“The trend is your friend” is a tried-and-true investing adage. But trends are slow-moving and often boring. It’s far more exciting to try to predict a market event. However, that approach is rarely as successful as following a proven trend.
Of course, like a river flowing towards a waterfall,trends often eventually hit an inflection point and become an “event”. Perhaps an explosive gain or implosive loss. Unlike Wall Street speculators, most Main Street real estate investors make long term commitments based on fundamental trends.
Obviously, most forms of real estate are quasi-permanent fixtures in a local economy, whether it’s a home, apartment building, office complex, industrial center, retail center, or medical facility. They all serve essential needs for specific demographics and economic activity in a community. And when you’re the owner of these properties, they can become a stable source of consistent income and wealth creation. Sure, not as exciting as “buy low, sell high”, but if you’re constantly going from cash to asset and back to cash (flipping), you only end up with pile of cash (hopefully) that still needs to be put to work.
To build truly resilient wealth, it’s not just about “net worth”, but rather creating recurring revenue and a steady increase in total asset value. And the secret to truly resilient wealth is to make sure your recurring revenue is firmly rooted on the right side of powerful trends.
For example, some investors in retail real estate didn’t see the long-term trend towards online commerce and the slow erosion of profits for certain kinds of retail tenants. Then, when the “event” of the pandemic shutdowns accelerated the trend, unprepared retailers and their landlords were negatively affected. Conversely, landlords paying attention to the trend began focusing on more than simply leasing space; They created synergistic centers based on tenants whose products and services could only be delivered locally and in person.
Of course, this seems obvious in hindsight. But just like mainframe computer makers, photo-processing centers, and video rental stores, people often seem to miss the trend until it becomes an event. Today, robotics and artificial intelligence (AI) are likely to create further disruptions to how people interact with and use real estate.
Long-term listeners of our Radio Show, which is now a Podcast called Trends with Benefits: Real Estate Investing, know we track long-term trends and look equally for problems as well as opportunities.
We like real estate that serves essential human needs, has strong geographic links, and whose economic model is on the right side of powerful trends. Obviously, housing is essential. It’s hard to imagine any foreseeable technology eliminating the need for humans to live in some type of shelter whether that be a home or an apartment. The resiliency of residential real estate is part of why so much institutional money piled into multi-family. Even large hedge funds got involved in a big way with single-family houses and apartments.
On the business side, real estate supporting businesses that provide products and services is another way to put resiliency in your portfolio. Of course, when you can find a resilient niche that’s being driven by a powerful trend, then you REALLY have an exciting opportunity.
That’s why residential assisted living communities are one of the most compelling niches in real estate today.
One of the most powerful economic trends of the last 80 years is the baby boom, which was kicked off when millions of military servicemen returned home to marry and start families. Every industry that served the needs of those babies as they advanced through the seasons of life… BOOMED. Today is no different.
The “Silver Tsunami” describes the millions of baby boomers entering the final phase of their lives, and many will end up in some type of assisted living facility. Their families can put them in cold, impersonal, institutional “big box” facilities which feel more like a hospital than a home – OR – Mom or Dad can live in a cozy, comfortable, friendly group home in a nice neighborhood where they feel like they’re still part of a family.
The amazing thing is, when set up properly, these residential assisted living communities can cash flow exceptionally well. It makes sense, because when you combine an essential human need like housing, with a locally delivered service like healthcare, supported by the powerful demographic trend of the “Silver Tsunami”, you’ve got an outstanding recipe for large and resilient profits.
So, while some niches of real estate are struggling, this is one sector which continues to shine.
Vincent Companies is a leader in the real estate sectors of Senior Living Communities, Multi-family Apartment Buildings, and Edge Data Center Facilities. To learn more about potentially investing with Vincent Companies in any of these powerful sectors, please feel free to contact us and we’ll be happy to answer any questions you may have.
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