By Mark Lemmons I August 15, 2022
The subject of investing is a big one and I hope you have been studying it and maybe even doing some investing yourself. It’s difficult to cover the topic in a short amount of time, but I will give it a whirl!
If you know me personally, then you may have heard this story, but I purchased my first home in the early 2000’s as a primary residence. I was able to purchase this home for pennies on the dollar because it was just concrete and studs! This central Houston home had been flooded when Tropical Storm Allison decided to dump 36 inches of rain in 24 hours! With 2 & 1/2 feet of water in the house, needless to say, it needed some work, but we knew the area and the market well enough to know that this was an anomaly and this area would be a solid investment in the long run. We had to completely renovate this house and I learned a lot about construction along the way, but I also learned about real estate investment in the process. We were able to create more than six-figures of equity from all of our work and enjoyed a nice payday years down the road. Of course, everyone I knew at the time called me crazy and told me I should just buy a house that was turnkey and ready for move-in, but I saw an opportunity and wanted to capitalize on it.
Investing can be risky and there are no guarantees. But when you consider the fact that the majority of people in the world who have become millionaires (which I agree, it doesn’t mean as much as it used to) have done so through the vehicle of real estate, it begs the the question, “What other way is there to grow or increase your wealth?”
For me, education and experience were the keys. I knew that I would someday buy a property, lose money on it, and wish I had never purchased it in the first place. I also knew that losing money and learning what I did wrong would teach me how to reduce my risk in the future.
And that is exactly what happened. One day I purchased a house and it burned down. Insurance refused to pay, and I didn’t have the money to sue. Ultimately I sold the land for less than I paid for the house. Thankfully, it was not a catastrophic loss due to being in an area with strong demand, but I still lost and I. DON’T. LIKE. LOSING.
But the fact remains, sometimes when we invest, we lose money.
I learned from that experience and I have learned from hundreds of transactions since then.
The most important thing that I learned regarding risk is that if the demand is strong, the risk of losing is low. No demand and your deal is dead. Strong demand and even if your deal’s margins are thin, the odds are good it will still sell. To me, demand is the number one criteria.
Due to Covid and some burdensome government regulations, hundreds of thousands of people are relocating to Texas and starting businesses here because of the fact that we have a culture that is tax and business-friendly.
Major corporations from around the world are also relocating to Central Texas. The news is full of stories announcing business after business moving here and bringing employees with them. Demand is at an all-time high.
We are always looking for opportunities and would love to partner with you when we find one that meets our strict investment criteria. We are picky because we strive to treat our investors the way that we would want to be treated if our roles were reversed. And we would not want to invest in a project that was too risky or hoping for a return rather than based on reasonable assumptions and an accurate gauge of the market.
I’ve heard a few people ask, “Why would you start a project when we might be at the start of a bear market?” Or “Don’t you think we’re now in a recession and wouldn’t a development like this potentially struggle?”
When I get questions like this I typically thank them for the questions and explain that, from my point of view, the 2007-2009 Great Recession was a “bubble”. What we’re seeing now is continued strong demand in our area. Will Rogers once said, “I refuse to participate in the recession.” That’s our mindset as well! We know we are in an area with strong demand and we are going to continue to work hard, produce a quality product and serve people well in the process. We believe the market will reward our hard work.
Right now, in Central Texas, supply is low and demand is still high. San Antonio needs an additional 65,000 homes to keep up with the demand and have a “healthy” market (according to the San Antonio Business Journal’s article from late July). Add to that the fact that retail space in Austin is 96% occupied (according to the quarterly report from NAI Partners), and we have huge, household-named companies moving here and hiring employees. These are real companies with real jobs for real people who need homes, apartments, and business spaces that don’t currently exist.
It will take years for the supply to meet the demand.
Will our market correct as the government attempts to slow consumption and reign in inflation? Yes, but going from an overheated market with a one-month supply of housing inventory to a more normal market with three months of inventory is still a long way from a buyer’s market, which is six months of inventory or more.
So, are you investing in this market?
I hope so and I hope you are doing well!
If you are not but are considering it, I would like to connect with you. I would enjoy visiting with you to see if it might be a good fit for you to invest in one of our projects. Either way, it will be fun to reconnect and catch up a bit!
In the past year we’ve had over 90 investors invest over $13,000,000 in our projects. We are expecting our next project to be as good as any of our other investment opportunities because of our underwriting process, local knowledge of the market, and our strict investment criteria.
To schedule a phone call to get to know you better and hear about some of your investment history and goals as well as allow you a chance to ask us about any of our previous projects, go over to our website: www.FLWcapital.com and select “Add Me to Your Investor List” or schedule a call with us through our Contact page on our website.
Thank you for taking the time to read this and good luck in your business and in your investments!
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