All Real Estate Is Local: What You Need To Know To Profit in Real Estate-In a Buyer's and Seller's Market - Hardcover

Lereah, David

 
9780385519229: All Real Estate Is Local: What You Need To Know To Profit in Real Estate-In a Buyer's and Seller's Market
Hardcover
ISBN 10: 0385519222 ISBN 13: 9780385519229
Verlag: Broadway Books, 2007

Inhaltsangabe

The author of Why the Real Estate Boom Will Not Bust--and How You Can Profit from It explains why the key to making money in real-estate is a firm knowledge of local market conditions, demonstrating how to determine values of homes, whether or not property values are on the rise, identify markets that overvalued or fully valued, and more. 25,000 first printing.

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Über die Autorin bzw. den Autor

DAVID LEREAH is Senior Vice President and Chief Economist of the National Association of Realtors. His economic and real-estate market commentary is regularly quoted in the Wall Street Journal, The New York Times, BusinessWeek, and on CNN Business News, CNBC, and other media. He lives in Fairfax Station, Virginia.

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Chapter One
A NEVER-ENDING STORY


My grandfather was not a gifted storyteller by any means. But there was one particular story he told with an emotion that captivated me every time I heard it. While I am sure that over the years his tale grew in size and hyperbole, it really doesn’t matter. It is the lesson of the story that is important.

My maternal grandfather was twelve years old when he, his mother, and his younger brother, like so many European immigrants in the early 1900s, anxiously crossed the Atlantic Ocean seeking a better life in America. Grandpa, as I affectionately called him, was born Dario Arditti, but an official at Ellis Island Americanized his name to David Arditti (in fact, I am named after Grandpa). He held several odd jobs in his teenage years, learning English and getting what education he could. His first job as an adult was sweeping floors for a company in the garment district in New York City. Over time, he worked his way up and took on greater responsibilities. By early 1928, he was the company’s bank courier. One of his tasks was to deposit the company’s overflow of operating funds every Thursday morning at a branch office of the Bank of Italy, located in Manhattan.

As his courier activities became routine, the bank manager grew particularly fond of Grandpa. Perhaps he felt an affinity for the struggling young Arditti, who was regularly depositing money in the Bank of Italy. After several weeks of exchanging pleasantries, the bank manager took a greater interest in Grandpa, opening a savings account for my grandfather and convincing him to deposit one–third of his salary every week in the account. The manager began giving Grandpa tips on the stock market, recommending specific companies in which to invest. Grandpa followed his advice. Curiously, the value of every company Grandpa invested in climbed dramatically over the next two years. In fact, by the summer of 1929, Grandpa had accumulated significant wealth for someone twenty–seven years of age.

Because he followed the advice of the bank manager, Grandpa was one of the few investors who avoided financial ruin in the Crash of 1929. He liquidated most of his stock holdings before the crash and invested in “real” hard assets. One of his largest investments was the purchase of a gift/furniture store: the International Gift Shop. The shop was located on what was then perhaps the busiest retail intersection in America, Thirty–fourth Street and Eighth Avenue, near Macy’s department store and across the street from Madison Square Garden. By the time Grandpa was thirty–six years old, he had become a relatively wealthy man—as well as a shrewd equities investor. My grandfather owed a great debt of gratitude to the bank manager who nurtured and guided him both financially and emotionally.

It was years later that Grandpa realized what had really happened. The Bank of Italy was founded in San Francisco. The garment company for which Grandpa worked dealt with Bank of Italy’s New York branch office. Sometime in 1929, the Bank of Italy merged with the Bank of America. The chairman and founder of the Bank of Italy, Amadeo Giannini, became the chairman and CEO of the new and larger Bank of America. It was a name Grandpa had heard his bank manager mention from time to time; as fate had it, the bank manager was the son–in–law of Amadeo Giannini!

My grandfather realized that Giannini’s son–in–law was investing Grandpa’s savings funds in stocks of companies that the bank manager knew had applied for large loans to the Bank of Italy in order to expand their businesses. They were loans that would soon be approved by the bank. The company’s stock price usually rose after a large bank loan was approved. Of course, using inside information was more prevalent in the twenties; not until the establishment of the Securities and Exchange Act of 1934, which created the Securities and Exchange Commission, did the practice become unlawful.

My grandfather was one of the fortunate few during the Great Depression who had financial assets left after the 1929 stock market crash. But he had to make some hard choices with his money. His younger brother (my great–uncle) had lost some of his savings, and the import business he had founded was struggling financially. Grandpa loaned his brother the money to keep the business alive. But Grandpa faced a more important financial decision in the mid–1930s. The owner of the skyscraper on Thirty–fourth Street that housed my grandfather’s International Gift Shop was desperately cash–poor. Knowing that his tenant had significant funds, the owner offered Grandpa the opportunity to purchase the building for $1 million, with a down payment of a mere $100,000. Now Grandpa could make the ultimate investment—real estate. It was the hardest of hard assets in a time of economic uncertainty. The $100,000 price tag was not an obstacle—Grandpa had the money. And the $1 million price tag was a deep discount for a building that was about 55 percent occupied during the Depression. But because the real estate markets had been down across the country as a result of the Depression, rather than purchase the building, Grandpa offered instead to pay for a low–priced, three–year lease up front. This seemed a sound decision—it would give the property owner sorely needed cash and at the same time reduce the leasing costs for the International Gift Shop over a three–year period. It seemed like a win/win deal for both parties.

But it turned out to be the biggest mistake my grandfather ever made. Thirty years later, in 1969, the property owner sold the fifty–story building for $150 million! Moreover, the new owner of the building tripled Grandpa’s rent, forcing the International Gift Shop to close its doors shortly afterward. Grandpa retired that year and moved to Florida.

Grandpa told me this story every year until the day he died, and he always ended the story with the same advice: Never ignore the local marketplace. What Grandpa didn’t appreciate at the time was that Thirty–fourth Street was one of the busiest and most popular streets in the world. Grandpa didn’t research the local real estate market. He made his decision about purchasing the skyscraper based on what he read in the newspapers and heard on the radio: Across the nation, jobs were scarce and families were struggling to make ends meet. He relied on national trends as well as on his experience of what was happening to those closest to him up in the Bronx, where he lived—businesses along the Grand Concourse struggling to survive. This was what was uppermost in his mind as he made his decision. He didn’t realize at the time that Manhattan was where the action was—indeed, it was the center of America at that time. Grandpa allowed the ills of the nation and the neighborhood where he lived—which he read and heard about every day—to blind him to the activity and prospects of the local marketplace in which his business was located. He had an opportunity to purchase a fifty–story building on one of the most sought–after retail streets in the world for a deep discount, and he missed it. He ignored the rich potential of Manhattan because he was so focused on the nation and the Bronx. He ignored the gravity and pull of Manhattan because of the dismal stories he heard about Newark, New Jersey, and Philadelphia. He learned the hard way that local real estate values are determined by local activity. He had made a mistake that he would not let himself, or me, ever forget.

In this book, I am following...

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Verlag
Broadway Books
Erscheinungsdatum
2007
Sprache
Englisch
ISBN 10 
0385519222
ISBN 13 
9780385519229
Einband
Gebundene Ausgabe
Anzahl der Seiten
239
Kontakt zum Hersteller
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Verantwortliche Person
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