In last week’s article, called "Irrational Exuberance,
Part II?," I discussed some of our concerns about
what is happening in the 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 MasterMind Group?”
The answer to this is really quite simple: we find
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 real estate, this is dead opposite of how we
think. Instead, we look for 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
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 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 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
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 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.
Can You Consistently Find Low Risk, High
Return Projects?
Many people struggle with finding quality
properties to add to their portfolio. Most
can only get access to what is available locally
and even then, it is tough to be on the inside
and get good access to projects.
This is where the Mastermind Group excels.
Using the purchasing power of a group of
individuals, we can get access to projects that
many people would never hear about. From
there, we bring back tons of detailed
information so that you can decide if this meets
your criterion.
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
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 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 opportunities in the right
kinds of properties.
