What's Your Investment Strategy for 2013?
The U.S. economy and real estate markets are sending
confusing signals but using the right strategy could really
pay off for real estate investors. The question is, what's
your investment strategy going to be in 2013?
Fortunately, we have Chris Lee , a Value Hound Academy
Advisory Board member and contributor, to shed some
light on this vexing subject. Chris publishes a regular
newsletter called the Strategic Advantage and recently
wrote a very compelling article that is a must read - for
all real estate professionals.
Here's a quick overview of the article, and a link for you
“Run For Your Life”…“Tread Water”…“Go All In”
By: Christopher Lee
Life in the real estate industry is all about risks
hiring talent, selecting partners, identifying investments,
incurring debt, terms & conditions, to pricing. Real estate
is a game of calculations, maneuvers, assessments, stra-
tegy and decisions. As T.S. Eliot said, “Only those who will
risk going too far can possibly find out how far one can go.”
Over the past 40 years, the real estate industry has been
defined (and maligned) by those who do not want to be
ordinary. The entrepreneurial risk-takers and the 10Xers,
as Jim Collins would label them, have been rewarded.
However, as we get ready for 2013, this time it is different.
This time the road less travelled may not be worth taking,
or maintaining status quo may have far more risk than
going all in. Opportunities seem hard to find because of
an increasing reliance on heuristics. Indeed, these are
uncertain times when selecting the right strategy can
be the difference between success and failure.
Knowing “what is next” or “what is around the corner”
can be a daunting challenge for those possessed by
dubitare (i.e. doubt/hesitation). Today we are at a tipping
point between more of the same and an era of endless
While the future of the real estate industry is assured,
the journey and how-to-get-there are in doubt. The
determination of success over the next five to seven
years will be based on strategy not tactics, actions not
theories, leadership not fellowship, psychographics not
demographics, and goals not hypotheticals. Now is the
time to shed cognitive bias and take control of your
destiny. Failure to develop and execute the proper
strategies ultimately will result in becoming Sisyphus
We have a fragile economy with an increasing probability
of becoming recessionary by 1Q/2Q 2013. We have
subdued expectations for economic growth. QE3, the
$480 billion fiscal rescue of choice, not necessity, by
the Fed ($40 billion a month until there is a substantial
turn in job growth) is a report card on the failure of the
current economic policies to revitalize the economy.
The Fed’s balance sheet has risen to nearly $3 trillion
from less than $1 trillion before the fiscal crisis. Re-
member that the Fed holds $1.64 trillion of government
debt (as of early September 2012), and as a result has
reduced government interest expense and size of the
government’s operating deficit ($1.164 trillion for the first
11 months of fiscal 2012). Today the Fed owns $1 out of
$6 of the national debt…the largest percentage in history.
Eventually interest rates will rise, and I expect by 2017 –
2018 net interest expense could rise to nearly 3% of
GDP…the highest level since 1948. The Fed’s QE3
bailout of excessive government spending distorts
reality, and real estate entrepreneurs are uncertain
whether to buy, sell or hunker down. Inflation risks
have increased with the QE3 decision.
We continue to muddle through an anemic economic
jobless recovery, and the 20 million or so unemployed
or under-employed Americans are becoming frustrated
and disillusioned. We have a Federal Reserve that,
according to many analysts, is “out of tricks,” and daily
we experience the results of political gridlock, unpre-
cedented deficit spending and the pending Taxmageddon
in 2013. While I expect a more traditional economic
recovery to begin in 2014, the current malaise is, unfor-
tunately, consistent with past real estate cycles.
what can one do?
What are the options and macro
trends to be considered for 2013 and beyond? Is this a
good or bad time to invest in real estate? Is this the best
or worst time to undertake growth initiatives? Is this the
best time to hire or maintain the status quo? Is this the
best time to accelerate new initiatives or curtail existing
activities? Is this the perfect time to sit on the sidelines
and wait for a more certain future or take advantage of
turmoil and chaos?
The answer to these and other questions asked by many
readers is the basis for this month’s issue of
I hope this information serves you. I look forward to helping
you reach for the stars!
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