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Tips for Investing in Real Estate Now

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    American Realty Capital CEO Nicholas Schorsch gives his outlook for the real estate market.

  • Duration 6:32
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Well you could argue that the real estate depression could present.

New opportunities for those that are willing to take on risk so where -- Willis and investors be looking right now.

Nicholas -- American capital's CEO joins me.

-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Now in this economy consumers especially with discretionary income.

It seems that help promote from the from a markets perspective they're coming back their spending again -- you say there's a real estate play.

And that -- that yes how do we do well.

-- that this almost a perfect storm for real estate because the world's do you leverage.

The market should be levering and real estate from a buyer standpoint.

It's all about prices being well.

And we have that now in certain sectors so we have real value.

You can buy it 2030% discounts to replacement costs in some cases some cases it's a fifteen to 20% below where was just 34 years ago.

So and that is cheap.

Not -- -- -- but cheap so low leverage for a for an equity buyer is very very reasonably priced today and market so.

Good quality commercial real estate is available in and powerful and it -- people are looking for yield.

But here's saying number and I don't I don't you like hotels are gonna get that but that -- it when it comes to commercial real estate basically the strip -- the middle Americans from all.

Is it we've got to focus ourselves on.

What those that are residential areas and also those that contain a major marquee name correct.

That would be stable in the rent such as a Walgreens.

Or a CBS.

How specific that we have to be up by region by state or did they present and -- Well it's it's -- national play because for example dollar general's very strong in weaker markets because they they their customer is.

Less affluent buyer.

Okay Wal-Mart same thing whereas Nordstrom is a different kind of buyer.

We look at risk adjusted values so Walgreens is a credit name CDS McDonald's.

FedEx these -- high credit quality long duration leases.

Give you great diversity risk adjusted returns and you can -- meant.

Very very reasonable values today -- and you're not gonna be looking vacancies.

OK so looking for looking for malls that that may be public Home Depot in them for instance OPEC -- let me ask you this with regards to office space.

That's us that's a piece of the -- that you say is not gonna come -- here actually bearish on office very bearish on office and lodging office we think he's.

Is going to continue to be challenged because of unemployment.

And technology people have all these blackberries iphones and they work more remotely so most corporations need less.

Space and major markets like New York are terrific for office it's gonna recover it -- -- is recovering the recovery -- strong.

But how about other markets like Cleveland or Atlanta.

Or Chicago where there is no profound need for office immediately and they still have a lot of vacancy to absorb so we think it's probably three years.

-- because before that is the right time to buy office OK let's.

About about health care.

Another that's been another popular investment play fair whether it's by stocks.

By -- whatever but with with regards to -- all books and hospice care things like that those properties.

Do you have direct ownership been answered yes.

We have we -- reached its focus to health care we think healthcare is demographically the strongest space in the market.

Because we.

The the need for health care is growing because we're aging us population -- generation is that argument -- -- -- but not just the senior assisted living with a skilled nursing facilities.

We're talking about the actual hospitals if you closure rising you think for a moment.

Across the country -- drove through drive through small towns what is building what.

Hospitals are building more facilities skilled nursing.

On on campus outpatient facilities.

And these are for sale assets under American -- capital Rick realty which is your your particular publicly traded -- -- over on an asset right now.

That there is exposure within that to helped well our parents American realty capital the parent company which which sponsors all of our and these.

Runs a company called American -- capital health care OK and I trusted to -- that trust -- exclusively medical office skilled nursing.

Hospital out care we focus exclusively on that space and that is a really hot market right now for.

For growth because -- and it will be for the -- for the foreseeable decade.

Okay -- -- -- tells I promise that viewers have tells let's talk about that I get acted a little bit of a surprise here I mean we are seeing consumer credit.

Jumped in December -- and the consumers coming back -- it if you're gonna go into the hotel REIT space.

Well we're we're not FO issue that's pretty bullish no we're not pollution hotel REIT -- -- -- we are.

We are not bullish on the hotel space because it's still too volatile.

There are pockets of hotels like New York that are very strong track but across the nation you have the economy coming back slowly.

Which is really good for real -- when you look at an economic recovery that's gradual.

And over the long period of time with low interest rates that's an ideal market it's a perfect storm for real estate.

Lodging has not stabilized across the country so -- hotels are going to be.

Tough in some markets for example Florida still have some trouble on how -- -- -- that -- REIT.

-- -- reinvestment -- how would you actually in a reading my in hotels yes well if -- gonna look at that down the road you know when the economy starts to heat up let's say 612 months before you see the market.

Recovering you want to buy level.

You wanna buy hotel space below the replacement cost -- key.

And you want to be able to own those buildings as -- as the basically the existing hotels not new hotels existing buildings while and it -- -- the -- that.

Of the hotel my I hope I can just -- energy market violent well the call -- -- there's a difference because those hotel companies don't own the real estate.

But they sell host has all -- Marriott's hotel right the split host America the reits through the hotel reits -- the real estate.

The hotel companies on the management.

So you -- -- both.

And -- very interest in play the hotel business could be good now the buying MGM could be good as the recovery comes through the realist it'll be good for three years after because they now do you insure that revenue.

From the stabilized facilities.

They don't have but I think about a violent amid little if you -- exactly have a high bias strip all Maximilian this and I guess this is not the time and we're we're still early for the hotels -- -- capacity to talking again net -- this perspective that you are observing right now on investing news is very diverse thank you to thank you very good to see you again thank you -- source American realty capital --

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