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Liquid Investors Should Increase Real Estate Allocation Now

September 14, 2009

George Heery Founding Partner

George Heery Founding Partner

This article was first published August 20, 2009.  Since then, concerns that equity markets have irrational heights are better documented.  Our point is to underscore that despite the risks of real estate investment, there is a unique investment opportunity right now.

The illiquidity risk associated with real estate and how leverage increases the volatility of this risk is keeping many otherwise liquid investors out of the market. Investors’ fears are rational and amplified by the current market conditions. A recent estimate by Deutsche Bank predicts that by the 1st Quarter of 2011, 48% of homeowner/mortgagors in the United States might be under water.

With negative equity pervasive, it seems implausible the National Association of Realtors is right that prices will bottom out in early 2011. Heery Brothers will outline how asset allocation to cash, stocks and fixed income instruments can work in consort with prudent direct ownership of investment property. The net result can be less risk and less volatility with comparable or better returns. It is clear that pricing is favorable and an over correction is likely over the next 6 to 12 months. Don’t wait for this excellent blend of a low cost of capital and low prices to lose its elixir.

Please read the rest of this story  and see relevant charts by clicking on the Heery Brothers’ blog.

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