I've lived in San Francisco since first arriving in 2001 from New York City. There's been so much negativity about tech that I'd like to share why the booming technology sector has changed my life for the better.
How The Booming Technology Sector Changed My Life
1) In the beginning there was envy for the technology sector.
I came to SF to work in investment banking, a industry where you could make a lot of money relatively quickly. You could do a lot of fun and interesting work and not be the most hated person. But once the financial crisis hit, the pay declined and the work increased. Further, we became public enemy #1, even if you had nothing to do with someone not paying their mortgage. I was in Asian Equities.
Sometime around 2010, tech became THE place to be. So many company benefits, great pay, fun outings, free transportation, free food, rising stock prices, and growth. Growth is fun! Stagnation, as we felt in banking, was not. People started joining technology startups left and right.
Here’s a chart of Google’s stock price versus XLF, the banking sector ETF. The irony is that I worked at one of the banks that took Google public, along with many other tech companies. It was kinda depressing to work in an industry that went nowhere compared to the technology sector.
2) In the middle there was hope.
After the financial crisis, working in banking lost all its fun. We were regulated tightly, there weren’t as many fun client outings, and there was a disconnect between pay and performance. But the rise in the technology sector gave us hope we could do something else besides finance if we were ever to move on.
In 2009, in the middle of the financial crisis, I started Financial Samurai. This was a personal finance site to help me make sense of all the chaos. I had zero technology skills. But WordPress made it easy to start your site quickly and cheaply, so I did.
I didn’t know what it could become. All I knew was that thanks to tech, the barriers to entry became so low that anybody could have some type of tech-related side gig. After more than 12 years, Financial Samurai is one of the largest independently-owned personal finance sites in the world. The technology sector gave me the confidence to leverage the internet for something more.
3) Towards the end there was elation.
Thanks to the growth of financial tech, consumer tech, education tech, and lending tech, I was able to ride the tech wave with Financial Samurai. I wrote about leveraging technology to more quickly achieve financial freedom. I didn’t clearly know all the different type of tech changes that would occur in every industry in 2009. All I knew was that I was sick and tired of working in an underperforming industry. I was living in the internet golden era age!
Thanks to tech, I was able to leave my soul-sucking banking job in early 2012, just 2.5 years after I started Financial Samurai. Tech enabled a dummy like me to start and run his own website pain free. To be free from the corporate grind at age 34 and not have to deal with terrible micromanagers who make you want to blow your brains out is a blessing.
Thanks to technology, the demand for my rental properties remained high for the entire duration of ownership as 90% of my tenants worked in tech. Then in mid-2017, I finally sold one rental house (kept another one and a Lake Tahoe vacation property) when demand dropped from $9,000/month to $7,500 a month.
Thanks to the growth of technology, I was able to sell my rental house I bought in early 2005 for $1.52M for $2.74M in 2017 to a technology sector VC! The price equated to 30X annual gross rent, which is about a 40% valuation increase (from 23x gross rent), a 80% price increase, and a 600% increase on my 20% downpayment since first purchase.
Leveraging Technology To Invest In Real Estate
Now thanks to the technology sector, I’m able to reinvest my rental house sale proceeds in the heartland of America through real estate crowdfunding.
Real estate crowdfunding emerged after the 2012 JOBS Act was passed in 2012. It now enables retail investors to invest in commercial real estate and multifamily homes across the country. I ended up invested $810,000 in real estate crowdfunding to earn income 100% passively and diversify my holdings.
With the huge trend towards work from home thanks to the global pandemic, it's clear that there will be a mass migration trend towards lower cost areas of the country.
The best way to play this multi-decade trend is by investing in 18-hour cities through CrowdStreet. CrowdStreet focuses on smaller, higher growth, less densely populated cities with lower valuations. Tier 2 cities like Memphis, Austin, and Salt Lake City should benefit from positive demographic trends.
Thank Goodness For The Technology Sector
Technology has changed my life for the better. I never in my wildest dreams thought I’d be able to be free by 34. I thought I was destined to work until age 60 and play office politics like my parents and their peers did.
Even though I’ve never worked in technology, I’m grateful for the tech boom, despite all the traffic, high prices, congestion and huge egos. The key is to figure out a way to leverage technology to your advantage by taking action. With no action, nothing extraordinary generally happens.
Financial Samurai was inspired by tech and entrepreneurship. I'm super thankful to have started this site back in 2009. I highly encourage you to start your own site too and potentially one day get rich off yourself.
Other Ways To Invest In Real Estate
If you don't have the downpayment to buy a property, don't want to deal with the hassle of managing real estate, or don't want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today. Fundrise is for non-accredited investors who want general real estate exposure.
Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible. For example, cap rates are around 3% in San Francisco and New York City. But cap rates are over 10% in the Midwest.
Fundrise is also free to look.
About the Author:
Sam began investing 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. He spent 13 years after college working at two of the leading financial service firms. During this time, Sam received his MBA from UC Berkeley with a focus on real estate.
In 2012, Sam was able to retire at the age of 34. He spends time playing tennis, hanging out with family, and writing online to help others achieve financial freedom.
FinancialSamurai.com was started in 2009. It is one of the most trusted personal finance sites today with over 1.5 million organic pageviews a month. Financial Samurai has been featured in top publications such as the LA Times and The Chicago Tribune.