Very Alternative Investments

“The lack of new construction and construction financing points to a fast rebound once the current stock is absorbed — the same pattern we saw after the recession in the late ’80s and early ’90s,” he says.

“In New York, for example, there are no major construction plans for the next year, because there is no financing. And the longer this dry spell continues, the faster the eventual rebound.”

This logic, and the 50% discounts that Mermelstein’s clients see, account for the 300-odd deals he has arranged in just the past two years for his clients from the former Soviet Union.

Across the country in Los Angeles, partners Sam Shvartsmann and Norman Lee of JAL Investments are reaching out to financial advisors looking to induce clients back into investing at more bite-sized share prices.

Shvartsmann, who coincidentally is also Ukrainian-born (both he and Mermelstein speak unaccented American English), says that traditional real estate investment is based on market appreciation with no current-period income, and oftentimes requires additional capital contributions during the holding period.

“Our strategy provides immediate income and potential for capital appreciation. We invest in foreclosed, multi-family properties 2 to 6 units each.

“Properties must at minimum produce a 10% capitalization rate and are purchased at a 35% to 50% discount from their pervious purchase price,” he adds.

Shvartsmann’s investments have brought 10 to 12% average returns over the past two years. The minimum investment on his last purchase was $17,500 a share, which has generated $1,925 a share annually.

The same investment in a 10-year Treasury would bring your client $472.50 — less than a fourth of JAL’s return. Shvartsmann pays indie investment advisors a commission for referrals to interested clients.

As in the case of that ice cream store that recently shut down, some investors cold to today’s standard investment choices are looking for something a little warmer in this still frozen economy.