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Real Estate and Stock Markets are both down. Where should I put my money? November 20, 2008

Posted by W. Keoki McCarthy in Invest, market conditions, real estate, real estate investing, REO.
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We interviewed W. Keoki McCarthy, MBA, owner of McCarthy GMAC Real Estate and asked him  whether to buy stocks or real estate.  He said, “The obvious answer is both.  If you can diversify you should.  There is no excuse for being too heavily invested in one place especially in this market.”  With the volatility in both market places these days it is hard to decide whether to put your money in the markets or under the mattress.

 The major difference right now between the two markets is negotiability.  “imagine if you could call your stock broker and say I’ll take Microsoft for $10 per share even though it is listed on the market for $20.  You would probably do it because even if prices went down you have bought below the market”  said McCarthy.  Obviously the stock market does not work that way.  The prices are set by supply and demand automatically.  You really can’t buy below the market at the time.  Real estate on the other hand allows for this.

 When you buy real estate you negotiate with the seller and generally speaking there is not another bidder it is just you and the seller. “It is possible to buy a home in today’s climate for upwards of 25% below market value.  That’s a nice cushion” said McCarthy. 

 McCarthy also mentions that a great source of good deals are from bank owned properties.  When a bank forecloses on a home and it is not bought at auction it goes to the bank and is called an REO (real estate owned).  Banks then hire specialists to sell these homes.  Northwest REO a division of McCarthy GMAC Real Estate represents many banks in King and Snohomish Counties.

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