Recently I read an interesting article that was published by the Bloomberg press about alternative investments. A majority of people interviewed for the article described real estate as a great ‘alternative investment’, and maybe I’m a bit biased being a real estate agent in Austin Texas, but I’ve always thought that real estate is a ‘great investment!’
I’ve noticed that endowment fund and pension fund associates are the most likely candidates to classify real estate as an alternative investment primarily because they’ve invested in stocks and bonds, however, in recent decades, they have started to expand their portfolios with alternatives. Some of these alternatives include:
- Hedge funds
- Private equity funds
- Commodities
- Venture Capital funds
- Oil and gas properties
- Master limited partnerships
- REAL ESTATE
Obviously real estate investment is what really interests me, so I’m going to touch on some of the factors that drive this to be a smart diversification for your portfolio.
Texas currently has a population of around 26 million people, and state demographers are estimating that the population will more than double by 2050 (specifically about a 120% increase!) With this vast and rapid population growth, there is going to have to be a drastic increase in housing, apartments, infrastructure, offices, and shopping centers. Imagine what it will take to support this growth.
From the years 2000 to 2010, almost 50% of Texas population growth came from interstate migration, (you may have heard it called ‘domestic migration’ and it basically means moving from county to county, city to city, or state to state.) A major block of the people that migrated to Texas in this time frame came from Louisiana, California, Florida, Illinois, and Oklahoma.
With all of this estimated growth, where is it mostly going to happen? Texas is a huge state, largest in land mass of the lower 48, so it’s easy to assume that the growth won’t be all focused in one area, and some areas may see more dramatic shifts in population than others. Picture the state in your mind and let’s draw a triangle over a certain area of it…start up in Denton, go down to Houston, over to San Antonio, and back to Denton…it’s estimated that this triangle will see the greatest population growth…why? Opportunity.
Almost 70% of all the jobs in Texas are located in this triangle in the major metropolitan areas including Dallas/Fort Worth, Austin, Houston, and San Antonio. Furthermore, close to 90% of the jobs are focused in the 25 major metro areas which mean that only 11% of jobs are located outside of the largest cities.
The State of Texas needs to build more homes. With the projected population growth, we will require more quality neighborhoods and new subdivisions for these homes. To fund these undertakings, we are going to need private equity investment and bank lending to provide capital. A shortage of lots and new homes, including low inventory of existing homes, is going to continue to push prices higher…which in my opinion makes real estate in Austin Texas a great alternative investment!
I’d love to hear your thoughts. Do you think Austin Texas is a good place for real estate investment? Call me today to figure out how you can grow your portfolio with Austin real estate.
