I have a very diverse network of friends. I have an even more diverse network of acquaintances. Yesterday I happened to run into an acquaintance (a friend of a friend) who I've know for a few years. His official title is "Financial Adviser", but what he really does and is really good at is picking stocks and bonds.
We happened to run into each other at Starbucks and we sat for a few minutes and chatted. He's been gracious to me in the past and referred to me a couple of potential clients. Unfortunately for me they were very small jobs and it was actually better for me to refer them directly to a few of my contractors. I've referred a few friends to my friend, who he happens to actually work for.
We were sitting discussing what's been happening in our business lives over the past few months. We are both in industries that have been on quite a roller coaster ride the past few years. I asked him his thoughts on oil, equities (stocks), bonds and gold. He shared his thoughts (sorry, a verbal non-disclosure agreement exists between us) and then he asked me mine. I shared with him what I think home building is going to do (not move very much). He asked why people are still building - I explained that there are still people who want what they want but there are many more people who want a deal - and we discussed in detail about both his area of town and mine. We then discussed the resale market and remodeling (he lives in an older section of town where people remodel because they cannot build).
We were winding down our conversation and he brought up a hedge fund titan who had started making some very bold recommendations when it came to residential real estate. DISCLOSURE TIME: neither I nor he is recommending that you do, or do not, do the following. He said that this guy, who made literally billions during the downturn, was recommending that people purchase a first home, a second home, a third home and if they can afford it even more. His other piece of investment advice is that if you couldn't own additional homes, then lend money to people so that you can at least be involved in the ownership. He stated that this gentleman believes that we are at such a bottom in the real estate market right now and that there are so many people who are going to be wanting to purchase homes in the near (1-2 years?) future that to not own multiple homes is crazy.
I found our conversation very interesting because there seems to be a slew of people in his industry and mine that have very divergent views of what the future will hold. I believe that the residential rental market will continue to be strong for a long time. If you are looking for an investment property and you want to be a landlord, the numbers look very good. If you do not want to be a landlord, then you can still participate by hiring a property management company to be the landlord for you (yes, I offer those services to my clients) but the cash flow is reduced by those property management fees. He asked me for a good mortgage lender because we discussed some financing options for some of his rentals and I obliged.
We both stood up and stated that it had been too long and that we should do "this" more often. I agreed and as a final question asked him if he was going to act on the hedge fund head's statement about real estate. He said that although it was interesting, he was going to gather more information before he reacted. I thought that his choice of words was very good. And I'm going to reiterate those to you: don't react. Gather your information from someone you can trust, work with someone who knows what they're doing and work on an action plan with that person. Once you are in a position where you need to react, you're actually in a much weaker position because what you're dealing with is now controlling the situation.
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