Covid-19 and the subsequent shutdown of the U.S. economy has accelerated a foundational shift in real estate. A shift that was already unfolding before our eyes – so slow that many didn’t even realize it was happening.
That has all changed.
All real estate is not created equal.
In the past, it almost didn’t matter what kind of real estate you invested in – you could make money.
That will not be the case going forward.
Single-family homes will prove to be a terrible investment and I believe America is waking up to that fact right now — that buying a home for the purpose of simply living in it is not an investment, but a very expensive proposition that costs money and mobility. There is some equity to be gained so it’s not a complete loss.
But buying residential real estate as an income-producing asset is a step in the right direction.
Retail, specifically mall real estate is facing an extinction-level threat. Prior to the shutdown, estimates showed that up to 30% of malls could close within 5 years. Post-shutdown, new estimates have up to 50% of malls closing within the decade.
Office real estate will continue to be speculative at best due to disruptive technologies and as companies experience the cost-savings of a partial or fully remote workforce, that will increase the downward pressure. This is compounded by the fact that the largest office space lessee in the U.S. is teetering on the brink of failure.
Multifamily real estate such as apartment complexes that offer security, amenities, built in community, and flexibility will lead the way due to changing desires of millennials and boomers.
If you’re still reading, you might get the impression that my outlook for the future of real estate is a bit pessimistic, but that could not be further from the truth.
Due to a combination of luck, good timing, and a high level of curiosity and willingness to try new things, I have stumbled upon a real estate strategy that has a high probability for success in this uncertain future.
What if we’ve been thinking about real estate all wrong?
Things are changing fast and it’s only accelerating…
A glimpse into 20 years from now:
- Most jobs are automated away
- All vehicles produced will be self-driving enabled and shareable
- Many people will prefer to live in a virtual world rather than our “real” world
- Housing will be expensive – real estate doubles every 10 years on average – that means a $300,000 house today will cost $900,000 in 20 years
But people will still need a place to live – that can’t be automated away.
But what if you could take the best benefits of single-family homes and multi-family real estate while minimizing the typical downsides such as vacancy and loss of property control? That’s what’s currently occupying my headspace and it’s very exciting.
Simply owning a home won’t cut it anymore. If your job gets automated away, how to you keep up with rising property taxes, inflation, healthcare, all of it.
Ownership is everything.
Do whatever it takes to acquire real estate that replaces some of your income. After you do that, repeat the process until you’re no longer relying on a job to feed your family. Now that you have positioned yourself to survive this uncertain future, repeat the process again to level up and thrive.
How long do we have before it’s too late for most to acquire real estate? I fear, for some, it’s already too late unless you relocate now. I grew up in Los Angeles and a starter home right now is around $600,000-$700,00. If there’s two incomes, that’s still barely doable. In 10 years, that starter home will be $1.2-$1.4 Million.
I currently live in Fort Worth, Texas. A starter home can still be purchased for $250,000, but affordability is slipping away fast.
10 years.
What we do in the next decade will determine if we become one of our generation’s winners or get left behind.
Don’t wait.
I believe the strategy I’m developing is the future of real estate, and in a way, it’s the strategy that will guide the rest of my life.
Maybe I’m wrong.
But what if I’m right?
If you enjoyed reading this and want to show your support, you can check out my non-fiction and children’s books at edgarescoto.com.
