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A couple of weeks ago I played golf in a threesome. I am 56 years old and in reasonable health. My golfing partners were 85 and 73, both with the usual maladies of their ages. At the end of the round I came in third. My uncle (85) still takes stairs two at a time and his friend (73) just flew back from Florida piloting his new airplane. My point? The US population is both growing and growing older. Moreover, it is growing older with an attitude!
In 2005 the National Coalition on Health Care reported the US spent $2 trillion on healthcare, growing at twice the inflation rate. Estimates are that spending will grow to $4 trillion by 2015. A full 20% of GDP!
I had several questions about demographic investing as a result of an earlier article. In that article I touched on the "Demographic Convergence" of Echo Boomers, Apartments and the Southern United States.
The Questions:
The Demographic Convergence
Who: Boomers
Doctors office visits are already increasing based solely on population growth. In the next ten years doctors' office visits will increase by 50% * representing just the beginning of an era of exponential explosion in healthcare demand driven by boomers.
What: Medical Facilities
Hospitals and clinics will be filled with boomers wanting to get back on the tennis court! The current supply of medical offices, especially those near hospitals, will lose the struggle to keep up with demand. The high demand will force increased rents, construction of new facilities and development of new health care zones.
Negative Market Correlation
This coming together of factors is occurring in a service industry where inelastic demand already exists. Inelastic demands are seldom affected by overall economic performance. It is unlikely we will see downward swings in demand for healthcare due to either the real estate market, stock market or even interest rate increases.
How Can You Participate?
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 exchange proceeds securitized real estate offers some potentially valuable additions to your diversification strategy.
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.
When large-scale demographic trends overlap, they create significant opportunities for demographic-minded investors. Investing in health care sector real estate is very easy and can be done on a very small-scale or very large-scale dependant on what is appropriate for the investor.
* National Coalition on Health Care2005
www.irs.gov
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. IRC 1031 is complex tax concept therefore you should always consult with your legal or tax professional for details regarding your specific situation.
