Real Estate Investors - Continued...

So many fortunes have been made in the realm of commercial real estate development finance that it has become almost a proverb.  The potential yields outpace the expected average returns of the public equities markets by such a pace that specialized funds have been created to advance the funds needed to fuel the beast.  The most recent bubble in the market is owing to housing speculation, but the commercial real estate market continues to drive earnings day in and day out.

Why does the business work this way?  What factors are involved and how can these factors impact a given investment in commercial real estate?  How can the risks and rewards generated by commercial real estate development projects be channeled to investors who are not Qualified Institutional Buyers ("QIBs" - pronounced "quibs")?

An understanding of market capitalism creates the knowledge base that you can use to create an outstanding retirement income for you, your family and perhaps generations to come.  The recent sub-prime fiasco is the result of risks being taken that were not legitimate.  The reason institutions were making these investments is that the institutional market perceived this as a higher-yielding loan opportunity that just would not quit.  But as with all things involving market capitalism, the more funds that were poured into the housing market, the more it tends to drive down the profits (Adam Smith made this observation in his book that was published approximately four months before our Declaration of Independence was signed).  There are no real mysteries here, just abject lessons we can use to our own advantage.