The <i>Other</i> Real Estate Market

An article in yesterday's Wall Street Journal, "Why Investors Should Consider Real Estate," explains that the bloodbath in residential real estate doesn't necessarily mean that the same fate will befall commercial real estate.

We wholeheartedly agree.

"Though many flee, strength in some segments makes a case for REITs and other vehicles," the author writes.

According to AMG Data Services, "New money going into mutual funds that own real estate has plunged to just $2 million a week, on average, from nearly $400 million a week as recently as mid-February."

Ramifications are being felt. A headline in yesterday's Financial Times (FT) reads, "Fresh fears over subprime mortgage woes spreading."

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According to the FT, "Investors yesterday [Monday] expressed renewed concern about the U.S. subprime home mortgage market spreading to higher quality loans, following a stark profit warning from American Home Mortgage Investment Corp."

[Editor's Note: Expert: Residential Real Estate Will Fall 20% to 40%.]

But as Lord Rothschild once said, "Buy when there is blood in the street." And there are certainly buying opportunities out there. Even for the average investor.

Farallon Capital Management, the fifth largest U.S. hedge fund group, said it would buy the manufactured home community business of Affordable Residential Communities for about $1.8 billion.

Now, hedge funds such as Farallon are taking calculated risks in their purchase of Affordable Residential. We do not feel our readers should engage in such risks.

Indeed, we have warned our readers for many months that the residential housing bubble was headed for a bust.

[Editor's Note: 5 Ways to Profit From the Housing Bust.]

However, we also urged our readers to ensure that they distinguished between residential and commercial real estate.

We believe that, in many areas (South Florida for example) where wild speculation has reigned in the residential market, the commercial market has lagged behind.

Now, with a massive inflow of new residents over the past decade, South Florida finds itself short of the commercial real estate necessary to support the newly increased population.

We believe that commercial real estate in areas such as South Florida represents an opportunity to generate high after-tax returns that offer a good hedge against both inflation and stagflation. We feel that our accredited investors should consider this market as a serious investment opportunity.

Editor's note:
Sir John Templeton first warned of market, housing crash – Read More Here
Yale`s Shiller: Housing Prices Could Fall By 40%
Protect yourself from rising inflation. The Fed won`t do it for you!