Now is the Time to Buy Real Estate and Create Significant Wealth

International financier, trader, and investor Shawn Baldwin says black people should take advantage of the Trump administration to build wealth

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Despite the explosive outcry against the political sentiment and executive orders being pushed under the Trump administration, Shawn Baldwin, chairman of the AIA Group, says there are plenty of ways for African Americans to prosper in our current economic and political environment. In fact, Baldwin explained 4 Ways Black People Can Thrive Under the Trump Administration earlier this month. In a follow-up phone interview with Black Enterprise, the internationally renowned investor discussed how and why African Americans should purchase property while Trump is in office as a means to generate wealth.

“For most people, the acquisition of real estate is one of the best ways for them to become wealthier,” he told BE. “For the average person, their wealth is concentrated in their home and non-depreciating assets,”—unlike a car or “retail jewelry, which is purchased at a markup and not worth as much as fine jewelry. However, now is a prime time for people of color to invest in urban re-development, which he says will be a primary focus under Trump’s administration. In turn, this will create opportunities for people of color.

“The acquisition of additional real estate can create wealthmainly because [Trump] will try to make the focus of the development of communities a prioritythis is going to create two opportunities: One, to add to your balance sheet, [and] two, to create places where other people of color are going to want to come and live.”

According to Baldwin, rather than just applying for a small business loan, people of color should invest in property and then use it as a stream of revenue to fund their business ventures. “Systematically, we have been denied loans, but we can do other things that can create significant wealth,” he said. “It’s more difficult to get a bank to fund you as a business.”

He continued, “They’re not going to give us money that they deem is risky. [Banks] are going to want to give a loan that is based on collateral,” he said, adding that 25 percent of all bank activities are commercial real estate based. “Most of the time, the loans that most people of color can get is a home or real estate loan.”

Rather than applying for a business loan, he advises entrepreneurs to what he calls the “backdoor method.” After you accumulate real estate, he says you can mortgage it and use that money to fund your own ideas. “If you acquire a bunch of real estate and it’s cheap, then use it as cash flow by leasing it out to people,” he adds.

Baldwin also suggests that people of color focus on areas “where there have been significant mortgage defaults because the banks will have pressure to lend in those areas. They don’t have pressure to lend in development because it is incredibly risky.”

“We’re not going to get back to prices that there were set in 2007, but the prices will climb and if you can get the properties on a discounted basis, then you can make significant wealth doing that.”

 
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  • sdot1980

    This is definitely NOT the time to buy real estate. Real estate is overpriced, they’re currently overbuilding and foreclosure rates are up. Houses are also on the market longer. If you have cash on hand, it may be more profitable to buy US oil stocks and gold etfs. A 10 year up trend is bound to falter as this business cycle is held up by low interest rates and government intervention. In order for factories and US output in America would also require a drop in the US dollar relative to other countries. Freight is also down. Just read the signs.

    • Shawn Baldwin

      I believe that I am being taken out of context, my suggestion is to purchase discounted real estate in the areas most aren’t looking in – – the inner city. There is a reason than Ben Carson went to HUD instead of becoming surgeon general. It is important to read Graham but his value thesis is out of context in a headline driven, momentum and sentiment market. Bill Gross along wit other professional investors have said thisi is the time for alternatives. And they have specifically noted real estate. This is an event driven thesis, the catalyst is that Trump will focus on urban revitalization and that will drive prices up in real estate where they were previously stagnant. I am not selling real estate nor do I have a real estate fund. I had the same thesis in 1998 in Harlem, in one year brownstones that were $200k went to $1m– unfinished shells. Neither you nor anyone else has to my target these properties but I can assure you that people outside the community will. I am trying to alert everyone prior to dramatic increases in value. Keep reading Graham, it will help when we get to a normalized market, I would also advise you to watch people like David Tepper of Appaloosa, when he is out of the stock market – – stay away. Thanks for your comments.

      Shawn Baldwin

      • Heb927

        Mr. Baldwin,
        The reason a medical doctor with no real estate or housing experience is put over HUD is because Trump doesn’t give a crap about housing. Also, all real estate is local. Strong job markets create strong real estate markets. Last thing, almost every major urban market has seen home values increase over the last four years.

      • Matt k

        It’s all already priced in by the market. Deals are deals for a reason 99.9% of the time.

  • MKH

    In all honestly, I have to disagree with the first comment. This IS the right time to buy Real Estate if you are IN the right market. You have to know that real estate will continue to appreciate it’s values, inventory is not keeping up with demand and foreclosure rates are actually decreasing. It’s more about generating stability and creating a legacy for your family, creating a generation of homeowners not renters which thus creates wealth.

    • Heb927

      MKH,
      The only time to buy is when you get a good deal. Hoping thing go up is very risky. Prices go up either because incomes are going up or interest rates are low. If interest rates go up, all the property values go down to reflect the loss of purchasing power even if the incomes remain the same. A $300K home at 4% would drop in real value using the same income to $276K with a 1% increase in interest rates. Also, everyone shouldn’t own property. It can be very costly to maintain. Drive through neighborhoods and look at how the yards are maintained, if the houses are maintained. When you invest, you are investing in the street or block that property is on.

    • Matt k

      Thinking you can time the market is the oldest mistake in the book and no pro will tell you you can do that. Anyone who says you can time the market is a speculator not an investor. So this guy, saying it is the right “time,” I know he is either intentionally trying to scam, or has no idea what he’s talking about.

  • Matt k

    All time highs, buy buy buy, they have to lure the last of the suckers in so they can bail and leave the bag-holders.
    Can they go higher? Maybe, but the downside is glaring. Real estate tracks the rest of the S&P 500. Based on the price-to-earnings ratios buying securities right now is expensive.
    Saying investing has to do with skin color, or colored people should invest differently is not only poor financial advice, it is an inherently racist statement. If your financial advisor even hints they are using skin color as an investment strategy, or people of different skin color need a different strategy, just run like hell and don’t look back. It is not only a logical fallacy but it may be illegal.
    Dollar cost averaging through highs and lows is the best strategy for basically all securities. Don’t let yourself and your emotions be your own worst enemy. And don’t get drawn in on the last 5 minutes of an epic pump. Just put the same amount aside every month to invest in a broad diversified portfolio, maybe including real estate, but don’t let it be your sole holding.
    Read Benjamin Grahams “The Intelligent Investor.” It is Warren Buffet’s mentor. The time tested strategy.

    • Lisa

      You are correct on all points. Color-based investing sounds sketchy to say the least.

      • Matt k

        Yea, most professions like real estate appraisers and brokers go to jail if they even hint at color-based investing. The financial sector however has managed to nearly completely deregulate itself apparently lol

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  • Heb927

    Trying to “speculate” on real estate is downright dumb. There are only three kinds of real estates you can buy: homes, commercial or undeveloped land. Undeveloped land is the most precarious because you are hoping someone else will see the value and one day do something. Could take years if it ever were to happen. Bad idea for an investment. Non-residential commercial property not as bad but typically hard to pull off. Unless you have a reliable viable tenant or can reposition the property into a different use, another tough nut to crack open, especially in moderate to low income communities. The last is housing. Can be done but what I have observed is that speculators get creamed. I have been an investor and its not that difficult to do, but you have to be very patient and do your homework. There is an old saying, “You make all your money in real estate on the buy not the sell. If you buy it wrong, you can’t sell it right.” You have to buy the property low. You have to buy a structurally sound property. Low so that you or another investor can buy and fix the property up and still be able to price the renovated property below market value and make money. If you can’t do that, what’s the point? Buying a property low in a declining community just means you are going to lose less money but your are going to lose. Rental properties can work if you know how to screen tenants. Typically from an investment standpoint you don’t want to spend more than 40% the rental market rate on a mortgage payment. So, if rental rates on a 2 bedroom is $1,000 then I don’t want to spend more than $400 on a monthly mortgage payment, which means that I would spend about $100K on the unit at todays rates. The property would still have to be undervalued before I would do the deal. The reality is, there aren’t that many good deals out there and for those that are, you get them far easier with cash money. Also, what I have noticed lately is that too many African Americans are paying way to much for rent. They could cut their rental cost by half if you shopped around. Some should even buy homes. I had a conversation last week with a young lady who makes over $100K and said she was living hand to mouth. I ask her how much she spends on housing and she said, $3700 a month on RENT in ATL. She could buy in Buckhead for that kind of number. She just want’ that aware about what she should be spending. Also, people have to improve their credit. It is killing them financially by paying high rates on everything.

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