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Booming
Real Estate Profits from Baby Boomer
Investing
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by:
Chris Anderson
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In
last week's article, called "Irrational Exuberance, Part II?," I
discussed some of our concerns about what is happening in the
preconstruction investment real estate market. What many people have
asked me is "if you're so concerned about the real estate market, then
why invest so much with yourself and with the preconstruction
MasterMind Group?"
The answer to this is really quite simple: we find preconstruction
projects that make complete sense EVEN WITH the current market
conditions. Many people think about the markets as one big entity and
you either decide you are in or out. In preconstruction real estate,
this is dead opposite of how we think. Instead, we look for
preconstruction investment opportunities that make complete sense in
this market and then, if we are wrong, we look (in advance) for ways to
exit with our skin still attached.
In this week's article, let's explore such a scenario. If you have been
on one of our teleseminars, you have probably heard me speak about the
"Baby Boomers" and the impact that they are EXPECTED to have in the
southeast and the southwest. Without getting overly technical, here is
the short story:
" We have an incredibly large % of our population moving towards
retirement age over the next 15 years;
" A large % of these people have no intent on staying in their current
locale;
" Even though many boomers are ill prepared for retirement, there is
still a significant % of people with tremendous wealth;
" These people want to live in places with good "lifestyles.
With that body of knowledge above, you can make great preconstruction
investments however most people want to overly complicate things. So
let's look at a typical conversation after someone has been exposed to
baby boomer investing.
Q: How do I make a good preconstruction investment with minimal risk?
A: Well, from above, it really is pretty simple. Find a place that the
boomers want to live, then buy, and wait.
Q: But what if the price drops because of all the investing going on
right now?
A: If you believe you truly have a place that boomers want, ignore it
and ride it out. With that many boomers (demand) looking for so few
properties (supply) in a few years, you will likely do just fine.
Q: So when will I see a good return on my preconstruction investment?
A: I don't know. Maybe this year, maybe 10 years depending on what you
buy, market conditions, etc. From the baby boomer investing mentality,
we just know that there is a large PROBABILITY that somebody is going
to want that property badly within a 15 year window.
Q: But I don't want to wait that long. How can I get in and out in a
couple of years or less?
A: Well this is a horse of a different color. So not only do you want
to invest in the boomers but you want to time when they are coming.
That is a little harder but still doable. Now what you are saying is
that I buy now and once I buy, for some reason a lot of boomers start
jumping at the chance to buy in. The only way I know this can happen is
if for some reason, there is a lot of people suddenly going to become
aware of your property. In this case, you are strongly relying on
somebody's marketing to bring "eyeballs" to your preconstruction
investment.
Q: Is there risk in this type of shorter investment?
A: Of course. You could buy in, and the lending rules change, or
suddenly we start seeing horror stories in other regions about people
losing money in real estate, and then on a short term basis, your
preconstruction investment may decrease in value. As they like to say
on Wall Street, that is not a loss until you sell. If you truly believe
in the longer term, then your decision might be to exit quickly or just
wait until the boomers start looking where they are going to live. To
me, it is very comforting that I know that I have that backup plan.
Q: What kind of preconstruction properties am I looking for?
A: This depends on the wealth category you are seeking but suppose we
are targeting wealthy but not super rich. The best way I know to do
this is imagine that you have just closed out all your real estate
investments in a few years and you are worth $5 Million. Where would
you like to live? What "lifestyle" would you want? Would you be near
water, or golf, or mountains, etc.? Now if you know you don't think
like most people, you may have to alter a little bit and try to think
what the majority of people would want that are worth maybe $1 - $10
million. Realize that these people want homes for the most part. If you
wanted to play this, then purchasing either raw home sites (land) or
the finished home may make sense.
Q: Can you give me an example?
A: Sure. In the MasterMind Group, we just introduced a preconstruction
property in the North Carolina mountains and we just finished our Boots
on the Ground work there. The mountains are certainly a draw to many
people. When we first got on location, we saw lots of other properties
that looked like nice places that good be purchased for ½ of our target
investment. Some of these had great views on nice lots. Quite frankly,
we were a bit concerned.
Once we had gone to the property, our perspective changed 180 degrees.
We were taken to see a preconstruction development that spans multiple
mountain peaks and truly has spectacular settings. Each future
homeowner will have large 2+ acre lots that are extremely private. In
addition, there is an extensive effort to keep this development
completely natural (no lawn mowers----YEAH!!!). While hard to describe
in a paragraph, this property is unlike any that I have seen before.
When you go on property and get the full picture, I have no doubt that
you could buy and hold this for 10-15 years and make a great return.
However, there is a twist. It turns out the developer is really good at
marketing but better yet, they are getting free exposure that is
expected to bring over 50,000 people ON SITE during the next year. Ok,
this might be a property you can buy now and sell for a tidy profit in
short order….. If you're wrong, then just hold it a little while longer.
Q: That sounds nothing like a preconstruction condo?
A: That is correct but the concept is the same. Get into something
where you are confident that a lot of people will want it down the
road, manage your risk, and hopefully make really strong investment
returns.
As you will see in upcoming articles and project announcements, we
think much more broadly than just preconstruction condo's and we
encourage you to do the same. In our opinion, the baby boomer market
acts very differently than the "investor market" and right now, we
believe there is lots of preconstruction opportunities in the right
kinds of properties.
Dr. Chris Anderson is a co-founder of www.GetPreconstructionDeals.com
and is referenced in many venues including the New York Times and USA
Today. Get a 3 month trial to his Mastermind Investing Group at GetPreconstructionDeals.com. |
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