Trump was a one term president. However, here is how to invest in Middle America post pandemic. More people than ever are moving to Middle America to save money and work remotely.
Investing In Middle America
Middle America real estate is cheap compared to coastal city real estate. Despite a revival of big city coastal real estate, the long term demographic trend is a spreading out of America.
Below is the 2016 presidential election results that show how vast Middle America is.
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. One of the reasons why the housing market will continue to stay strong is due to positive 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.
Middle America Is Growing
Given how much Middle America is growing, it's wise to allocate capital towards the heartland of America.
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 is to fly around the country and invest in commercial or multifamily 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 Middle America instead.
Because of government restrictions, I can’t highlight the current live deals on the platform, but you can sign up and see them for yourself.
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:
- 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 rise of real estate crowdsourcing platforms increases the supply of capital, thereby increasing the demand and prices of previously hard to tap investments.
- With the new tax policy for 2018, expensive coastal cities will get hurt with the $10,000 SALT deduction cap and the $750,000 mortgage interest cap.
Favorite Real Estate Investing Platforms
The best real estate crowdsourcing platform to use is Fundrise. They were founded in January 2012 and are based in Washington DC. Fundrise is the pioneer of the diversified private eREIT, that gives investors exposure in a less volatile way.
CrowdStreet is another great platform, only for accredited investors. CrowdStreet focuses on 18-hour cities with lower valuations and higher cap rates. If you have more capital, you can build your own select real estate fund with CrowdStreet.
Both platforms are free to sign up and explore!
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 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. In 2012, Sam was able to retire at the age of 34 largely due to his investments. He spends time playing tennis, hanging out with family, and writing online to help others achieve financial freedom.
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