Why Real Estate vs. the Stock Market?
By comparison, investing in stocks requires guess work as to what stocks may appreciate, and they could lose value down to zero just as easily. And if you are investing for dividends, the typical dividends from stocks yield only 1% to 2%, less the 1% fee paid to an investor advisor, leaving not much. Another negative with investing in a mutual fund is that as the manager of the fund sells stocks within the fund, the negative tax impacts can pass through to the investors.
Why Real Estate vs. Tech Start-Ups?
Having invested in tech start-ups over the last 15 years, I've found through experience and observation that since the Great Recession investing in tech start-ups is not the same, because tech start-ups now require repeated rounds of capital before they can be sold - thereby diluting the original investors. Likewise, the management teams are most often diluted and lose the incentive to sell, instead using the company to maintain their lifestyle. The result is that frequently tech start-ups don't sell as quickly as they used to, and when they do sell the buyers have learned to bleed the start-ups down to low cash balances and then make low-ball offers to save management but leaving the investors with less.
Remember, with tech start-ups investors don't typically don't get paid unless the company is sold. There are typically no dividends or current cash returns, and less face it, many of such companies don't even have positive cash flow. Not even the theory of investing in enough start-ups works any more, because as you invest in more and more start-ups, the law of averages works against you - since the greater number of losers brings down the average return over your portfolio.
An investment in multi-family properties that, once leased up, have on-going positive cash flow and pay current cash returns can be a far better investment. Unlike tech start-ups or investing in stocks, real estate provides 3 return opportunities. First, the cash on cash return. Second, the annual benefits from depreciation - being able to use that depreciation against other passive income. And third, appreciation in the value of the property over time yields an additional return.
Why Real Estate vs. Bonds?
Keep in mind that like stocks, returns from bonds are typically smaller, in the 1% to 3% range currently, again, less your investment advisor's fee or mutual fund fees. And bonds have an inverse relationship with interest rates. As interest rates rise, bond values decline rapidly. And right now, the country is in a rising interest rate environment (2017), placing bond values in great jeopardy.
Market Demand, Greater Madison Area Growth
- Employers are estimated to expand the workforce by 1.4%, or by 7,200 positions in 2017
- An increase from the 6,300 jobs created in 2016
- Millennials make up 75 million young adults. Only 27% of them would consider buying a home within the next 5 years.
- The Wisconsin homeownership rate is currently 66%, which is the lowest since 1965.
- The typical homebuyer rents for 6 years prior to buying.
- Nine out of ten new households since 2007 have been renters.
- Madison (MSA) labor force has grown 10.92% from 2005-2016, 1.5x the national growth rate.
- Dane County population is estimated to grow 34% between 2010-2035, compare to only 25% nationally; this is over 4,750 people per year.
- There is a shifting housing demand because the millennials are getting married later. In 1970, 70% of people aged 30 years-old were married; in 2015 only 30% of 30 year-olds were married.
Middleton Market- Middleton Center Ph II
- Unemployment rate is 3.8% compared to the national rate of 4.9% in 2016
- Median household income was $61, 691 in 2016
- Average age in Middleton is 39.1 years old
Business Friendly Climate
- Business Climate Features several Major Manufacturers and a cluster of 56 high-tech businesses.
- Headquarters for 10 of Dane County's largest employers
- UW Medical Foundation (1,900)
- North Central Group (687
- PPD (685)
- Springs Window Fashions (605)
- Electronic Theatre Controls (584)
- American Girl (493)
- Spectrum Brands (650)
- New Fiskars North America Headquarters
- New Mead & Hunt
- Meriter Clinic- Coming Soon
Recent Multi-Family Development
- Middleton saw an increase of only 1,363 multi-family units over the past 10 years; 190 f these units are at Tribeca Village.
- Tribeca Village Phase 3, a 75-unit apartment building developed by T. Wall Enterprises, opened in March 2016 and as of October 2016 it is 100% leased.
East Madison Market- Hidden Creek Ph II
- Opened UW-Hospital and Wellness Center at the AMerican Center in 2015; over 2,000 new jobs with 2 adjacent clinics.
American Family Insurance
- Employs over 7,900 people and is less than a few miles away from Hidden Creek.
Prairie Lakes Retail Development
- Two blocks from Prairie Trail.
- Includes new Costco, Marcus Theaters, Target, Cabela's and Menard's.
- Cabela's opened an 86,000 square foot store in 2015, adding over 200 employees.
Sun Prairie Population Growth
- From 2000-2015 Sun Prairie's population grew 44%