All Forum Posts by: Samuel Goldberg

Does anyone have suggestions for methods for non-institutional investors to hedge against falling rents and/or real estate prices?  

I'm considering investing in a leveraged inverse ETF to hedge against potential declines in rent and home values as a means of protecting my equity if another recession were to occur. One such leveraged ETF that I'm considering is the Direxion Daily Real Estate Bear 3X (NYSE: DRV). It seeks daily results of 300% of the inverse of the price of the MSCI US REIT index (which includes equity in a broad array of REITs that generate most of their income from real estate rental operations).

I figured that, because my real estate investments tend to be leverage between 70-80%, a leveraged ETF of this nature would help counterbalance rental income and pricing fluctuations. 

Others have mentioned purchasing puts on companies that tend to decline in depressed real estate markets, such as home builders.

There's also the possibility of selling short futures contracts based on the S&P/Case-Shiller Indices.  There are 10 major cities from which to choose (or I could choose a National Composite Index (CUS) that represents the stock-weighted average of all 10 cities).

All of these options seem like a broad-based solution to a potentially localized situation.  While I realize that the local markets in which I'm invested may react differently from these larger national markets, I'm unable to find a method that permits me to create a leveraged hedge against my local markets (mainly Columbus, OH and Ithaca, NY).  It seems to me that the benefits of the leveraged transaction outweigh the possible deviation from a precise inverse relationship to my local market.

I would greatly appreciate any and all input on the subject. 

Thanks for the great responses.  Given the advice on similar Biggerpockets discussions, we've expanded our search to include properties in Dundalk as well as areas on the peripheral of Charles Village, Old Goucher and Remington.  

We're finding more opportunity in Dundalk that's in line with Ned's advice regarding all-in budgets of $60-$90k with $1.2-1.3k monthly rental incomes.  We set up multiple showings in Dundalk through our real estate agent.  Does anyone have any specific insight to offer with respect to Dundalk?  

We realize that, as with most of Baltimore, the "good" properties and the "bad" properties in Dundalk seem to vary largely on a block-to-block basis.  Thus, I plan to take the advice of pretty much everyone who responded and make multiple trips to Baltimore to map out promising blocks within our target areas.  

My business partner and I are interested in investing in Baltimore. We've been reading a lot about opportunity in and around Baltimore (both with flips and multi-family rental properties). We're fortunate enough to have capital and credit capacity.

We have experience investing in student properties and thus started our search around the Johns Hopkins campus (mainly Charles Village, Old Goucher, Remington and Barclay) to see whether we could find promising opportunities. While there are some viable options, most of the distressed properties we've found in these areas seem to be price prohibitive (when combined with estimated rehab costs) relative to their potential post-rehab rental income.

We're wondering where to look in and around Baltimore for less conservative investments. Does anyone have any suggestions for promising areas where you project future rental increases and mid to long-term price growth? I realize this is likely a broad question, but we have very little knowledge of the area and could use all of the help we can get from seasoned veterans.