May 30, 2024

Buy health care, drop commercial real estate amid post-Covid recovery: Chuck Lieberman



Published May 9, 2023, 10:40 a.m. by Courtney


Commercial real estate is one of the most lucrative investments a person can make. However, if you're not careful, you can end up losing a lot of money if you make poor choices.

When you're buying commercial real estate, you need to be aware of the risks involved. Here are some of the most common risks:

1. Poor Location: If the property is in a bad location, it's likely to lose money. You'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

2. Overpriced Properties: If the property is overpriced, you're likely to lose money. You'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

3. Bad Credit: If you have bad credit, you'll have a harder time getting a loan for a commercial property. This means that you'll have to pay more for the property.

4. Poor Maintenance: If the property is poorly maintained, it's likely to lose money. You'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

5. Poor Management: If the property is poorly managed, it's likely to lose money. You'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

6. Economic downturn: If the economy is bad, it's likely that commercial real estate will lose value. This means that you'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

7. Natural disasters: If there's a natural disaster, it's likely that commercial real estate will lose value. This means that you'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

8. Political instability: If there's political instability, it's likely that commercial real estate will lose value. This means that you'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

9. War: If there's a war, it's likely that commercial real estate will lose value. This means that you'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

10. Economic recession: If there's an economic recession, it's likely that commercial real estate will lose value. This means that you'll have to spend more money to fix the property, and you'll have a harder time getting tenants.

If you're buying commercial real estate, it's important to be aware of these risks. You can minimize these risks by following these tips:

1. Do your research: Before you buy any property, do your research. You need to know the market conditions, the zoning laws, and the history of the property.

2. Get a loan: Before you buy any property, get a loan. This will help you cover the costs of the property and protect you from risks.

3. Get insurance: Get insurance on the property. This will protect you from risks such as fire and theft.

4. Get a mortgage: If you want to buy a property outright, get a mortgage. This will protect you from risks such as interest rates and inflation.

5. Use a real estate agent: Use a real estate agent to help you buy the property and protect you from risks.

By following these tips, you can minimize the risks involved in buying commercial real estate.

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let's dig into the weakness that we're


seeing within the Financial Group even


on the back a better than expected


quarterly results from Goldman as well


as Bank of America but you can certainly


quibble with the quality at Goldman and


certainly investors are doing that our


next guest is actually spending a lot of


time doing homework within the


financials looking for opportunities


let's bring in check Lieberman he's


Chief investment officer and managing


partner at Advisors Capital Management


Chuck thanks so much for being with us a


lot of stress and anxiety about what are


the financials going to tell us about


the health of the financial system and


their ability to perform against that


backdrop on that measure what has your


key takeaway been of these Bank stocks


well unfortunately we're right in the


middle of the reporting season for the


banks we've gotten data from the large


Banks and as expected they saw big


deposit inflows coming presumably from


the smaller Banks which haven't reported


yet and that's where the stress is the


expectation is that the smaller banks


are going to see outflows they're going


to report deposit outflows that'll put


their balance sheets under a bit of


stress and the question is has the


market already discounted all of that


stress I would say though that hasn't


been that has been the narrative going


into it but not necessarily what has


shown up in results for example PNC


managed to grow deposits a little bit


Bank of America the Big Money Center


Bank saw deposits pull back uh from last


year so there's a little bit of kind of


muddling out there is is that maybe why


we're not seeing at least today kind of


that big rush into Bank of America even


though they were able to deliver in


other areas of their business


well I think we had a big bounce after


Friday's reports of the some of the


major Banks and those were much much


better than expected uh now we're just


bouncing around I think uh the ultimate


uh test will be as the smaller


institutions report because those are


widely expected to show sizable declines


in deposits pretty much across the board


it won't be as muddled as for the larger


institutions so that's where the the


rubber hits the road and and that's


where the concern is that if they see


lower deposits they can't afford to lend


as much and that'll hold back uh


investment in housing and real estate in


particular which are large focuses for


those Regional banks are you buying Bank


stocks today


well I bought a bank stock just a week


ago uh I put some more money into the


sector we bought shares in Fifth Third


which is a large relatively safe


Regional we see it as ultimately a


beneficiary of what's going on


um so yeah we see the banks is offering


very very good value at prevailing


prices Fifth Third


award in two days on anxiety issues like


loan growth and


you think that there's a good chance


that they're able to show some strength


well I think that the stock already


discounts a lot of weakness more


weakness than I think is deserved


within the financials group there's a


lot of concern about real estate


exposure we talked about this at the top


of the 10 o'clock hour that we're going


to start to hear more and more Banks


talk about things like commercial real


estate and their exposure there how are


you thinking about that piece of it


well there's no doubt that uh commercial


office space is very weak in the U.S


um we're seeing uh weakness pretty much


across the board obviously work from


home is part of the problem


um Rising rates is another part of the


problem uh so that part of the market is


very very weak but as a read analyst I


read recently argued that represents


three percent of all commercial real


estate there are lots and lots of other


sectors within commercial real estate


everything from shopping malls shopping


centers uh uh industrial properties of


apartment properties


there are many health care it's a very


very diverse sector and we don't find


any great value in the office space we


think there's some risk there


um I have done a little bottom fishing


in that sector with Vornado uh so we


have some exposure but the opportunity


the largest opportunity that I see is in


health care uh specifically in nursing


homes uh that sector got decimated


during the pandemic of course and since


then it's been coming back uh occupancy


is recovering their biggest problem is


it's tough finding workers they're


having to pay more for workers and


government payments for nursing homes is


rising but just not Rising very quickly


so that's put some pressure on


profitability let's talk about what well


you just want to use a stock is an


example of one of those ideas you're


holding's Omega health care I think is a


play on what you're talking about a


dividend yield of nearly 10 percent is


that sustainable


we actually own Omega we think that


dividend is sustainable and we expect


the uh the situation there to continue


to improve Rising occupancy Rising rates


uh ultimately we think this will pay off


in a big way


and generally people look to the reads


for income which is a major part of what


you do you you manage an income


portfolio what is the risk reward of


buying a Reit right now that yields say


six percent versus just putting it in


you know what's been popular to do at


least to talk about is just a six month


T bill


so in the case of a six-month T Bill


you're locking up that yield for six


months uh so in six months if


expectations of a recession proved to be


accurate uh six month T bills will then


yield much less than six percent


um in the case of a Reit


um that business is not going away uh


the ultimate


growth of that business will provide


more cash flow and there are lots of


companies in that yield range six


percent give or take where we expect to


see solid growth over the coming five


ten years so we think of of REITs as


vastly more attractive than treasuries


uh that's not to say you should ignore


the treasury markets it's obviously a


very safe it provides a high level of


assurance to investors so people who are


nervous about Market fluctuations or to


have some of their portfolio in very


safe fixed income but as Silicon Valley


proved just buying long-term safe


treasuries is not safe that's


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