In today’s changing world, new products and services are introduced almost daily. Products that were used everyday just a short time ago are now obsolete. And the rest are in the process of becoming obsolete.

Getting up to change the channel, using carbon paper, creating documents on a typewriter: These are all once common tasks that no longer exist. Other items and services are on the path to extinction, such as film for cameras, landlines, and faxes.

There is another stage to this type of extinction: Products and services that are just beginning to show signs of obsolescence. Nowhere is it more obvious, unstoppable or dramatic than the change that seems to be affecting America’s regional shopping centers (RSC), which seem to have a very uncertain future.
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Regardless of the type, investors’ first and foremost concern is whether or not now is the right time to buy. Surprisingly, the answer to this question differs depending on the investment at hand. The ideal time to buy income property may not be the right time to acquire other types of investments and vice versa.

Because income property relies heavily on changes in the economy, the time of the investment is not as relevant as the means of acquisition. As the government deals with the current recession by continually spending in excess of revenues, the difference between how to buy and when to buy is even more apparent.
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Last week the media reported that a NYC skyscraper sold for about $600 million, and according to Real Capital Analytics the prior purchase price was $1.74 billion. The property has 1.8 million gross square feet, 1.6 million rentable square feet, and is 50% vacant.

From the information provided by the media, one would conclude the new buyer stole the property. After all, the property was purchased at a 65% discount from its previous purchase price only 2.5 years ago. For the naive, the story would end there and open the door to believing they found the deal of the century. Before running out to buy the next property at a discount to its previous purchase price, or giving money to a proclaimed bottom-feeder buyer, let’s look at all the facts.
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A real estate investor recently asked the following: “I’ve noticed that most if not all properties in my area offer a cap rate of 3.5%-5.5%, and when I ask the brokers why the cap rates are so low they say it’s ‘perfectly normal’ for this area. Am I missing something here?”

It was “perfectly normal” to buy mortgage backed securities without collateral before they collapsed. It was “perfectly normal” to invest with Madoff before his empire collapsed. It was “perfectly normal” to buy dot.com companies before they became worthless. History is replete with giving comfort to poor investments by considering them “perfectly normal”.
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