Unlike in other countries, homeownership in the United States has always been very attainable. The playbook traditionally went like this: you graduate from school, rent for a few years and then buy your first starter home. Most people were out of the rental rat race by thirty-five years of age.

However, now the United States is moving towards a renter nation. Homes are now unaffordable to most people in their thirties, and many young people have given up on the prospect of being able to purchase a home. Instead of buying a home, many successful young people are moving into luxury rental units that are much nicer than a home they could afford.

Forever renting is being glamorized by the younger generation. They look at the lack of responsibility and the ability to move around as they please as the benefits of renting. However, this is a young person’s game. Most of them will want to settle down and raise a family, and homeownership and a set monthly mortgage payment provide the stability later on in life that most of them will desire.

What the younger generation needs to understand is the incredible upside to owning a property. To start, in the United States, banks offer a thirty-year fixed loan that doesn’t move with inflation. Rents/mortgages are about thirty to forty percent of someone’s monthly expenses on average. Imagine if this cost is fixed for thirty years. It would mean that as you move up through life and your salary increases, that large cost of shelter will remain the same. If you are a renter, your rent will continue to slowly climb year over year.

In the United States, owning property is the main staple of building wealth. For most older Americans, their net worth is primarily the value of their home. It is based on them paying down their mortgage over thirty years and the home appreciating over time. If the younger generation doesn’t have that, they will have a harder time building wealth and being able to comfortably retire.

How Gen Z Can Afford a Home

As stated above, traditional homeownership is out of reach for most of the younger generation. The average cost of a starter home is over $400,000. That is why the successful kids of Generation Z are getting creative. Below are ideas I have seen from this generation on how they are obtaining homes.

1. House Hacking

This generation is all about affordability and house hacking provides this. House hacking involves purchasing a property and living in one of the rooms while renting out the others. The rent collected from the other rooms can offset the mortgage payment, making the property more financially manageable.

2. Rent to Own

In a rent-to-own arrangement, you can rent the property for a specified period with the option to buy it later. A portion of your monthly rent goes towards the home’s purchase price. This allows you to save for a down payment over time. It is beneficial to the landlord as they are slowly getting paid on the property year over year vs. one lump sum which would be more heavily taxed.

Conclusion

While most of Generation Z is focused on living in the moment, those who want to set themselves up for success will own a home. Creative strategies like rent-to-own and house hacking can make homeownership more attainable at a younger age. The new narrative of “you will own nothing and be happy” is a lie, and this generation needs to open their eyes and understand that home ownership is the anchor of the American Dream.

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Would Lowering Interest Rates Be a Magic Bullet for the Economy?

In the last few years, due to printing money and low interest rates, inflation has become a big problem in the U.S. economy. This has happened in past administrations, the most notable being the 1970s, which was called the time of “Great Inflation.” At the time, Paul Volcker was the FED chair and he reduced inflation by increasing the Federal Funds rate to a whopping 19 percent in 1981 and inflation eased to 2 percent by 1983.

Volcker’s tough on inflation stance is Jerome Powell’s current strategy. Powell believes if we raise interest rates, it will slow down the economy and decrease inflation. While it sounds good in theory, I don’t think the FED’s strategy of raising rates can get us out of the high inflation predicament we are in. In fact, there is an argument to be made that lowering rates is the only way to bring inflation down to anywhere near their target 2 percent. Let’s dive into the numbers so I can explain this to you.

The Consumer Price Index, or CPI, is broken down into eight categories. One of these categories is shelter. Shelter accounts for one-third of the CPI, so if shelter prices substantially rise, the inflation numbers increase drastically. So while inflation came in at 3.7 percent across the board last month, shelter came in at 5.7 percent. This shows us the real problem in the inflation numbers is housing.

Housing has very little to do with interest rates, and a lot to do with supply and demand. In the time of the “Great Inflation,” we had an overabundance of housing. When rates increased, this made shelter prices decrease, as you would see in a traditional raising of interest rates environment. What is currently different is we have a deficit in the supply of houses on the market. This deficit creates a problem for the FED because even with high interest rates, there is no supply to let the market pricing naturally decline. To get shelter inflation under control, you need more supply. There are two ways to achieve more supply on the market and both of them involve lowering interest rates.

The first reason lower rates would create a housing supply is it would allow people to list their homes. Currently, many people would love to move, but the 3-4 percent interest rate they are locked into prohibits this. If rates dropped dramatically and were closer to 5 percent, people would take a slightly higher rate to be in a home that fits their needs, but most people wouldn’t take on an 8 percent interest rate to do so.

Secondly, lowering rates would increase supply because it would increase building. Most of you probably don’t pay attention to this, but anything you see being built now is only being completed, not started. This is because construction loans are currently sitting around 10 percent. I know in my company, MC Companies, we have put six apartment projects that we haven’t started on hold until rates are at a more reasonable level. This is going on with developers all over the country.

However, lowering rates isn’t a magic bullet. Low rates will stimulate the economy and create more inflation. Lowering rates would only help the housing piece of the CPI. Printing money and extremely low interest rates put the U.S economy in this situation and with the lack of supply of housing, this is uncharted territory. It will be interesting to see if the FED can get us back to 2 percent inflation or if they accept a higher inflation benchmark in order to start lowering rates later this year.

For more financial articles, check them out here.

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A couple of interesting bills have been proposed in response to corporate America being more involved in the single-family home market. These bills were proposed because affordable housing is becoming an issue nationwide and corporate America is fueling that problem. They are easily able to outbid homeowners and even regular investors.

In the last ten years, there has been an increase in corporations purchasing single-family homes. This trend has been accelerated since the pandemic. I believe this was because there was such an increase in home prices that large corporations saw those investments doing better than other investments they had in their portfolio. I was unaware this was happening on such a large scale until a good friend of mine who invests in single-family homes went to a conference this year and told me there were way more corporate employees there than the mom-and-pops who usually attend.

In response to the increasing acquisition of single-family homes by hedge funds and corporate entities, two bills have been introduced in the U.S. Congress. The “End Hedge Fund Control of American Homes Act of 2023,” which seeks to restrict hedge funds, defined as corporations, partnerships, or real estate investment trusts, from owning single-family houses. It mandates these entities to divest their single-family home holdings over a ten-year period, ultimately prohibiting them from owning single-family homes.

Similarly, the “American Neighborhoods Protection Act” targets non-corporate owners who possess more than 75 single-family homes. It requires these entities to contribute an annual fee of $10,000 per home into a housing trust fund. This fund is intended to provide down payment assistance to families, facilitating more accessible home ownership, particularly for those with lower incomes. As those who invest in single-family homes know, you would be lucky to net ten thousand a year on the actual home, so the government is simply proposing you don’t own over 74 homes.

The Impact of Corporate Ownership on Housing Markets

While institutional investors only own three percent of all single-family rentals nationwide, they have a substantial presence in more affordable markets. For instance, in Charlotte, North Carolina, institutions own 20 percent of single-family rentals. Such significant ownership by institutional investors can drive up housing costs and limit the availability of affordable housing for individual buyers and families.

The Future of the Bills and How I Feel on The Matter

The million-dollar question people are asking me is how I feel about this. To start, I hate when the government puts its nose where it doesn’t belong. We have a housing shortage and anything that limits creating housing I am going to oppose. However, these corporations do drive up prices for normal Americans.

I don’t believe these bills will pass into law. This is because there will be a negative effect on the economy if they do. If corporate America was forced to sell their housing stock, it would certainly drive down home prices. This would be great for first-time homebuyers, but those who hold the majority of their wealth in their home would be upset. As would a majority of the members of Congress and the Senate who are also homeowners and don’t want to see their assets lose value.

Secondly, a lot of these institutions get their money from pensions, people’s 401(k)s and other saving vehicles. The government wants to see these assets perform, as well. As do the people whose money they are investing. Real estate is a great diversification for these funds.

However, this is an interesting topic. It really will put to the test how much the legislators want to see housing become more affordable versus how much they want to appease their donors, who want a growing economy. As I discuss a lot on my podcast, “Real Estate Strategies with Ken McElroy,” the only way to make housing more affordable is to deregulate zoning and create more of a supply. Once we can do that, it will be less expensive and easier to get a home. Until then, the trend of moving into a nation of renters will remain strong. That is why I think real estate will stay a good investment for many years to come.

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Unless you have been living under a rock for the past three years, you know that home prices have been elevated since 2020. The initial spike occurred because of low interest rates, and it has continued due to the lack of housing supply. So when everyone asks me when real estate prices will start to come down, what they really want to know is when more houses will come to the market, increasing the supply, and offsetting the high home prices.

I personally don’t think we will see a major housing correction anytime soon. This is because I don’t think we will have enough of a housing supply coming to the market to lower prices. Below, I am going to go over the factors at play that I believe will keep inventory low into 2025.

Interest Rates

Interest rates are the biggest factor that will keep the supply of homes listed for sale very limited. Currently, rates sit at around 7.5 percent, which historically is not high. However, at the low point during the pandemic interest rates sat closer to 3 percent. This 4.5 percent difference is a lot of money when looking at a monthly payment.

To put it into perspective, If you had a thirty-year $400,000 mortgage at 3 percent interest, you would be paying roughly $1,700 monthly. That same $400,000 mortgage at 8 percent would now cost you roughly $2,800. So even if a homeowner is looking to replace their home with one of equal value, they would be almost doubling their mortgage payment each month. Even those looking to downsize are realizing the cost of their new smaller home may have the same payment as the home they currently live in.

I know the Federal Reserve has discussed cutting rates this year. However, I believe these cuts will be small—maybe a quarter of a point each. Once they start to cut, you will see housing pricing climb back up as demand increases. It would take interest rates moving back under 5 percent, in my opinion, to make those sitting on low rates list their homes. I don’t see that happening in 2024.

Building Costs

Not only are homeowners not selling, but builders are not building. Now you may be thinking that’s not true because you have construction all over your town. Those cranes are from projects already started that need to be finished. Hardly any new projects are starting at this time. At MC Companies, we have shelved six of the land deals we were planning on building. Rates are too high, building costs are too expensive, and bridge loans are too uncertain.

Expect an increase in rental supply in 2024 from these construction projects. However by 2025-2026 when nothing new is coming to the market, you will once again have a rental/housing shortage.

Looming Recession

There is a lot of talk about a recession being right around the corner. Recessions make people nervous and make them want stability. They try to not take on additional and unneeded expenses. Homeowners are trying not to get stuck with something they can’t afford so they are choosing to sit tight until the economy stabilizes. This diminishes the number of homes being listed. Some are still talking about a soft landing and the Federal Reserve may just pull that off, but no one knows for sure just yet.

However. . .The moral of the story is we need supply. Even though I just listed why I don’t see a large supply of homes coming to the market anytime soon, there is one event that could trigger a surplus of houses being listed. The only thing that could be a catalyst for supply is a large recession. Extensive job loss will make people sell their homes and that will add supply, hence lowering prices. As of now, I don’t see that happening, but we have been on a wild ride the past three years and I am closely tracking the economy into 2024.

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Most areas of the real estate market have seen substantial price increases since 2020. These increases, along with increased interest rates, have made it hard to make deals pencil out and show cashflow. Even though my company MC Companies looks for deals every day, the ones where there is potential for cashflow are few and far in between.

Because it is hard to find cash flowing deals, this is the point in the cycle when people start trying to get creative to make cashflow work. I love the creativity and I do this in my own company. Some people look at adding additional dwelling units or upgrading units to provide more cashflow. Even looking at buildings that are managed poorly or are undervaluing their rents are hidden opportunities to make a deal work.

However, there is one strategy I am strongly against that many gurus are recommending, and I want to address this “strategy” and the issues I have with it in today’s environment. Adjustable rate mortgages or ARMS, are a tool that some are recommending people use in order to make the cashflow work. For those that don’t know how an ARM works, it essentially is a mortgage rate that fluctuates and is not fixed. Depending on the terms, the ARM will determine how often it can adjust its rate, but no matter what, it is not a fixed rate. People go for these mortgages because the initial rate is lower.

This is a big bet to take on the Federal Reserve. If you take out an ARM, you essentially are betting the FED will lower rates significantly in the next couple of years. However, if they don’t, then you will be cruising for a much higher rate than if you locked in to fixed rate debt. Ross and I have locked in most of our properties, and the few we have left to refinance we are currently working on as we speak.

A few other things to consider about adjustable rate mortgages is even though they go up, they don’t necessarily go down when rates start to fall. Normally they hold steady or continue to increase. This puts people in a bind like it did in 2008, when the downpayment has increased so significantly, the borrower cannot even make their payment.

Now you may be thinking if that were to happen, you can always refinance into fixed debt, but the question is, can you? In 2008, property values went down. Ross and I owed more to the bank than what the properties were worth. What saved us was the cashflow. If the property you purchased no longer is worth what you bought it for, you cannot refinance. If the payment becomes too high for you to make each month, now you are in a dilemma. You can’t refinance, you can’t sell, so you either make the payments or walk away from the property. That is not a position you want to put yourself in.

In times of high inflation and a very aggressive FED, you only want to be in fixed debt. Sure, the FED may lower rates in the next couple of years and real estate values may remain strong. If this is the case, I will still hold my position, because as an experienced investor I know these are not gambles you want to take. Play the long game. Play for cashflow and use fixed debt in times like these where rates are going up and values are not. Don’t try and make deals work by taking risks; find deals that work fundamentally with the current fixed rate environment. Remember, slow and steady always wins the race.

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Decisions such as renting vs owning impact your median net worth.

If you read personal finance articles, you will constantly see that most Americans don’t have enough to retire. That thought can be scary as you’re looking at your own finances. However, the real question is, what is the net worth of the average American your age? Remember, your net worth is the total value of your assets less any debts you may have. In this article, I am going to break down the average net worth by age, but also discuss how adding real estate can help grow your net worth in the future.

18-24-Year-Olds 

Since they are just beginning their journey into adulthood, they don’t have a big net worth. The median is just eight thousand dollars, not surprising because a lot of them are in college or starting low-paying jobs. If you are in this age group, I recommend getting approved for a credit card in order to build your credit and pay it off every month. This will set you up for your future investing endeavors.

25-29-Year-Olds

At this age, your average net worth actually goes down! This is largely due to student loans starting to come due and credit card bills beginning to rack up. Your average net worth at this age is seven thousand dollars. This is the time to start dabbling in investing. Even if it is just investing $100 into the stock market, you need to start following what is happening with the economy. Also, you should pay off any outstanding credit card debt you have to avoid having bad debt hold you back in years to come.

30-39-Year-Olds
Your thirties are when wealth starts to be built. Your median net worth at this age is 45 thousand dollars. A lot of people in this age group are beginning to save for a house, and this is a wise investment move if you want to have enough to retire in your later years. The extra work you put in at this age to secure your future will really pay off.
40-49-Year-Olds
The median net worth for this group jumps significantly to 169 thousand dollars, predominately due to homeownership. Instead of paying rent, they are making a monthly house payment that increases their equity and net worth. In this age group, a large gap in net worth starts to form between those who purchased a house in their thirties and those that remained renters.

50-59-Year-Olds
The average net worth in this group is 171 thousand dollars. This comes from paying down their mortgage and their home accruing equity. Also, at this point, most people are making much more money than they made in their twenties and thirties.

60-69-Year-Olds 

By this age, many people have their homes paid off and are enjoying retirement. A paid-off home has a lot of equity, and this home is where most people store their net worth. Those that are still renters in this age group will have a difficult time retiring as they never received the benefits of equity in their home.  

Your Home is Your Net Worth

For most Americans, their homes are their net worth. This is why your first goal of investing, regardless of age, should be home ownership. I believe we are headed into a recession and lowered real estate prices. If this is the case, those who do not yet own a home need to start preparing to become homeowners. Saving for a downpayment, paying down bad debt, and improving your credit are all things you can be doing to get ready for these buying opportunities.
 

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I don’t believe in saving money. In my experience, you want to take money and put it into assets that rise with inflation, with my favorite being rental properties. The rents tenants pay rise with inflation, and over time, this is a winning situation for your money. This is why inflation helps the wealthy who own assets and hurts people who rely on a job to make money. Saving money isn’t good over the long term, because it will lose its purchasing power due to inflation. However, that doesn’t mean it isn’t good to save money in the short term. In times like these, cash is king.

Inflation vs. Deflation

Two things can be true at the same time. Right now, we have massive inflation that the Federal Reserve is trying to cool through raising interest rates. However, this inflation is mainly hitting everyday goods, so money that is being used for gas, groceries, rent, etc. is going to be losing purchasing power month after month due to this six percent inflation.

However, this is where is gets confusing because when investors who are saving for assets hear about this inflation, they assume their money, too, is being eaten away. Yet, if you dig deeper, you will see certain parts of the economy are deflating. Cars, real estate and stocks are all beginning to fall in value. This is predominately due to rising interest rates, but these rising rates are meant to cool the economy, which takes these larger purchases off the table for a lot of people. Hence, this lowers the prices even further. I believe we are just at the start of this asset price deflation as inflation just came in at six percent in March, and the Fed really needs to get that under control for the average person to be able to financially survive.

Patience is a Skill

In times like these where you have falling asset prices, patience is important. I see a lot of investors who believe the money they have in savings is burning a hole in their pocket. They are desperate to either buy something or give it to a syndicator. This panic mentality is not good for investing money.

Purchases should only be made by verifying the income a property produces minus expenses, with that total being net positive. It should never come from panic that inflation is eating away your savings. When you buy something in a panic without adhering to these cash flow fundamentals, that is when buyer regret will take place and where mistakes are made. To be clear, this doesn’t mean I don’t think you should be looking for real estate deals. At MC Companies, we are always looking for cash-flowing real estate. We just buy based on the cash flow of the deal, not based on wanting to off-load cash.

The lesson is, if you have money sitting in your savings account, practice patience through this downturn and remember, when times get hard, cash is king. We are in the third or fourth inning of a nine-inning game, and as the game progresses, there will be more buying opportunities that fundamentally make sense.

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With the new year upon us, we are all starting to realize it is a very different atmosphere than where we were in 2022. While 2022 felt very prosperous and moving towards growth, 2023 feels stagnant and uncertain. Below, I am going to address the top issues facing the economy in 2023, and what we at MC Companies are doing to handle the challenges.

1. Inflation

As we all have heard and seen, the FED is focused right now on lowering inflation, and they are currently doing that by increasing the cost of borrowing money. We have had six rate increases since March and we believe there are more on the way as inflation still isn’t even close to the FED’s target of two percent. Inflation on fuel, groceries, and utilities is a supply and demand issue and won’t be affected by these rate increases. However, increased rates do affect financed purchases, which include real estate.

Keep in mind as some of you are very secure financially, that as the cost of money goes up, the pain for your average household goes up. Your average household is very tight on cash, and groceries, gas and utilities are three things that are very hard to cut back on significantly. Also, many families have non-fixed debt in the form of credit cards, and those payments have increased since these rate increases started.

These price increases caused by inflation will hurt the average household. Discretionary spending will be limited, which will slow down the economy even more than we have seen from the rate increases.

2. Price of Money

Money has a cost to borrow, and that cost has increased six times since March. This is why fixed debt is important, but so many people are borrowing in variable debt in the form of car loans, credit cards, personal loans, private college loans, etc. When the price of money goes up, they get squeezed. This makes purchasing a home very difficult and renting a more optimal solution.

You don’t just see this with families, but you also see this with a lot of syndicators, as well. The price of money has increased, and they are in hard money loans where the debt cost goes up every few months when the loan renews. If you are trying to exit a deal in this time frame, like many syndicators who buy solely to sell, then this is problematic.

The value of the property is inversely related to rate increases. As the interest rate goes up, the price of the property goes down. – Ken McElroy

This is because real estate investors make offers based on the monthly payment and cash flow and if the monthly payment increases, we have to offer less for the property. Since MC Companies doesn’t map out exit strategies and are holders, this does not affect us nearly to the extent it affects those whose business plan was built around forced equity and a planned exit on a deal.

3. Unemployment

Unemployment and inflation go hand and hand. As the FED increases borrowing rates, inflation will decrease because the economy slows down, but as the economy slows down, more people will lose their jobs, which slows down the economy even further. That is why the fact that the FED is in charge of both inflation and employment makes it a very difficult balance between the two.

Personally, I think they needed to slow down the economy, but the lag in unemployment will be significant. What do I mean by this? I mean there is always a delay between the cause and the effect, so these raised rates are just now starting to show in the decreasing employment numbers, and I fear these numbers will get worse in the months ahead.

Conclusion

2023 is going to be a very different year, but it needs to be. We couldn’t sustain the growth we had for the past two years. Bubbles need to pop, and everything needs to go back down to reasonable price points. This includes inflated real estate, cars and other assets that were propped up by stimulus money. This really is a positive situation over time and there will be great buying opportunities when the dust settles. For now, just sit back, relax, and look for some cash-flowing deals. If you can’t find any, then wait a few months and it will surely be a lot easier.

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With the federal government’s recent announcement implementing student loan forgiveness, Americans are hyper-focused on student loan debt. The Biden administration’s plan will forgive $10,000 of student debt for borrowers earning up to $125,000 per year, while borrowers who received Pell grants would have up to $20,000 of their debt forgiven. While student loan forgiveness has been politically divisive, it is spotlighting a rarely discussed reality, which is that student debt can cast a long-standing shadow over borrowers.

Undeniably a college degree is financially out of reach for many. In 2020-2021, the average yearly tuition and required fees at a public college was $10,388 for an in-state student and $22,698 for an out-of-state-student. The average cost of a year at a private college for that same period was $38,185. This high tuition is the result of years of increases that have outpaced inflation. From 2010 to 2020, college tuition increased 4.63 percent annually while inflation averaged about 2.53 percent per year.

In order to cover rising costs, nearly one third of all American students take out loans to pay for college, with an average balance of $37,667 according to the Education Data Initiative (educationdata.org). That amounts to a whopping 43 million Americans who have federal student debt totaling over $1.6 trillion. Student borrowers aged 30 to 44 years owe 49 percent of the national student loan debt balance, or $823 billion. While there’s a widespread perception that student loan debt affects mainly the young, 8.14 percent of federal borrowers are aged 62 years and older. The average 62-year-old federal borrower owes $40,560 in federal educational debt.

With 43 million Americans on the hook for $1.6 trillion, that’s money that cannot be applied toward homeownership. As a result, the demographics of homeownership have shifted. In 1981, the average age of first-time home buyers was 29, but by 2021, that age had risen to 33. Among all adults, 47 percent of student debt holders have stated that their loans prevented them from making a down payment on a home.

The Impact of Forgiveness on Inflation

While student loan forgiveness has drawn criticism in some circles, the argument that the new policy would spark inflation isn’t borne out by the facts. According to economists at Goldman Sachs, the plan to discharge approximately $400 billion in student debt wouldn’t send out inflationary shockwaves. Their projections indicate that reducing borrowers’ loan balances would boost the gross domestic product by only about 0.1 percent next year, with that amount expected to be even smaller in subsequent years. A big reason for this is that unlike the pandemic stimulus checks, in which the economy was suddenly infused with trillions of dollars, there wouldn’t be a substantial enough shift in the buying power of borrowers to drive up inflation. Additionally, the debt forgiveness would coincide with borrowers resuming payments on their outstanding balance in January of 2023. The forgiveness would add to the national deficit, but that is not expected to exacerbate inflation, either.

Looking Forward

While it’s clear that student debt impedes homeownership, what are the alternatives? If tuition and the cost of real estate continue to outpace inflation, people will be increasingly forced to decide between education and homeownership. While debt forgiveness offers some relief to existing borrowers, future generations will inevitably need to borrow to pay for their education.

First, I would suggest potential borrowers seek out less expensive alternatives to private universities, at least for part of their education. For students who want their diploma from a private college, they can take their core requirements at a less expensive public university and then transfer to a private college afterwards. As stated above, the disparity between tuition at a private college versus in-state tuition at a public college is about $18,000 per year. If you were to attend a public college in-state for the first two years and then transfer, you would save $36,000 that way. If you attend an in-state school for four years, you could save $72,000.

If you’re the parent of a child who will need student loans, it’s important to have a realistic conversation about this choice. When I look at buying a rental property, I always “run the numbers” on it, meaning that I evaluate the expenses versus potential profits. I would advise borrowers to “run the numbers” on their degree. That includes looking at the salary that a recent graduate could expect in the intended field as well as how much disposable income they expect to generate compared to their monthly payment. For young people, coming up with these estimates may be difficult, so parents could assist with calculating real costs for rent, taxes, and other expenses. Having a conversation about these numbers could persuade a student to make choices that will leave them less burdened by debt in the future.

The main problem with student loans is that they’re commonly taken on by teenagers who are pressured to dive headlong into hundreds of thousands of dollars of debt. In most cases, they haven’t worked full-time yet but are expected to commit to a career track. This is why I would encourage incoming college students to take a year off after high school to get some experience in the field they intend to pursue. This is fairly common in Great Britain, where it’s called a “gap year,” and it allows students time to work in the real world. In the US, where higher education is so much more expensive, this should be common practice.

Ultimately, a system that forces people to decide between education and homeownership should be reassessed. People choose to get a degree to advance themselves professionally and financially. Individuals with a bachelor’s degree but no student loan debt have the highest rate of homeownership in their age group, regardless of their age. For their counterparts who are burdened by student debt, they’re forced to defer their dream of homeownership, which is the best way to build long-term wealth.

The post The Reality of Student Debt: It’s Putting Homeownership Out of Reach appeared first on JetsetMag.com.

I’m a true believer in real estate. It’s hard to find an asset class that will hedge against inflation more reliably. I’ve been investing in multifamily properties for pretty much my entire adult life, due to their consistency and reliability. While my enthusiasm for multifamily properties remains strong, I’ve also discovered other types of real estate that offer the same advantages of long-term passive income while edging out inflation.

As a real estate investor, I have learned to see opportunities where others don’t. Over the course of my career, it’s become increasingly clear that there are million-dollar ideas all around us that we tend to ignore. Without a doubt, you’ve passed by data centers, industrial real estate and billboards without giving them a second thought, but each of these can offer incredible revenue streams.

Data Centers

While you’ve probably never set foot in a data center, you are using one every time you go online. Data centers are home to the technological infrastructure that allows all online activity to take place. Data centers can be a building, a dedicated space within a building, or a group of buildings used to house computer systems and associated components, such as telecommunications and storage systems. Data centers have unique requirements that make owning one more expensive. It costs about $1,000 per square foot to build your own data center, and that doesn’t include the added cost of having fiber optic cable installed to reach it, which will typically run over $10,000 per mile. That buy-in is typically too expensive for most, but accredited investors can still invest in data centers through private investment funds specializing in them.

One thing is certain: the demand for data centers is not going to slow down. After record growth in 2021, data centers are being built as fast as possible to keep up with demand. According to projections by the International Data Corporation, data usage is expected to grow at 24 percent per year compounded through 2025.

Industrial Real Estate

As is the case with data centers, the pandemic accelerated the already-high demand for industrial real estate. When online shopping shifted from a convenience to a necessity, the demand for warehouse space and e-commerce fulfillment centers exploded.

Industrial real estate in coastal markets has played a major role in e-commerce, but space near the ports is limited. In 2021, rents for industrial real estate shot up by 33 percent near port cities in California and the northeast. The scarcity of inventory in these areas has often led to bidding wars and has forced developers to consider other areas far from ports.

In an effort to solve the industrial real estate shortage, retailers and developers have moved inland, creating what is known as the Golden Triangle of industrial real estate. While the name may evoke pricey coastal markets, the Golden Triangle actually stretches through the south and Midwest between Illinois, Texas and Georgia. Once goods arrive at a port city, they’re put on trucks or trains and sent off to one of the many new warehouses in this region.

According to a report by Deloitte, industrial real estate demand is expected to increase by 850 million square feet, to 14.8 billion square feet, by 2023. Much like residential real estate, the supply of industrial real estate is barely keeping up with demand. In the first quarter of 2022, the vacancy rate for industrial real estate reached an all-time low of 4.1 percent.

Billboards

For me, billboards are the ultimate example of a million-dollar idea that’s buried in plain sight. I speak from experience, as I have owned billboards and know firsthand what a great investment they are.

While data centers and industrial real estate have tenants, in the case of billboards, your tenants are the advertisers paying for your space. Billboards aren’t the most cutting-edge form of advertising, but they are still tremendously attractive to advertisers. That’s because per viewer, billboards are the least expensive. A static billboard ad costs from $2 to $10 per one thousand impressions (or views), while a digital billboard costs from $9 to $32 for the same number of impressions. The location of your billboard will determine how much you can charge advertisers.

About four years ago, my business partner and I acquired a billboard located across from a stadium in downtown Phoenix and we bought it for $275,000. The billboard was two-sided, so we put ads on each side. We were making a good cash flow as a static billboard, but then we decided to take it a step further and turn the billboard digital. That allowed us to rent to multiple advertisers at the same time. After turning it into a digital billboard, our monthly revenue skyrocketed.

Recently, my partner and I decided it was time to sell the billboard. Our profit from the time of purchase to the time of sale turned out to be one million dollars. While I have to admit that I hadn’t been especially interested in billboards prior to that experience, I have always been open to learning more about potential opportunities. Even now, just driving by a nondescript building can pique my interest. My invitation to you is to look for the million-dollar idea that’s right in front of you.

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