) 751-2787 x 210; or Dimitri Amor, CPM, RMP at Damor@jdproperty.com or (714) 751-2787 x220.

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