Buy Treasuries or Real Estate?

[Arn Cenedella]

While the 5% “risk free” Tbills looks attractive………….

It also at least partially assumes an investor can time the bottom of the real estate market.

Perhaps one CAN time the market……….

I went to Colgate University for undergrad and then University of Michigan for grad school and ended with a MS in Physical Chemistry. So I have at least a solid level of education and intelligence.

My entire adult career has been spent in the real estate industry starting in 1978…..and have been investing since 1980…….

And I don’t try to time the market………

In my experience:

1. The bottom of the market isn’t known for 6 to 12 months after the fact.

2. When the market turns up, it does so quickly and so the window of opportunity is short.

3. When the market turns up, prices also go up quickly.

We all read stories about immense amounts of capital - dry powder - poised to jump back into the market…….

Assuming there are deals to be had…….I submit for consideration, the retail investor isn’t going to get them……it’s the groups with Millions and even Billions in the bank that will get them……

While returns on multifamily have decreased - at the present time, solid deals run by experienced operators might yield 13% 14% IRRs……….and 16% or 17% annual rates of returns…..

On a 5 to 10 year horizon, I believe investors will be better off continuing to invest in real estate than Treasuries……..

So while parking the money in Treasuries may feel safe - deciding when and where to re-enter the market is a difficult decision.

I believe retail investors will do better investing with a long term horizon - less focus on timing the market or getting a deal - time in the market v timing the market.

Thoughts?