We recently interviewed Antonio Velardo, a very successful real estate investor and developer. Since we are in unstable times and some would say unstable real estate markets, who better to talk to about it than the man himself, Mr. Antonio Velardo.
Waqar Hassan: Hi Antonio, thank you for taking the time to sit down with us today! There are a lot of “guru’s” making their predictions about the real estate market, but how do you think the market is going to do as we head into the end of 2015 and 2016?
Antonio: My group and my investors made a substantial return in the last few years, but I have noticed that the prices are continuing to climb and “good deals” are getting harder and harder to find. Now I am in Miami, and as much as I would love to continue to invest here, with prices at 2008 levels, I can’t rationalize buying here when the grass is definitely greener elsewhere.
Waqar Hassan: Mr. Velardo, it sounds like what you are saying is that you are pulling out of the US and moving to more fertile grounds, would you say that that is an accurate statement?
Antonio: Absolutely. Some of our investors have invested with us for decades, because they know that we are always researching and comparing data to give sound investment advice and to find the best investment instrument that is going to make them the largest ROI possible. In this economic climate, it happens to be in the real estate market. However, for now at least, those bargain basement deals in Miami may be a thing of the past. It’s time to move in different directions.
Waqar Hassan: Are you moving to better grounds simply to find a better deal or are is this part of a bigger business model that includes international expansion?
Antonio: Well, Both. I believe in value more than in just growth. The fact that real estate is growing or it will be growing does not necessarily means it’s a good investment. Things may change quickly, and if you have bought a value asset, you will always have proper cash flow and the ability to recover your money. If you jumped in when things were hot, even if your portfolio experienced a temporary gain it can all be wiped out very easily by the first thunderstorm. Buy value not buzz.
Waqar Hassan: Is the value now more in real estate assets in Miami?
Antonio: There is very little inventory, and rent is crazy; people cannot sustain it. We are at a point where in the low income areas the only people that rent are becoming the ones with very poor credit, because buying can be 50% cheaper than monthly rent payments. In the Class A neighborhoods yield went down to 2% or less; it does not make sense. Taxes are getting higher every year. Also the city is becoming very hard to deal with, and cost of rehab and construction is much higher.
Waqar Hassan: Would you say we are headed towards another bubble?
Antonio: To be candid, the Miami market has been spoiled by foreign investors who make primarily cash investments. In a cash market a bubble takes a long time to form, and we are still in a positive trend. I am a different type of investor. I like the buzz, make money fast and move on. I just think that we reached a level in which financially it does not make sense to invest.
I see opportunity for development in some areas and maybe still in lending. The latter makes much more sense, as opposed to buying the asset if you are looking for cash flow.
Waqar Hassan: Where next then?
Antonio: South America is quite interesting. I am studying the data , and in some country GDP was amazing the last few years, the middle class is growing , prices still interesting, and of course again high yield.
Waqar Hassan: Do you think American investors would be interested in investing for higher yield in other countries?
Antonio: I do believe so. I mean the important thing is stability and security, and I can say some systems work as well as in the USA, and they are growing economies. If they have a professional company that does the right due diligence, they can benefit from their knowledge and begin to enjoy the fruits of their overseas investments.
Waqar Hassan: How should an investor know when it is the right time to pull out?
Antonio: You know, it depends on many things but mostly from individual circumstances. If you have nice cash flow, and the house is great and the neighborhood is fine, it does not really matter if you reached the peek or not of the value. What really matters is how much the cash flow is, and if you could get better cash flow with the same money in an alternative investment at parity of risk.
One of my firms sold a building in Miami, because when value goes up property tax do too so it may erase your net yield. We bought land and are developing it now in places with less tax impact.
Tax is also of primary importance. If a country had debt (and this is the case in the USA) it will end up charging their people more taxes each year. This will affect all investments.
I don’t see amazing opportunity for the average small investors In Florida, mainly in the eastern part. I think that those like us who took advantage of the market prior to now did great and made a lot of money, but honestly it’s time to look somewhere else.
Waqar Hassan: Mr. Velardo, thank you so much for your time. I’m sure the viewers will definitely appreciate your advice. I hope to have the opportunity to interview you again in the near future! Keep us informed and let us know where you move to next!