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American Morning
Advice For Potential Real Estate Investors
Aired July 08, 2002 - 07:33 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRIS MYERS, CNN ANCHOR: The stock market is heading south, as you know, along with the reputations of a lot of corporate big shots. But the housing market is heading strongly in the opposite direction and investors are pouring money into real estate at record rates. But are bricks and mortar really the best way to find shelter during the economic storm?
Well, joining us now with some advice for potential real estate investors and anybody out there at home who wants to put their money in a safe place, Marion Asnes from "Money" magazine.
Good morning. Nice to see you on AMERICAN MORNING.
MARION ASNES, "MONEY" MAGAZINE: Nice to be back.
Good morning.
MYERS: Thanks for being with us.
And, first of all, people like things that they can see and put their hands on when they invest their money. That was the old school thought before we went through what we did with the stock market. Is real estate -- that used to be a slow, safe investment. Is it even safer now? And is it even maybe gaining faster now in terms of return?
ASNES: Well, it's funny, slow and safe, I don't know that, you know, certainly you wouldn't call real estate slow lately, especially if you've been trying to buy a house, because prices seem to be appreciating by the week in certain good neighborhoods. But real estate has continued to be strong. New housing is up, all the sales of old housing is up and this seems to be one place where Americans just have not lost the faith.
MYERS: Well, it used to be -- what about commercial versus rental versus your own home...
ASNES: Well, that's...
MYERS: ... property?
ASNES: Yes, of course. That's a big, big difference in categories. It is homes that have continued to rise at an amazing pace and it's very hard when you think that people are investing in their homes, you have to ask questions, because a home is a wonderful thing. It is, at this point, in the average middle class family, about 60 percent of a family's net worth.
MYERS: Really?
ASNES: Yes. It holds an amazing place in our scheme of things. But the other thing about a home is that you live in it. So that unlike most investments where you can sort of pick up the phone and say OK, I want to dump this, I'm not satisfied, with a house it's a little harder to do that because you have to live somewhere.
So...
MYERS: Yes, you can't just bail.
ASNES: Right. Even if you are in a hot market where you can virtually sell your house overnight, you still have to move out and find another place to live...
MYERS: You have to...
ASNES: And very few people move to a less expensive home, even in retirement.
MYERS: Right.
ASNES: So that investment element is a little tougher to contain.
MYERS: Yes, that's the problem. I live out in southern California and though you can get a lot for your home or your real estate investment, if you're going to continue to live out there you're going to spend a lot more.
ASNES: Yes.
MYERS: What about mutual funds, real estate and that area? They're holding up well considering.
ASNES: They are performing very well. In fact, the average REIT, real estate mutual fund is in positive territory this year, unlike most of the stock market. But real estate mutual funds are not buying homes. What they are buying are a combination of things that include what are called real estate investment trusts, which are companies that invest in condos, in offices, in hotels, in hospitals, even. And they're also investing in mortgage companies, hotel companies.
And these funds have done pretty well. In fact, we have two of them in our latest issue in our Money 100, which is the list of best mutual funds.
MYERS: It's easy for people with a lot of money out there to find places to -- real estate to invest or in mutual funds.
ASNES: That's right. MYERS: What, how much money do you have to have to invest in real estate?
ASNES: Well, that depends on how you invest, once again, in real estate. If you are buying a house, fixing it up, renting it out, turning it over, which is a classic American route to wealth building, you do need quite a bit to get started. You need, you know, $10,000 minimum to buy a house, you know, a distressed home at, you know, with a special mortgage and then start putting sweat equity into building it up.
To buy a mutual fund is much less expensive. For an IRA account it's maybe $1,000.
MYERS: And if you don't have a lot of time or don't know a lot about the subject but think it's a better way to go, what would you recommend for people?
ASNES: Well, I certainly wouldn't recommend buying properties that you're going to manage yourself if you don't have a lot of time because this is a small business and like every other business, it demands effort.
MYERS: And in terms of rental property, I guess, what, 10 million people have rental property, secondary homes.
ASNES: That's right.
MYERS: So you recommend that if someone's going to take care of that for you?
ASNES: Well, either you have to take care of it or you have to have someone trustworthy to take care of it, and in some cases people have management companies that take care of it.
MYERS: Right. I guess there's some good property, well, some home front or lake front homes, waterfront homes that are actually mobile homes in Texas right now that are available.
ASNES: Oh, gosh.
MYERS: And we hope that they can make it through that.
ASNES: I certainly do.
MYERS: But I guess...
ASNES: That's distressed real estate, all right.
MYERS: Good time.
All right, thank you.
Marion Asnes from "Money" magazine, a pleasure having you with us.
ASNES: Nice to be here.
MYERS: All right, thanks for being on AMERICAN MORNING.
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