The Best Investment Opportunity For 2021 And Beyond
With stocks at record highs again in 2021, it's time to look for cheaper investment opportunities elsewhere. Let me share the best investment opportunity for 2021 and beyond.
I think there's a great investment opportunity that is overlooked and can provide 10%+ annual returns for the next five years is in real estate crowdsourcing through large platforms like Fundrise to invest in the heartland of America.
Coastal city real estate is under siege now that new policy caps state and local tax deduction to $10,000 and mortgage interest deduction on mortgages up to $750,000 from $1 million. Capital should flow towards Middle America as a result.
I've personally invested $810,000 in real estate crowdfunding after I sold my San Francisco rental house for 30X annual gross earnings in 2017.
Why Invest In The Heartland Of America
The below chart is the final electoral college tally. As you can see from the map, the losers are California, Oregon, Washington, Nevada, Colorado, New Mexico, Minnesota, Illinois, New Hampshire, Vermont, New York, Maine, Massachusetts, Rhode Island, Connecticut, New Jersey, Delaware, Maryland, Washington D.C. and Hawaii.
Blue states are losers for the next 4 years at least
Now let’s drill down to the election results by county. Not every county in every losing state voted for Hillary. For example, just eyeball California on the map below and you will see the state is pretty divided. But given we have a winner take all system, Hillary was able to gain all 55 of California’s electoral votes.
The real shock from the county-level results is how much of a landslide it was for Trump thanks to the heartland. If you were just listening to the mass media, you would have been lead to believe the outcome was much more balanced. But as we know, the mass media and firms like Facebook and Twitter lean left. Therefore, you’ve got to constantly be aware of potential bias and think for yourself.
You might now be wondering, how can there be such a county-level landslide victory for Trump when Hillary won the popular vote by close to 2.9 million? The answer simply lies in demographics.
About half of the U.S. population lives in the blue areas seen below, and the other half of the population lives in the gray areas. Folks in the blue areas underestimated the desire of folks living in the gray areas to want something other than a career politician. With globalization, a lot of people living in the gray areas have not been able to take advantage of the economic boom.
Half the country lives in the blue areas, the other half of the country lives in the grey areas
The Easiest Way To Move Capital To Winning Cities, Counties And States
An easy way to invest in a Trump Presidency is to look at the sectors that should benefit from his victory. These winning sectors include banks, energy, infrastructure and defense. The idea is that less regulation and more government spending should be a boon for these five industries. We’ve seen these sectors perform quite well since the election victory. They could potentially continue to outperform if earnings surprise on the upside.
The other way to invest in Donald’s America is to fly around the country and invest in commercial or residential properties. The problem with this method is that it’s not only inefficient, it requires a lot of capital and a ton of follow-on maintenance once a property is purchased.
Instead of flying all around the country investing in locations where I have zero expertise, the simple solution is to leverage real estate crowdsourcing platforms like Fundrise to search for investments in Trump’s America instead.
Here’s a snapshot of some exited deals on some deals. All deals had successful returns, and all deals except for the New Jersey deal qualify as an investment in Trump’s America.
Investing in the heartland of America made easy
There are plenty more deals in the pipeline each month that usually have only $5,000 minimum investment requirements. That’s much more affordable than having to fly to Newnan, Georgia to poke at some sheetrock before making a much larger cash investment.
Every project is different, so spend time reading the research each sponsor puts together on the platform before making a decision. Here's my comprehensive Fundrise review.
Take Advantage Of The Trend
Blue state real estate prices exploded over the past eight years with Obama in office. With his term now over, the good times must wait until the next wave of mega IPOs and hungry foreign investors enrich tens of thousands of lucky blue denizens again.
Good investors always think about secular changes, regardless of where they stand on the political spectrum. Thus, I believe Red state real estate should outperform over the next 4+ years because:
A Republican president will give back to the people who got him there.
There will be a net migration out of Blue states into Red states as more people realize it’s a great deal living in Texas if you can get 3X as much for 1/3rd the price.
The remote work trend will continue due to technology and a tight labor market.
Sanctuary cities are at risk of seeing their federal funding pulled and reallocated to Red cities.
Income growth should be higher in Red states due to demographic shifts.
Now that investing in real estate is more efficient, Red State 10%+ cap rates compared to <4% cap rates in Blue cities are too hard to ignore. The spread should narrow.
A potential expansion of who can invest in real estate crowdsourcing will lead to an increase in demand and prices.
The biggest risk to my investment thesis is that jobs don’t return to the Red states due to failure by the new administration to make it attractive for American and foreign companies to invest in our heartland.
With the likes of General Motors, Walmart, Softbank, Carrier and others announcing new investments in America, so far so good.
Even Google announced in 2019 that they will be investing $13 billion in heartland real estate to build more datacenters and more offices to hire thousands more employees.
Check out Fundrise for free and explore all they have to offer.
About the Author: Sam began investment his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.
About Financial Samurai: FinancialSamurai.com was started in 2009 and is one of the most trusted personal finance sites today with over 1.5 million pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal.