Taking Calculated Risks

As a real estate investor you’re looking for the equivalent of a stock market mantra, “Buy low, sell high.”

Attracting Trend-Setting Couples
Well off empty nest 45 – 65-year-old couples and successful midlife 30 – 44-year-old couples signal the transition to higher appreciation in real estate.

An excerpt from Book Five in “The Knowledge Path Series” dedicated to helping you find the place of your dreams in the Sierra Mountain resorts.

Part Two in a 4-Part Series.

Part One: You

Look for a real estate market just taking off or, as in the Lake Tahoe market, accelerating again after a consolidation or drop in prices.

Lake Tahoe Homes

Contact local brokers for property price statistics and discuss vacancy rates for the town

  • Falling vacancy rates indicate demand is outstripping supply.
  • And that translates into enduring price appreciation.
  • Another quantitative variable to check is any factor that would limit the amount of land available for development.

Harry Dent advises you to look for any clues

These would include environmental constraints, water shortages, adjacent hills and lakes that count towards the acreage totals but cannot be developed, zoning laws, and so on.

  • As a real estate investor you’re looking for the equivalent of a stock market mantra, “Buy low, sell high.”
  • Or in retail, “Location, location, location”
  • A limited supply of suitable land plus growth equals appreciation.

    Explosive Las Vegas Growth

Dent turns to Nevada, Florida and Colorado for examples.

  • In Las Vegas at the time of his report had been growing by 14% every year, exactly the kind of statistic you’d want to find.
  • But with so much cheap land surrounding the gambling and entertainment mecca housing supply easily kept ahead of demand.
Desert Surrounding Vegas

This is why, for example, Las Vegas is growing at an astonishing rate of 14% per year but homeowners are enjoying only modest appreciation. 

Here’s the contrarian position.

  • When “timing is everything.”
  • There is a physical limit after all.
Mountain Range Halting Limitless Expansion

But Las Vegas is approaching the limits set by the surrounding mountain ranges. As a result, it may see more substantial price appreciation in the future.

What about Florida, an irresistible  magnet for snowbirds and retirees?

High population growth rates?

Check.

But, Dent says to consider two anti-appreciation factors.

Florida Lifestyle

Lots of flat land suitable for development and plenty of water have kept the price appreciation in most areas relatively modest. 

Look for pro-appreciation factors at work.

Limitations which limit growth (supply) while the attraction (demand) drives population growth.

  • California’s priciest areas limit growth by geographical, think Pacific Ocean, and ecological limitations.
  • Finally, at the top of our bucket list, Telluride, Colorado, is surrounded by mountain walls.

    Canyon Surrounding Telluride

The appreciation in such areas due to a growing population has been phenomenal.

The idea for this book germinated from a simple question my son asked on the porch of Tom’s Place.

He pointed to the houses, cabins and vacation homes perched on the winding terrace lots.

“How to live in one of those while doing what I want to do.”

My quest to build my knowledge bank came from Dent’s insight.

The final piece of quantitative data that can give us insight into a potential boomtown tells us about the local lifestyles, known as psychographics. 

Without having to visit each and every boomtown you can first filter a long “Birds-of-a-Feather” bucket list down to a more manageable regional itinerary.

  • Then visits to your short list you can confirm what lifestyle profiles suggest.
  • Take extended vacations in both the summer and winter test the fit, get a “feel” for the place and check out what’s going on.
  • You can correlate numerous measurable demographic factors with specific lifestyle preferences as we’ve shown beginning in Whitefish, Montana and ending with Mammoth Lakes, California.

A lifestyle analysis of any city, town, zip code, or neighborhood …

can help you identify a new town that is  attracting people like you whom you’d enjoy as neighbors. 

It is also important to use such data to identify which towns are attracting the trend setting lifestyles of the more affluent sectors of the population. 

The towns with Wireless Resorter profiles attract trend setting lifestyles.

Center of Mammoth Lakes Development
  • Over time Mammoth Lakes shifted from a Maturing Resort lifestyle magnet – informal, bluejeans  unpretentious – to a growing Premier Resort  attraction over the years we tracked them.
  • The appearance of both the 09M1T1 and 25Y1T1 profiles — well off empty nest 45 – 65-year-old couples and successful midlife 30 – 44-year-old couples signal the transition to higher appreciation in real estate.

Dent originally wrote …

If a Claritas (now Nielsen PRIZM Segmentation) report on the town you are researching shows a significant or growing influx of any of these lifestyle segments, then it confirms that you have selected a boomtown. 

But if it didn’t, how could you find Wireless Resort profiles?

Steps:

22) Selectively evaluate the best quality-of-life communities to live in and weigh the tradeoffs of risk and rewards for accruing real estate appreciation along a progression of rural and small towns that meet what your pocket books can afford.

 

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