What the World's Most Successful Real Estate Investor Is Buying

Blackstone Group Inc. President Jon Gray has some advice for investors looking to make sense of the wild real estate market in the U.S: Don’t fear a bust anytime soon.

Home prices have surged the most since 2005, cheap mortgages are encouraging buyers toward new homes, and building costs are spiking because of rising prices for raw materials. At the same time, a worker shortage means new construction is failing to keep up with soaring demand. And in commercial real estate, the wider acceptance of remote work during the Covid-19 pandemic is threatening to decimate office properties.

In spite of all that, now’s a pretty good time for the market, according to Gray, who has been at the center of the biggest booms and busts in the industry over the past three decades.

The market isn’t showing the typical warning signs — too much leverage, too much capital, too much building, Gray said in the inaugural episode of “Bloomberg Wealth with David Rubenstein.” There will be a “rediscovery” of cities such as New York and San Francisco, fueled by immigrants, creativity, entrepreneurship and technology, he said.

The economy has been pretty good, but it probably will head down at some point, so if I want to invest in real estate, is now a good time?

It’s still a pretty good time for real estate for a couple of reasons. The warning signs are twofold -- too much leverage, too much capital -- and we don’t really have that in the real estate system today. The other is too many cranes and too much building, and we’re actually below historic levels in terms of new supply............

Is residential less risky or more risky than commercial real estate?

If you talk about for-sale, single-family housing, there’s probably more risk, in the sense that you’re building something and you’re selling it, and it’s a function of the market. If you’re talking about rental housing -- an apartment complex -- that tends to be less risky because it’s less cyclical. People don’t give up their apartments. There’s some volatility but nothing like, say, office buildings or hotels.

A lot of people have moved to Florida and Texas, maybe for warm weather, maybe because those states don’t have income taxes. Do you think that trend will continue? And is that a good place to invest in real estate now?

It’s a bit of both. The weather, the lower cost of living, lower taxes, concerns about quality of life. Texas is one of the fastest-growing states in the country, even though it’s enormous. I think that will continue, and it was accelerated a bit by the pandemic. On the other hand, New York City, San Francisco, these are amazing places. And when you think about technology and innovation, entrepreneurship, immigrants -- there will be a rediscovery of these cities. But, yes, Texas and Florida are well-positioned.

What’s the best investment advice you ever received?

To be a high-conviction investor — that when you dabble, and just put a bunch of money here on things you don’t know or understand, it tends to work out badly. But when you see something, single-family housing, global logistics, the movement of everything online, and you lean into that, that’s when you have the best outcomes.

Excerpted from the Bloomberg Wealth News. To read the entire article go to the original link on Apple News: https://apple.news/Ay_FmBDQvRDi9digSV8dNBw

Ricardo Parente, Realtor? - Lic. Real Estate Agent - Orlando, FL - https://parente.homes