Benefits of Demographic Investing
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One advantage to the securitized real estate investor is they can easily diversify across identifiable demographic trends. So with cash, IRA money or IRC section 1031 exchange1 proceeds securitized real estate offers some potentially valuable additions to your diversification strategy.
Now this is not a hands on strategy, personally I do not want to work that hard anymore anyway! It does allow you to put your money to work as efficiently as possible. When large-scale demographic trends overlap, they create significant opportunities for demographic-minded investors. Securitized real estate managers often look for aligning trends, such as when the needs of one expanding age group have a positive alignment to a geographic location. These aligning trends may not be the "perfect storm" but may point towards a potential opportunity.
Whether you are investing in a Tenant in Common (TIC) interest, non-traded Real estate Investment Trust (REIT) or the house next-door they are subject to the risks inherent in owning, operating and disposing of real estate including illiquidity. That being said many REITs trade on national exchanges or in the over-the-counter market and are easily liquid.
Who: Echo Boomers 2
Born 1982-1994 according to the US Census the "Echo Boomers" are 76 million strong, just 2 million short of the baby boomers and account for 26% of the US population.
What: Apartment units
A Harvard university study issued in June of 2007reports: "The children of the baby boomers coming of age in the next decade (echo boomers) will reinforce demand for rental units." With four million echo boomers turning 21 every year, the study concludes: "In fast -growing areas, the existing (apartment) stock will be unable to accommodate the rising number of young households."
The Demographic Convergence
As the Echo Boomers enter adulthood they are migrating in step with broader trends and fueling a new apartment demand particularly in the South. In 2006 the South accounted for 60% of the nation's new renters.
There are certain goods and services with near universal appeal. Among these goods and services potential opportunities can be identified by applying demographic analysis. For example, energy demand is generally stable across all ages and regions. Class A apartment housing, however, is in greater demand from key segments of the population living in concentrated regions of the country.
1 www.irs.gov
2"The Echo Boomers" CBS News 09/04/2005
3 "State of the Nation's Housing 2007" 2007
This material is for educational purposes, it does not constitute an offer for purchase or sale of real estate securities. Such offers are solely made through the sponsor's Private Placement Memorandum, which is only available to accredited investors. Rick Willoughby is a Registered Principal offering securities and advisory services through Independent Financial Group, LLC, a registered broker-dealer and investment advisor. Member FINRA and SIPC. Independent Financial Group, LLC and Symphony Financial Services, LLC are not affiliated.
