Real estate experts recommended multifamily properties as a good first step while skipping raw land that only produces expenses not income until you sell.
By comparison multifamily rental units provided steady income.
Normally rent checks came monthly by mail while the value of the unit appreciates.
Of course, now in a frictionless economy, they can be directly deposit funds into your account without delay.
Another example of, with the right insight, a fully functioning Knowledge ATM.
On the downside you’ll need to deal with problem tenants from time to time.
Depending on the age and condition of the property you’ll begin to incur high repair costs that will eat into your profits at some point.
Once you’ve got residential properties under your belt, the next easiest is investing in and managing industrial and commercial properties.
The experts caution about jumping into large properties, advising beginners to start small.
Incomes tend to rise and fall with the ups and downs of the economic cycles.
When conditions favor your property and your vacancies are low you can generate large incomes with a full building.
What about shopping centers and strip malls?
Like commercial properties in good times which generate high incomes with centers and malls you can share in the gross receipts of your tenants.
And, with the right location your land can appreciate quickly.
But, there’s a downside.
Buying can be complex and difficult to negotiate due to the property’s high cost.
So, zero cash deals can be extraordinarily hard to work out.
And, remember sophisticated tenants want to negotiate their best deals which will eat into your profits.
What’s the attraction to raw land?
In great areas it can appreciate very quickly as development approaches your location.
And, before the path of development becomes common knowledge you may be able to tie up property for as little as $ 1.00 down.
However, without the strong appreciation probability, raw land requires improvements like streets, sewers, electricity and other utilities — all costs.
So it rarely gives you a positive cash flow, especially after the tax burden is factored in.
If the path of development stalls or turns in another direction, your bet on higher appreciation bailing out your investment turns out to be a sucker bet.
Likewise, building self-storage warehouses incurs out of pocket expenses.
But once they are built, or if you buy existing units, you can enjoy positive cash flow with little overhead and low operating expenses if you keep your vacancy rate low.
(22) Selectively evaluate the best quality-of-life communities to live in and weigh the tradeoffs of risk and rewards for accruing real estate appreciation along a progression of rural and small towns that meet what your pocket books can afford.
(34) On your visits look for any newer developments that may trigger changes in neighborhood patterns. New construction in or around the neighborhood? Major regional economic adjustments? Transition from households with children to ones that are empty nests? Rezoning, and dramatically rising/falling land values?
“Psychologists have found that midlife is typically a time when many of us take stock of our values and goals.
Predictable Real Estate and Consumer Trends as Generations Change Aging through Life Stages.
Part One in a 4-part Series evaluating real estate and consumer predictions as generations transition throughout successive life stages.
Fifteen years ago in 2002, as Mammoth Lakes realtor Paul Oster reminded us, Harry Dent built several real estate scenarios on shifting demographics called “Age Demographics, Buying Cycles and Real Estate Appreciation”.
And years earlier management guru Peter Drucker wrote about how dismal most predictions turn out, except for one type.
Those based on fundamental demographics.
If I remember correctly he coined the phrase “Demographic Determinism”.
Dent said as a new generation enters the workforce around age 20, we can expect commercial real estate to boom.
The influx of new workers stimulates demand for office space and manufacturing facilities.
Since these new workers are also consumers, there is increased demand for new stores and shopping malls.
Of course Amazon, losing money quarter after quarter in 2002, had only just begun to exercise its disruptive influence over traditional retailing.
And the older Millennials coming of age in high school may have remembered a time when Amazon didn’t exist, but their younger brothers and sisters act as if they didn’t.
But as a rule of thumb, when it comes to residential housing you can identify five age-specific buying cycles.
Over the life span of a generation, spending on each category accelerates to peak at predictable age intervals.
When an entire generation goes through such predictable property spending patterns, we get a macroeconomic view of the wave-like fluctuations in real estate demand.
As a result, investors can know years and even decades in advance what kinds of properties are going to be hot and when.
For example, someone who is 52, a “youngish Baby Boomer” or “oldish Gen Xer,” and at the peak of his earnings doesn’t typically rent a one-or two-bedroom apartment for himself—though he might rent one for his 24-year old daughter.
Instead, he’s thinking about what kind of vacation home he wants or, if he’s already purchased it, how to transition to retirement in 10 years or so.
But, his daughter, just now transitioning from school-to-work, represents the median age for the Millennial generation.
In 2015 we already know her generation ranges in ages from 18 to 35.
They will be segmented into at least six life stage lifestyles.
20-29 Year Old Singles
20-44 Year Old Families
25-54 Year Old Singles and Families
30-44 Year Old Singles and Couples.
What’s their impact on apartments and retail shops?
The demand for rental apartments and retail space including shopping centers, begins to accelerate from 19 and peaks around age 26.
Here’s where the rules of thumb may need to hitch hike down the road for a few years.
Starter home purchases begins accelerating at around age 26 and reaches a peak around age 33.
Maybe, something else is going on, as we track Millennials through time.