Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Find Out How to Amazon-Proof Your Real Estate Portfolio

Housing-Market / US Housing Jul 07, 2017 - 06:21 PM GMT

By: Charles_Sizemore

Housing-Market I recently heard Amazon, the world’s largest online retailer, described as a “bull in a china shop” for the way it’s disrupted industry after industry.

But that’s really the wrong analogy. An angry bull lashes out erratically, goring or trampling whatever happens to be in front of it at the moment. Amazon is far too mechanical for that.

The better comparison for Amazon would be a steamroller. Like a steamroller, Amazon slowly and methodically flattens everything in its path.


Bookstores?

Obliterated.

Shopping malls?

On life support… and just barely.

Department stores?

Dying a painful death by 1,000 cuts.

Even grocery stores, convenience stores, and pharmacies – businesses long believed to be “Amazon-proof” – are now at risk of being run over.

With the entire brick-and-mortar retail economy seemingly under attack, retail-focused real estate investment trusts (REITs) have absolutely gotten smashed

National Retail Properties (NYSE: NNN) – an ultra-high-quality retail landlord I previously recommended in Boom & Bust but have been out of for a while – is down about 20% over the past year, even while the broader stock market is close to all-time highs. And National Retail is the bluest of the blue chips with exceptionally strong tenants.

Some of its more mediocre competitors are down significantly more. Spirit Realty Capital (NYSE: SRC) – which has weaker tenants more directly in Amazon’s path – has seen its stock sink by nearly half in the past year.

What’s the takeaway? Are we looking at a nightmare future of boarded-up shop fronts and decaying, dilapidated retail real estate?

Not exactly.

In fact, Warren Buffett’s Berkshire Hathaway just made a major investment in a retail-oriented REIT. There’s still a lot of value to be had in real estate, at least if you know what to avoid.

So today’s let’s go over some things to keep in mind when putting together an “Amazon-proof” portfolio.

#1: Focus on services.

Amazon drones won’t cut your hair or do your other half’s nails any time soon. Basic personal services, such as barbershops or hair and nail salons, tanning beds and even gyms and movie theaters are about as Amazon-proof as they come.

It’s worth noting that the REIT that Buffett purchased has about two-thirds of its portfolio in properties tied to the service sector.

Shopping malls have been dying for years. I don’t consider that up for debate. But the strip mall next to your house – the one that probably has a dentist, a Starbucks and a dry cleaner in it – should be just fine. Amazon is not realistically a threat here.

#2: Focus on demographics.

One of our specialties at Dent Research is using demographic data to forecast consumer spending, and this works phenomenally well with real estate.

Consider nursing homes or assisted-living facilities. With the aging of the Baby Boomers, it’s a foregone conclusion that demand for these kinds of properties is about to go through the roof.

There’s just one big problem with trying to invest in this space: the person picking up the tab is Uncle Sam, via the Medicare and Medicaid programs. And Uncle Sam can – and does – arbitrarily change the reimbursement rate he pays for services.

I have no interest in trying to invest in a nursing home operator. And, for that matter, I wouldn’t want to be a doctor these days either. The risk that the government changes the payment rate and grinds profits to nearly zero is a risk I’m not willing to take.

But I’m perfectly comfortable being the landlord in this situation. While the government is very likely to crimp profitability in the years ahead, it’s not likely to actually drive nursing home operators out of business. As a landlord, you don’t need your tenant to be loaded. You just need them to make enough money to continue paying the rent.

One of the most profitable recommendations in Boom & Bust’s history was in a REIT that specialized in skilled nursing properties.

And, not surprisingly, that same REIT recently popped up on my friend John Del Vecchio’s quality screen in his newsletter, Hidden Profits. (Learn more about John’s approach here.)

#3: Be careful with hotels, office buildings, and apartments.

President Trump will very emphatically tell you that he’s never personally been bankrupt, and I believe him. But in his career as a hotel and casino mogul, he’s had a handful of colossal failures.

Hotels and casinos tend to be expensive trophy assets that, because of their high purchase prices relative to the rent received, often fail to generate a reasonable return for their investors.

They’re also highly cyclical and get hit hard during recessions when business travelers and vacationers cut back on travel. The same is true of ritzy office buildings and high-priced luxury apartments.

Boring, distinctly non-sexy properties like storage units and warehouses often make far better investments than trophy assets because the rents collected tend to be high relative to the price paid for the properties.

So again, avoid trophy assets or REITs that buy trophy assets and focus instead on less exciting addresses that throw off a lot of cash.

#4: Remember, real estate is all about cash flow.

And, finally, remember that real estate is first and foremost an income investment.

This makes it perfect for my newsletter, Peak Income. I currently have three REIT investments in the model portfolio, and I’m looking to add a new one this one that has all of the characteristics I covered today: It’s service-based, is backed by strong demographic trends, is delightfully boring, and throws off a tremendous amount of cash every quarter.

And, most important of all, it’s Amazon-proof.

Click here to learn more about how you can get in on the action!

Charles Sizemore

 Portfolio Manager, Boom & Bust Investor

https://economyandmarkets.com/author/charles-sizemore/

Copyright © 2017 Charles_Sizemore - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in