Cedar Rapids Gazette (Newspaper) - January 24, 1974, Cedar Rapids, Iowa
The Investors Guide
lhc Cedar Rapids Gazette: I luirtt., .I,in. 24. I!»74
By Sam Shulsky
Q. I'vt* been reading your column for years, but notice I hat you never advise on buying real estate as an investment. Yet this is a major are* of investment. Don’t you think your readers would be more interest ed in the leverage and tax ad vantages inherent in real estate than in buying securities9
A — I have written many times that I believe more for tunes have been made via real estate investment than via common stocks. I have also pointed out that the person who buys a $50,000 property with a $10,000 down payment enjoys any prof its from the entire $50,000 property even though he has put down only $10,000 of its market value. And I have pointed out many times that ownership of real estate has certain tax advantages — primarily the conversion of current income into long-term capital gain via allowable annual depreciation.
Okay. After I’ve said that, do you expect me to go further and tell a reader that 'the 4 - store taxpayer at the corner of “Oak and Elm” streets would make an ideal investment for him when both the reader and the corner of “Oak and Elm” are 1,500 miles distant from this typewriter? And when, furthermore, I haven’t the slightest idea of: the mortgage rate on the building; the income; the real estate assessment and tax rate; the cost of heating, repairs, insurance, water; the reliability of the present tenants in the building; the trend of the neighborhood; the threat of a new shopping center a mile down the state highway, etc., etc., etc.?
Of what earthly use is it for me to say real estate is a good investment, if I haven't the slightest idea of what specific piece of real estate you are talking about and — most impor-
Paulson Gets Contract for Swimming Pool
O. F. Paulson Construction Co. was awarded a contract Wednesday for construction of a swimming pool in Cherry Hill park.
The firm submitted the low bid, $481,976.
The city council last fall allocated $400,000 in revenue sharing funds for the pool. Councilmen said the additional cost can probably be paid from interest earned on investment of the revenue sharing money.
Construction will start as soon as weather permits. The pool should be open in time for use during part of the 1974 summer season.
C.R. Drug Numbers
To report a violation:
Michael Dooley 377-8081
lf you need help:
Foundation ll... 362-21 74
(4 p rn. to midnight,
tautly how much you know about judging real estate?
lf you ask me about common stock XYZ, I can tell you how much it is earning, what it pays I in dividends, how long it has been paying dividends, its market price, whether it has mortgages ahead of it, and how much, and even give you some hint as to its investment value by listing the rating. This is possible because the shares of A T and T or General Motors you are inquiring about — regardless of where you live — are the same shares listed in my record books. Hut — I repeat —■ what can f tell you about that piece of property at “Oak and Elm”?
Your letter accuses me of neglecting a major area of investment. Correct. I also turn away questions such as: “should I buy this rare old violin,” or “what about a 3-earat diamond a friend wants me to buy” or “do you think ’s paintings will be worth twice as much in IO years”?
Every piece of real estate rep
resents a different investment opportunity and I know of no way ol forming an opinion on its value except firsthand by a real estate expert
♦ * *
More on selling a stock short by putting up warrants: Robert E. Brown, executive editor of the Value Line Convertible Sui Vey, published by Arnold Bern-hard and Co., points out that one may sell short, for example, IOO shares of A T and T without j putting up any margin on the short side by buying IOO A T and T warrants (not Chicago Exchange Board options), provided he has a margin account with his broker.
Federal Reserve board regulation T provides that a short I sale requires no margin if the I a c c o u n t contains securities which are exchangeable or convertible, within 90 calendar days without restriction other than the payment of money, into the securities sold short.
Mr. Brown points out, however, that each brokerage firm is i permitted to set “house rules” that are more stringent than the Fed’s regulations and that some brokerage firms do require at least some margin on this type of short position. Further, if the stock sold short rises, the investor may have to put up additional cash
* * *
Mr, Shulsky welcomes written questions, but he will be able to provide answers only through the column. For Inter motion on retirement, and ore-retirement planning, please Include a self-addressed, stamped envelope. Address your requests to Sam Shulsky, car# of The Gazette.
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