Real estate investor Jeff Greene bought his first properties in 1977, when he was a student at Harvard Business School. He purchased three apartments in humble Somerville, Mass. for a grand total of $36,900, living in one of them.
“I was just looking for free rent,” the 67-year-old Palm Beach, Fla. resident said in an interview with TheStreet. “I wasn’t looking for a career in real estate.”
Greene estimates that his real estate portfolio now – primarily apartments in South Florida – is worth more than $5 billion. Forbes pegs his wealth at $7.2 billion.
TheStreet.com chatted with Greene Oct. 12 to get his take on real estate investing and the current market. Here’s what he had to say.
TheStreet.com: What’s your overall philosophy for investing in real estate?
Greene: I’m a long-term investor — 10 years and up. There are flippers who try to time the market. But I try to take advantage of long-term trends, something that can withstand the cycle. Real estate is very cyclical. I also don’t want to be leveraged.
TheStreet.com: What cities and sectors are you invested in?
More than 80% of my investments are in South Florida [primarily in West Palm Beach]. It’s better to buy properties close to where you live and work. That way you can be hands on and pay attention without getting on a plane or video meeting. I believe in Florida: it’s always growing.
I lived in Los Angeles for more than 20 years, so I still have some properties there too.
As for sectors, more than 80% of my portfolio is in multi-family units. It’s good to be specialized. You can know one thing better [than you’ll know a lot of things].
Jeff Greene
TheStreet.com: Why do you like the multi-family sector?
Greene: People need a place to live. There has been a general housing shortage for a long time, and it looks like that will continue around the country. Regulations discourage building. It’s always better to own something scarce.
Management-wise, it’s easier to find tenants for apartments than for retail or office. In commercial real estate, you might get a long-term lease with a good tenant. But when they move out, you might have no tenant. It might take years to find a new one.
If your apartments are in a dynamic place, you’ll always have tenants at some price. It’s been easy the last few years, because fiscal and monetary stimulus has put a lot of money in people’s pockets. Now that money has been pulled away, and some areas are challenged.
Los Angeles isn’t overbuilt, because there’s restrictive zoning. If you own apartments there, there’s not a lot of new competition.
But all over Florida there is a lot of new [multi-family] development. As the economy slows there will be more and more competition for tenants.
TheStreet.com: Do you think individuals are better off investing in REITs or in individual properties?
Greene: That depends on the person. If you want to own a building, you have to be entrepreneurial about it. You have to manage it and make repairs. If you want to rent apartments, you have to have a sales personality.
You can hire a management company, but a lot don’t want small properties. If it’s an eight- to 20-unit building, a management company will charge about 3% to 5%. And they likely won’t put a huge effort into it.
If you want to do this for a career, buy a small building, rent it yourself, see how it works out and then maybe build up.
With REITs, you don’t have to worry about day-to-day management, you can get regular income and possibly a capital gain. You have to decide what sector you want to invest in and of course you want to pay a low price. Do your homework.
Two good ones are AvalonBay Communities AVB for apartments and Apple Hospitality REIT APLE, a hotel REIT.
AvalonBay buys good properties and manages them well. And Apple is an excellent manager of limited service hotels.
The author owns shares of AvalonBay.
