Your summary of DD is spot on. Many of the newbies here don't yet understand how to look and analyse the big picture yet.

Posting graphics here is a little challenging to say the least. It's up there with the worst site upgrades I've ever seen. I feel like a trady trying to work with a kids tool set he got for Xmas.

Six notable nontraded REITs on the slide

Behringer Harvard Opportunity REIT I -58.80%

Behringer Harvard REIT 00 $4.64 -53.60%

Behringer Harvard Short-Term Opportunity Fund  -96%

Cornerstone Core Properties REIT  –71.88%

Inland Western Retail Real Estate Trust Inc.  -30.50%

KBS Real Estate Investment Trust Inc. 6 -48.40%

Source: SEC filings

Questionable dividend yields of 5% to 10% (non traded REITs) are likely to fall closer to the 3.3% yield for publicly traded REITs

http://www.investmentnews.com/article/20120329/FREE/120329894

GENERAL COMMERCIAL INDEX REGRESSES: The Equal-Weighted General Commercial Composite Index decreased by 2.0% in June 2012 as economic uncertainty took a toll on property pricing. This index had steadily recovered since the beginning of 2012, but weak demand for space during the second quarter has begun to negatively affect pricing in this asset segment, indicating that higher quality property is back in favor again among investors. Nevertheless, the index closed the first half of 2012 a full 2.0% above January levels.

http://www.costar.com/ccrsi/index.aspx

On the pro side CCRSI above and RICS Global Commercial Property Survey Q2 2012 offer a slightly more positive but cautionary outlook for US commercial property.

One of the major weaknesses I see in a manufacturing recovery in the US (which is touted as driving the positive numbers in Commercial RE) is that the sectors underpinning this uptick were the first to collapse in 07/08.

• America has steadily increased production of vehicles and parts,

  semiconductors, civilian aircraft, clothing, fuel oil, and commodity based food items,

  to name a few. Likewise, manufacturing employment has clearly reversed the

  downtrend. Since hitting a low point in January of 2011, the manufacturing

  sector has added 335,000 jobs ending in June of 2012. 

'Onshoring' is seen as the new driver in a manufacturing recovery and consequently ComRE as companies bring back production to the US. Everything I see suggests 2013 will test this theory. Inventories among auto makers through channel stuffing are at bursting point. I suspect the US auto makers may well need major bailouts again next year. 

The US macro Forecast Report 2012 from Cassidy Turley paints a fairly realistic picture of the ComRE market but some of their assumptions are overly optimistic I believe. They've identified the risks in the market and threats to ComRE but simply assume governments and central banks will somehow just fix the problems predominantly by applying more QE/LTRO type actions.

What they fail to understand is that past QE/LTRO operations where all about supporting bank balance sheets not underpinning manufacturing or commercial business. 

One thing is clear to me. Governments and central banks have not addressed the problems that caused the 08 GFC. All that's been done is a superficial papering over of the cracks. Massive amounts of additional debt have been created in unsuccessful attempts to reignite the worlds largest economies and shore up largely insolvent financial institutions. The global financial problem is now magnitudes bigger than 08 but somehow we're supposed to believe that a solution is just around the corner and that if we just believe then all will heal itself.

 In amongst this is the US economy with a $1.3T annual stimulus programmed through budget deficits,

• debt of $16T and growing exponentially,
• 48% of US citizens not paying any tax, 
• 20 percent of all American men between the ages of 25 and 54 do not have a job at the moment,
• average household debt $75,000,
• 70% of GDP is government spending,
• 70% of the Federal budget is medi care/medi aid and welfare,
• the aging demographic will swamp the current budgets with unfunded liabilities over the next decade, 
• social welfare benefits make up approximately 35 percent of all salaries and wages.
• 48 percent of all Americans are currently either considered to be "low income" or are living in poverty.
• Since 1970, the U.S. dollar has lost more than 83 percent of its value.
• more than 46 million Americans on food stamps
• 200,000 U.S. households will use the money from their tax refunds this year "to pay for bankruptcy filing and legal fees"

   

The American Middle Class Under Stress

An interesting and very scary article

Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?

George Soros

• “I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”

This presentation looks at the impending economic collapse and the 3 main drivers that ensure it will happen, Energy Environment & Economics. It expands on the theory of exponential growth and how the 3 E's couple together to virtually guarantee a GFC of almost unimaginable proportions. 

There is absolutely nothing in the US economic outlook that would suggest it's nothing other than one huge risk play for quite moderate returns.

A  high risk 5- 10 year REIT play in a collapsed(ing) market with an imploding economy based on assumptions like;  the FX rate will likely go down because it's historically high and the US economy will somehow save itself even though if everyone paid 100% taxes they still couldn't produce a surplus budget.

If you talk to any very successful person they'll tell you (if they're honest) that they often make more wrong decisions than right. Steve's made a couple of good calls over the years and has picked the turning point in 2 markets. One needs to be careful now that they don't assume every play will be as successful as the last. On the contrary. One should assume any new opportunity receives the same DD and is not affected or influenced by subjective reasoning.

There is nothing in this deal that looks good to me. The risks are high to extreme and the returns are little better than fixed rate term. Anyone assuming returns in excess of 10% (while higher returns are possible in theory) is being either overly optimistic or simply ignoring economic reality as it stands currently.

The pressure on interest rates is likely to be down for the foreseeable future. The global situation is a mess and deteriorating on a daily basis. My guess is that over the next 24 months there is probably a better than 50% chance the RBA will drop rates by at least 1% over that time. If things go south faster and further than expected you could see an even more aggressive stance by the RBA.

The only thing that might change that is a decline in the exchange rate which would mean a lift in imported inflation. That would see a more cautious RBA but I don't see any upward forces at this stage. However, QE3  by the FED and another LTRO by the ECB would almost certainly see the exchange rate climb and both are looking more likely by the day. If the AU$ heads back to $1.10 again the RBA might have to cut rates to make the AU$ less attractive.

Personally though I see more upside for you in a floating rate than fixed for at least the next 12 months.

What a load of rubbish. Typical MSM misinformation. You cannot raise rent during a lease period unless it's by mutual agreement. People break leases because their circumstances change, transferred, unemployment, sickness/injury, purchased, change of living location etc. 

Go thru the process and figure out all the angles good and bad. Then use the experience here as a sounding board to educate yourself. You need to progressively up your knowledge base as to how, why etc a deal is good or not good. It also teaches you how you might structure your own deals in the future.

Posted from my HTC android but definitely not user friendly yet for mobiles. Tablets may get by alright though.

The last person I would advise a first time investor to talk to would be a property developer/builder. I have a fair idea how that conversation will go.

Jac and Catalyst make good points. If a trady or tenant for that matter do any sort of work on your property you are liable by law for their safety. So the well meaning tenant who cleaning leaves out of the guttering, slips falls and breaks his back, the sparky rewiring a switch but fails to isolate it properly and electrocutes himself, the roofer who temporarily disconnects his fall safety harness and falls off the roof. 

Then there's thing that go bump in the night. The tree roots lifting a driveway/wall/foudation. A leaking tap, blown hot water system flooding the neighbor. The tree limb that falls next door. The brick wall that feel into the neighbors (happened to a guy here). There's a million little things that can go wrong. 99/100 they don't but that 1/100 is a ball breaker.

Not only will the financial side wipe you out but the stress will probably wreck your life for 10 years. The public liability alone is peanuts. They appoint the legal guys, fight the case and pay the award. That's worth gold. 

OK after some further playing it seems I half solved that problem. If my laptop goes into screen saver mode or sleeps the page stops although before I had a blank page now I have a page but it's stalled (needs to wakeup after the laptop). Still it's much better.