The Benefits of Real Estate Investing

David Moore: Once again, David Moore, Equity Advantage, here with Robert Zink, Zink Realty Advisors, and we’ve been talking about real estate, how Bob got started, the wonderful helicopter. I love that story. And we’re going to talk about real estate.

So right now, we’re in a situation the last few days stock market’s been a little bit crazy, and I don’t know if you in the audience, we have a couple of different business in here, one that handles tax deferred exchanges and one that does retirement accounts. And anytime we have whoop-de-doos in the stock market, the retirement side of our business sort of warms up.

David Moore: So with that said, tell me about real estate. Why real estate? Why real estate today in your mind. And you did mention your tenants buying a property, but you’ve got lots of other benefits too.

Robert Zink: Well, I think real estate gives us more benefits than the stock market typically. I mean you have appreciation, debt reduction, the ability to change the use, improve the property, and over time, our tenants, ours as I mentioned earlier, paying off the loan and making the mortgage payment and making those payments for us. But real estate is just a more flexible vehicle than the stock market and typically isn’t as volatile as the stock market. Anything can happen, but you’re still paying off the loan and all of that.

David Moore: So this sort of bundle of benefits you talked about, I was always taught never to bank on appreciation, but as we said, typically, you’re going to have that happen anyway if you hang onto things long enough. Now, so if we look at that, what would provide a problem, I guess, in real estate is leverage, and I joke when I was a kid, probably when you were a kid too, if we can buy something with nothing down, we’re going to.

Robert Zink: Right.

David Moore: And today, we’re probably not going to do that because we don’t need the brain damage or our wives getting on us about losing something, and so the debt can be your best friend, your worst enemy.

Robert Zink: Right. And I think as we get older, we’re just more conservative. We don’t need to take those risks so we have less debt, sometimes no debt. Sometimes people want their property free and clear, and that’s fine. Often times, they see 40, 50% debt, or across a portfolio, you might have no debt on one end and some debt on the other end which is one of my client’s attitude towards it. They’ll have a mix of debt and kind of all averages out to 40, 50% debt.

David Moore: So Bob, in today’s world, where do you think we’re headed because your background is not that much different than mine. I mean you were a professional in the real estate community where I was more the investor/consumer on that. So you talked about some of your limited partnership type stuff.

But if you look at that and you look at one of the things I loved about real estate was your ability anybody can get into real estate, investment real estate. And a lot of times somebody’s first investments, their home, maybe they get married, they have kids, the home’s too small, they move out, and that home now becomes an investment, and the next thing you know, they’re calling me up about a 1031 exchange growing that thing.

David Moore: But in today’s political world, we’ve got things that are impacting that little person’s ability to get started or to maybe grow things. What do you see happening out there with let’s say, let’s just break it down more to residential investment property versus other things because typically, we’re talking bigger investors, deeper pockets with industrial and those things.

Robert Zink: Yes, David, I think most people in real estate start in rental houses, duplexes, fourplexes, or a small plex of some kind. And historically, we could get into one of those for small amounts of money, and today, with appreciation, it takes a lot of money to even buy a rental house. A rental house in Portland could be two to $400,000, which means a pretty significant down payment. And then once you own it, you’ve got all these hassles of tenants and toilets and government intervention and all.

So we’re seeing people gravitating to other vehicles such as we mentioned earlier, the DST market where you own a piece of something, and there’s a large provider taking care of that property for you. So they look after the property, the tenants, the mortgage, the maintenance, all of those things. So it’s not just the cost but also a lot of us, as we get older would like to spend time traveling with our spouse, seeing our grandkids, and enjoying the fruits of the labor of all this hard work of having those rentals over time.

David Moore: Definitely. Definitely. Well, any investment professional is going to talk about diversification, whether we’re talking Wall Street, real estate, or Wall Street and real estate. But the thing is if you look at the investment world, the real estate doesn’t really pick up that much if somebody’s, especially if we’re talking about retirement portfolios.

But to diversify, just the last few days with the whoop-de-doos in the stock market, I’m looking at it, and every morning, I get up, and my wife tells me not to, but I don’t listen to her, of course. So I have to look at my phone to see what the stock quotes are and where we are with everything, and it sort of puts my mood in positive or negative for that day.

Robert Zink: Right.

David Moore: Unfortunately. So I got to look at it. But I always like the real estate in just from the perspective that I felt like, hey, this is something tangible. It’s there. And when I’m buying it, I’m not going to buy it unless I know what I’m going to do with it. What am I going to make? How am I going to make it? When am I going to make it? And if I can’t answer questions, don’t buy it.

But those things are starting to get tied down by government regulation and cost, and I’m seeing just this movement where the investment property owner is looked at as the bad guy, and everything’s leading to more cost. So I think you’re working in another very interesting field, the DST market, and we’ll hit that in the next segment, but I think it’s really interesting to see where that world’s going and giving people a place to go. And ultimately, it adds liquidity to a marketplace, and I think that’s good for everybody.

Robert Zink: Right.

David Moore: Anyway, thank you. And once again, David Moore and Robert Zink, Zink Realty Advisors, and thank you for being here with us today.

Robert Zink: Thank you.