foreign investorWe Americans can get a little paranoid when it comes to foreign investors buying up our real estate. It seems that every time the market gets hot, overseas buyers exchange their more colorful currency for greenbacks and start buying properties in the U.S. During the dotcom bubble, it was the British and Germans. The boom before that, the Arabs. Before that, it was the Japanese. And yet our culture persists, and we still own the vast majority of the land in this country, even in the most welcoming — and highest-priced — port cities. It’s happening again now, though. Non-U.S. individuals, corporations and sovereign wealth funds are once again investing heavily in housing throughout the States.

Moving in

“Foreign investment volumes increased [in U.S. multifamily properties] by 29.3% in 2018,” according to a Bisnow article citing a JLL research report. Not to worry, though. The new neighbors are reflexively polite. “Canadian investors alone deployed $9.8B over the year, 31.5% more than the previous high in 2015,” Dees Stribling writes for Bisnow. “Beginning early last year, for example, the Canadian Pension Plan Investment Board and GIC, an organization that manages Singapore’s foreign reserves, partnered with Atlanta-based Cortland to buy up to 10,000 Class-B apartment units across the U.S. and remake them into Class-A units.”

Canada might be the largest non-U.S. player in the market, but it is hardly the only one. Other names on the leaderboard might surprise you. According to the 2019 report itself, “Rising 23.8 percent from one year ago, annualized cross-border investment activity remains near record levels at $14.6 billion. Canada-, Bahrain- and Singapore-based investors drove continued investment, contributing 67.5 percent of quarterly foreign capital in Q1 2019.”

Bahrain and Singapore are not the names you might expect to see on the list. According to the National Association of Realtors, these are not the nations that are buying up general residential real estate, which is primarily single-family. On that list, Canada comes in second to China, followed by India, the United Kingdom, and Mexico.

Bahrain has a population of 1.6 million, while that of Singapore is 5.8 million. So why are these countries with as many residents as Idaho and Wisconsin respectively gaining such an outsized footprint Stateside? While it’s hard to say for certain, it might have a lot to do with investments made by their sovereign wealth funds. Two of the top 10 in the world are domiciled in Singapore, with combined assets of $815 billion. Next to Singapore, Bahrain pales in comparison, but a $15.4 billion valuation will keep them from having to drive Uber. With that much money to invest, anyone might consider buying into a gleaming new addition to the midtown Manhattan skyline.

There are reasons for non-U.S. institutions to acquire space in America even if they have mere millions to burn.

The hype

One invaluable source for this article is a 2017 CBRE report titled “U.S. Multifamily Housing: A Primer for Overseas Investors”. If there’s one criticism to be had of it, it’s that it often explains why multifamily can be viewed as a better investment than retail or office space, rather than why the American multifamily market is unique from the perspective of a cross-border backer. You can see the full report if you want CBRE’s “10 Reasons to Invest in U.S. Multifamily,” but really only four are relevant once you’ve considered that criticism.

No. 3: Favorable regulatory environment. “With respect to ‘social’ housing, the U.S. has a lower level of subsidized/low-income inventory than many other countries. These properties require additional expertise on the regulatory environment, but represent only a small portion of the total inventory (estimated 5% to 10%).”

No. 5: Liquidity. Real estate is not an inherently liquid asset but, it is far less illiquid in the U.S. than in other corners of the world. According to CBRE, this is due to the enviable degree of access to mortgage capital here: “The availability of debt capital is important for investment in any commercial real estate sector. Leverage is used for most transactions, with acquisition financing usually in the 50%-to-75% loan-to-value (LTV) range.” The article also cites the diversity of sources of multifamily real estate debt: banks of course, but also life insurance companies, commercial mortgage-backed securities, conduit lenders and particularly government-sponsored enterprises: Fannie Mae, Freddie Mac and the Federal Housing Administration, major sources of debt capital for existing assets in the U.S., don’t have analogs in many countries.

No. 8: Short-term leases allow immediate adjustment to market conditions. American renters are so conditioned to one-year leases that they can be forgiven for thinking that’s the global standard. It isn’t. It’s a factor of the “American dream” of homeownership; it is assumed that every renter is temporarily sojourning in their apartment rather than calling it their permanent home. In other countries, even fairly well-off people consider renting more common. In Singapore, for example, the typical lease is two years long. In Germany, it can last lifetimes or even generations. So imagine you were born and raised in Germany and grew up with the impression that landlording was a dicey financial proposition because of all the tenant protections. Then you discover that, in the U.S., your contract with your tenants expires on an annual basis. That means you’re not locked into the relationship for more than 12 months. You can raise their rent unless local ordinance intercedes. Given cause, you can evict them.

foreign investor“In periods of high rent growth, the short-term leases provide owners the ability to adjust rents upward quickly,” according to CBRE. “More importantly, if the U.S. moves into a period of higher inflation, short-term leases provide owners with the ability to make upward adjustments to cover the increased costs of operations.”

No. 10: Third-party leasing and management options. In America, unlike in many other countries, owning multifamily real estate can be a passive, turnkey investment. “[T]he 50 largest multifamily management companies in the U.S. managed 3.2 million units,” CBRE reports, citing the National Multifamily Housing Council. “The largest 50 firms each managed at least 30,000 units; the top five are each responsible for more than 100,000 units.” These management companies not only provide tenant interface and local knowledge, but they also add a professional gloss to the process that most financial investors haven’t been steeped in. Whether the task is to coordinate vendor schedules or using pricing software to optimize revenue, sometimes it’s best to leave it to the pros, and an outsized number of those pros are focused on U.S. markets.

But let’s add one more reason why investors are looking at apartment buildings in the U.S.: immigration.

“A great deal of foreign investment is motivated by a desire to immigrate to the United States or to provide financial support to dependent students attending schools in the United States,” according to a 2018 Socotra Capital blog post by Adham Sbeih.

If deep-pocketed overseas investors are looking to reside permanently in the States, buying multifamily real estate can satisfy two requirements at once: making the case for EB-5 visas, and securing a place to live once they get here. We’ve seen this happen. We’ve also seen wealthy people from outside the U.S. buy up a block of apartments, assign one to a child studying at an American college, and collecting rent on the others. If the kid decides to stay in the States, she continues to have a roof over her head. If she decides to return to her home country, that’s one more unit available to rent.

The reality

Even with all these use cases and all these anecdotes, foreign investors ownership of U.S. real estate is far lower than you might guess. “Currently only about 4% of multifamily holdings are owned by non-U.S. companies,” according to CBRE. That said, the number might be rising, at least in the short term. “[I]nvestors from foreign countries accounted for $13.65 billion, or about 8%, of the $174.5 billion of apartment property sales that took place in the United States last year,” Orest Mandzy wrote for Trepp’s blog in April, citing another CBRE study.

And yet, that surge might end up being too short-lived to constitute a trend, if the NAR’s findings have any bearing. The Realtors look mainly at single-family properties, so their research presents a far-from-perfect leading indicator. That said, non-U.S. citizens’ purchase of American residential real estate has fallen off considerably in recent months.

“Foreign buyers purchased to $77.9 billion of U.S. existing-homes during April 2018–March 2019, a 36 percent decline from the level in the previous 12-month period ($121 billion),” according to the NAR. “The slowdown in global growth, tighter controls on the outward flow of capital from China, and a low inventory of homes for sale likely account for this huge drop.

A similar decline was seen among non-resident foreign investors. Combined, resident and non-resident foreign investors accounted for only 5% of the $1.6 trillion existing-home market over those twelve months, down from 8% in the year-earlier period.

So yes, the hot U.S. housing market has attracted capital from all around the world. And as long as the boom times continue, you can expect foreign investment to pour in. But cycles end and, when this one does, there’s every reason to expect a regression to the mean. But there are reasons why that mean isn’t 0%. There are reasons why overseas investors look favorably on U.S. real estate investment even in lean times. One reason is that it’s largely unrestricted. No matter how many tariffs Washington has placed on Chinese goods, it hasn’t told the Chinese — or the Russians, or the Europeans or anyone else not connected with state-sponsored terrorism — that they can’t buy up an entire time zone if they wanted. Just pay the taxes as if you were a U.S. citizen or, if you prefer, a 30% flat tax.

foreign investorsNow compare that with the byzantine real estate laws in effect elsewhere. “Changing rules and regulations in other countries are also effecting where global investors are choosing to put their capital,” according to UpNest. “France has levied new taxes on investors. London, which was long the international favorite has stumbled, and put new taxes on wealthy investors. Even Canada has begun penalizing foreign investors with new taxes, and fines for having a vacant property, in an effort to reduce foreign investment, and maintain affordability.”

In that case, as long as U.S. public policy remains friendly to foreign investors in real estate, there will be euros, pounds, yuan, Canadian dollars and whatever it is they use in Bahrain available for multifamily projects here.

RECFThere are three primary drivers of the rental market in real estate right now. 

               1. Large companies are buying up single-family rentals and holding them in their portfolios long term. This is driving up the cost of real estate and making it unaffordable for a large number of would-be homeowners, especially young millennials and first-time home buyers. This is forcing those potential homeowners to continue renting for a longer period of time.

               2. The job market isn’t the same as it used to be. In fact, the average employee tenure for people aged 45 and younger is less than five years. As a result, people are reluctant to buy real estate so that they don’t get tied up in a mortgage when it’s time to move.

               3. Wages are also volatile. Since people tend to switch jobs more often, their income and benefits packages change more often. Plus, many people are working in the gig economy at least part-time, which means their income fluctuates. It’s difficult to get locked into a long-term mortgage agreement when you don’t know how much money you’ll make, or how much you can save, from month to month.

These factors are driving the current rental market. That’s why more people are renting, and many of them are renting single-family homes. That spells huge opportunity for real estate investors looking to cash in on high demand. But how do you get in on this rental market if you are not highly liquid and cannot afford to lay down huge piles of cash on real estate acquisition?

RECF Offers Rental Opportunities for Investors

Rather than opt out of real estate investing altogether because you lack the liquidity to purchase physical property, why not invest what you can each month in real estate opportunities on real estate crowdfunding platforms?

There are two types of deals investors can get involved with on RECF platforms: Equity and debt.

Equity deals allow investors to own a piece of real estate along with other investors. That real estate can be ground-up construction, fix-and-flip, or rental properties. If you invest in a rental property, you’ll receive monthly dividends from the rental income those properties produce, and when the properties sell you’ll get a portion of the proceeds from the sale.

Debt deals allow real estate investors to get in on a loan with other investors. Rather than loan $100,000 to a real estate investor for property acquisition, repair costs, and more, you might just put in $10,000 and become a partial owner of a loan product. Another word for this is fractional ownership.

Because the rental property market is so hot, there are quite a few opportunities for investors to participate in both debt and equity deals that allow them to become investors in rental properties without the associated headaches.

How to Invest in Rental Properties on Real Estate Crowdfunding Platforms

The best way to get involved in partial ownership of rental properties is to set up an account at a RECF platform like Sharestates and begin looking for suitable properties. Each property deal includes information on the property and the borrower. You’ll be able to compare the risk associated with each deal based on the underwriting criteria used, and you can choose how much you want to invest in each property.

As with any type of investment, you’ll want to perform your own due diligence, but the benefit of real estate crowdfunding is you can invest in real properties without having high liquidity.

multifamilyThe multifamily real estate market, in general, has occasionally lost sight of downmarket properties as we fixate on big, bright, shiny new towers.

But as enticing as high-end real estate is — not just to live in, but also to brag that you own a piece of — it’s not the whole story. We do a disservice to the broader population and, not inconsequentially, our investors if we don’t at least study how we could make as much if not more money from rehabbing existing housing stock.

The ABCs of Multifamily Real Estate

First, let’s make sure we’re all defining the classes of multifamily real estate the same way. While Seeking Alpha offers a good nutshell on the topic and Realty Moguls provides a slightly deeper dive, the best description we’ve seen of multifamily real estate’s class distinctions comes from the Commercial Real Estate Finance Company of America. Not to be lazy, but maybe it’s best just to capture CREFCOA’s bullet points verbatim:

Class A Multifamily

  • Generally, a garden product built within the last 10 years
  • Properties with a physical age greater than 10 years but have been substantially renovated
  • High-rise product in select Central Business District may be over 20 years old
  • Commands rents within the range of Class “A” rents in the submarket
  • Well merchandised with landscaping, attractive rental office and/or club building
  • High-end exterior and interior amenities as dictated by other Class “A” products in the market
  • High-quality construction with the highest quality materials

Class B Multifamily

  • Generally, a product built within the last 20 years
  • The exterior and interior amenity package is dated and less than what is offered by properties in the high end of the market
  • Good quality construction with little deferred maintenance
  • Commands rents within the range of Class “B” rents in the submarket

Class C Multifamily

  • Generally, a product built within the last 30 years
  • Limited, dated exterior and interior amenity package
  • Improvements show some age and deferred maintenance
  • Commands rents below Class “B” rents in the submarket
  • Majority of appliances are “original”

Class D Multifamily

  • Generally, product over 30 years old, worn properties, operationally more transient, situated in fringe or mediocre locations
  • Shorter remaining economic lives for the system components
  • No amenity package offered
  • Marginal construction quality and condition
  • The lower side of the market unit rent range, coupled with intensive use of the property (turnover and density of use) combine to constrain budget for operations

multifamilyAccording to Seeking Alpha, the rents you can expect from these classes vary as you go through the alphabet.

“Class A apartments in the nation’s one-hundred largest metros rented for $1,663 on average in January 2017, while rent for the average Class C ran $850,” the article reports.

But just because you’re getting paid twice as much for a Class A as opposed to a Class C, that doesn’t mean that it’s twice as profitable from an income statement perspective. And, from a capital investment perspective, the returns from a 20-year-old garden apartment complex with a new coat of paint could even exceed that of a new glass tower with lemon water in the lobby.

The Advantages of Workforce Housing Stock

No need to read the whole Harvard study on the current state of America’s housing. There won’t be a quiz. The important takeaway is this: As a nation, we added more than 1.2 million new units in 2018, and it’s not enough. The vacancy rate keeps falling, with the most recent nationwide reading at 4.4%.

“Meanwhile, the housing that is being built is intended primarily for the higher end of the market,” the study says. “The relative lack of smaller, more affordable new homes suggests that the rising costs of labor, land, and materials make it unprofitable to build for the middle market. By restricting the supply of land available for higher-density development, regulatory constraints and not-in-my-backyard (NIMBY) opposition may also add to the challenges of supplying more affordable types of housing.”

So there’s a serious unmet need for Class B-and-below housing.

Although a management company can’t get Class A rent from Class B apartments, the amount required to invest will likely be far less. Rather than breaking ground on greenfield construction — which is getting more expensive all the time — may be all that’s needed after a comparably low-cost acquisition is refurbished kitchens and baths, new HVAC systems and more contemporary signage.

“The modest returns of a Class A property with single-digit to low-teen internal rate of return (IRR) just isn’t enough when compared to the high-teen IRR results obtained when value-add is completed on Class B and C properties,” according to Blue Lake Capital CEO Ellie Perlman.

And let’s not forget that rents are a moving target, and it so happens that Class B rents are moving far faster than Class A rents. According to a rather data-intensive report from Bridge Investment Group, the investment case for Class B projects just keeps getting better when you factor in how much more rents in this class increase over the life of the asset when compared with Class A.

A Word of Caution

We’ve been largely silent about Class C and D so far, but that’s not because it’s necessarily a bad investment or even unpalatable from a renter’s or public advocate’s perspective. There will always be a need for low-end housing most obviously because there will always be poor people, but also because there will also be people who choose not to spend too much on rent at a given juncture in their lives. Maybe they’re new in town and are looking for a permanent place, or maybe they’re working on a six-month contract and $500 a month for a furnished studio near the job site is all they’re looking for.

These classes, though, are a bit off the beam of what Sharestates investors are looking for.

“Class C and D assets tend to be financed by local banks with little to no interest from secondary market lenders, according to CREFCOA, which warns investors to expect higher interest rates, shorter loan terms, lower leverage, and even personal recourse if the project fails.

Even with Class B, though, you might not get the same leverage or fixed-rate terms as you would with a Class A investment. And if your Class B project stands outside a major market, you might even get pushback about using the property as collateral and need to provide a personal guarantee.

It’s not Slumlording

Lumped together, these three less glamorous classes are often called “workforce housing” or “affordable housing,” and they serve an important social function. Not everyone can afford Class A and not everyone who can afford it sees the value of spending money on four walls that, during waking hours, they’re only going to shower and watch Jimmy Fallon at.

And while we’ve gone on about the opportunities to make a profit from refurbishing an old property, there’s really no need to do even that. Affordable housing advocates point out that these value-adds that move a Class C up to a Class B or a Class B to a Class B+ or A- have the effect of pricing potential renters out of the low end. Beyond merely maintaining the pipes and mowing the grass, low-end properties can serve as essentially passive investments.

Still, real estate investment is an imperfect market. Locations aren’t nearly as fungible as securities or mutual funds. Moreover, nobody on Wall Street ever had to be cautioned, “Don’t fall in love with a debenture.” It’s just human nature to want to be associated with a skyline-defining work of modern architecture than with a lump of poured concrete that dates predates America Online.

“With most new construction targeting the high end of the market, there have been some potential for excess supply to filter down to lower rent levels,” according to the Harvard study. “But with rental demand far outpacing additions to supply through 2016, this has not happened.”

So there’s a lot of pent-up demand for workforce housing. To meet it in a financially rewarding way, it just requires some investors to peer out of their ivory towers long enough to notice that not everybody lives in one themselves, or even want to.

Tampa Bay

With all the talk about a looming recession — inverted yield curves, slowing factory orders and so on — it’s easy to believe that everybody’s next residence is going to be a highway underpass. But if you’re looking for a real-world indicator of continued economic expansion — and thus a continued real estate boom — look no further than Tampa Bay.

The Gulf Coast of Florida –in fact the entire state — is the canary in the economic coal mine. As early as 2006, unemployment was creeping up in Tampa Bay and by 2007 housing starts all but evaporated. The region was swamped with foreclosures and houses were cheap enough to put on your credit card a year before the rest of the country knew it was in the Great Recession.

But that’s not happening now. Far from it.

[art:,h_726,q_75,w_1920/v1/clients/tampabay/Riverfest_Composite_3__0c46ffc2-37b3-4e90-923c-a51439185ff1.jpg ]

Housing Starts … and Doesn’t Stop

Between Tampa, St. Petersburg, Clearwater and the surrounding Census-designated places, there are more than 3.1 million residents, and the demographics are a little surprising.

We tend to think of this area having a huge Cuban influence, but it turns out not to be the case. Certainly, there is a strong Cuban-American community in the area and in the city of Tampa in particular, but there are more families from either Puerto Rico or Mexico. Taken altogether, though, Latinos make up only 11% of the region’s population, just a fraction more than the African-American population. Tampa Bay is a predominantly Caucasian region, but even that apparent lack of diversity is not what it seems. When you think of white Southerners, you might just assume that they’re mainly Republicans and evangelical Christians, but that also turns out not to be the case. The area is roughly split between Republicans and Democrats and, although those who express a religious preference tend to be evangelical, they are far outnumbered by those who decline religious affiliation.

What we do know for a fact about the Tampa Bay population is that it has far more people moving in than it has people moving out. According to, for every two moving vans pulling out of Hillsborough County, three others are pulling in. “Multifamily transaction volume exceeded $2.5 billion in 2018, marking a new cycle peak, as investors are drawn by the region’s solid fundamentals,” according to a recent Yardi Matrix report. “Developers completed 5,187 units in 2018, with an additional 3,660 units expected to come online this year.”

As is the case through much of Florida, tourism has an outsized effect on the local economy. This sector added 5,600 new Tampa Bay jobs, but these are often seasonal, temporary, part-time or just plain dead-end. It’s been said that, to Floridians, the word “ambitious” means working four bartending shifts a week.

In the realm of rental property development, though, this is not bad news. Sure, the churn is high, but that just means that residents have to rent instead of buy, and there is a premium to be had.

“Rents in the working-class Renter-by-Necessity segment rose 4.6% …, while Lifestyle rates were up 2.6%,” Yardi Matrix continues. “Rents have grown rapidly for years due to a combination of below-average rates and above-average economic growth, and that could extend well into the future.”

The new Neighbors

You wouldn’t think of Tampa Bay as a destination for Millennials, and it doesn’t fit the profile. In other posts in this space, you’ll read about the big companies that have headquarters or regional offices in a particular urban area. The biggest corporation based in Tampa is The Mosaic Company. Yes, it sounds high-tech to those of us old enough to use the Mosaic web browser in the mid-1990s, but this Mosaic isn’t that. It mines phosphates and potash to make fertilizer. And that does require a certain amount of technical and creative brainpower, but hardly enough to pack the local Starbucks.

And, while the region’s unemployment rate is slowly notching up, it’s still below 4% while employment — which is measured differently — is also increasing. Even so, the mix of occupations available doesn’t exactly scream for Ph.D.’s in data science. There are indeed computer jobs in Tampa Bay, but not more than the restaurant, retail or customer service jobs. Far more jobs are to be had by landscaping and cleaning crews.

The area, however, is home to the three main campuses of the University of South Florida. USF doesn’t jump out at you as a bastion of technological erudition the way MIT or Stanford or CalTech does, but it’s not that far behind. It’s in the Top 10 among universities worldwide in the number of U.S. patents granted and in the Top 50 among all American universities in terms of research spending. That $1.5 billion lab budget is bound to attract more than a token few of the best and brightest.

And some of them will be entrepreneurs who’d rather form their own startup than wear a corporate ID badge. The biggest success story out of Tampa’s tech community is that it lured WebstaurantStore’s headquarters away from Pennsylvania. By the way, Mosaic wasn’t born in Florida either — Tampa bay poached it from Minnesota. Don’t be surprised if other rustbelt companies follow the sun down to Florida’s Gulf Coast — and bring management, marketing, research and creative jobs with them. It already seems to be happening, as professional and business services comprise the fastest-growing job segments, albeit from a low baseline.

Already, there’s a clear distinction between Tampa Bay’s youthfulness and the prevailing demographic that has earned Florida the nickname “God’s Waiting Room”. The average resident in the metro area is six years younger than the average Floridian. There is just as great a distinction when it comes to academic attainment; locals are far more likely to have a college or graduate degree than others in the Sunshine State.

So Millennials are, coming to Tampa Bay but, candidly, not yet in droves. They have formed several young-professional enclaves which the next wave of arrivals might find attractive.

Youth, but no Fountain

Here’s the true story of Juan Ponce de Leon. He was a Spanish nobleman who chose a life of adventure and served under Christopher Columbus under the famed explorer’s second voyage. Starting in 1508, Ponce de Leon served as Puerto Rico’s first governor, establishing the tradition of corruption and over-the-top drama that persists to this day. But the Columbus family, which resented how much money Ponce de Leon was able to make off this new continent compared to their own more humble fortune, kicked him off the island. He shrugged it off and set sail again. After all, he had a whole new world to explore.

He continued his journey, making landfall in 1513 in a place he named La Florida, where he sought gold and plantation land. His explorations took him very likely from St. Augustine, down around the Keys and up the Gulf Coast perhaps as far as Pensacola. In 1521 he picked a fight with a local tribe known as the Calusa and was killed by a poison-tipped arrow.

Everything else you’ve likely heard about Ponce de Leon is probably garbage. All that stuff about searching for the fountain of youth is not to be found in his expedition’s charter or ship’s logs. It was first recorded more than a decade after Ponce de Leon died and mainly forgotten until somebody decided to fabricate a tourist trap in St. Augustine.

Besides, even the most casual visitor to the Sunshine State knows that, if there is a fountain of youth anywhere in the world, it’s nowhere in Florida. That’s not to say there is no youth there. There are bastions of recent graduates throughout Florida, and around Tampa Bay particularly. But there’s no fountain. The supply of youth needs to be constantly replenished by new transplants.

Upon consulting an array of sources, it appears that these are the most Millennial-friendly neighborhoods in the region:

  • Downtown Tampa and the adjacent Channel District, a.k.a. Channelside, are part of Tampa’s urban core, sandwiched between the more established neighborhoods — Hyde Park to the west and Ybor City to the east. These neighborhoods are pricey by local standards, whether for high-rises in Downtown or loft apartments in Channelside, but are close to nightlife and such attractions as the Florida Aquarium. 
  • Courier City/Oscawana, on the other side of Hyde Park from Downtown, features Howard Avenue, which is packed thick with bars and restaurants.
  • Carver City/Lincoln Gardens, in the west end of Tampa, is convenient to — but not on — the beach, and is convenient to Tampa International Airport and Raymond James Stadium, or what Buccaneers fans call “Ray Jay”.
  • Historic Ybor, adjacent to Channelside, is considered one of the trendiest neighborhoods in Tampa. It is not to be confused with the three other neighborhoods with “Ybor” in the name.
  • Hunter’s Green, a community in the New Tampa area northwest of the urban core, presents a more affordable alternative. It caters to people who want to get in a round of tennis or a few laps in the pool after work.
  • Downtown St. Petersburg is just as viable an option as any neighborhood in the more urbane city to the east. It’s right on the beach, has a major arts vibe and is a short jaunt to Tropicana Field for a Rays game. More than 1,200 units are currently under construction there.

All That and More

Of course, these aren’t the only neighborhoods around Tampa Bay that are attracting new residents.

Gandy and Ballast Point are often considered in tandem, despite being separated by a bridge spanning three miles of bay water. Gandy is part of St. Pete and Ballast Point is part of Tampa. Taken together, though, rents rose 7.7% year-over-year, according to Yardi Matrix, the sharpest increase around Tampa Bay. This tends to explain why these two communities also have more units currently under construction than any other submarket.

The Gulfside communities of Palm Harbor and Tarpon Springs, meanwhile, saw 7.5% year-over-year rent rises, despite being tucked away in the northwest corner of the metro area.

The good times for Tampa Bay’s multifamily real estate market won’t last forever, but there doesn’t appear to be any imminent cause for concern.

Tampa Bay at a Glance

  • Construction (projected, 2019): 3,660 units, down from 5,187 in 2018; 7,200 units were under construction in March 2019 with another 37,133 in planning or permitting
  • Occupancy rate (March 2019): 94.9%, down 40 basis points year-over-year
  • Annual rent (March 2019): $1,239, up 3.6% year-over-year with 3.3% growth projected through year-end 2019

Sources: Yardi Matrix

Sharestates Recently Funded Projects in Tampa

Sharestates has been forging new relationships with borrowers in the Tampa metro area and recently funded a few noteworthy projects there. Click the button below to view some recently funded Sharestates projects in the Tampa area!

When you thought of Texas, you didn’t use to think of Austin. If you thought of any city — and you probably didn’t because the most evocative image of Texas is probably an endless, untamed prairie — you thought of Dallas, with its “Big Rich” lords and ladies ruling over thousand-acre ranches. Or maybe you thought of industrious Houston, where West Texas Intermediate crude oil is refined into gasoline, and a control room full of earnest young men in short-sleeved white shirts and horn-rimmed glasses send Apollo spacecraft to the moon. Or maybe you thought of San Antonio, that in the heart of Texas cowtown where Davy Crockett, Jim Bowie and a handful of other bravos held off the entire Mexican army and sacrificed themselves at the Alamo for the cause of Texian independence.

Maybe in fifth grade, you had to remember — just long enough to pass a test — that Austin is the state’s capital. You might have caught a live music show called Austin City Limits, where you might hear Willie Nelson, and Run the Jewels play on the same night. Or more likely not unless you’re a passionate music festival goer. This long-running music festival also aired on television for longer than American Bandstand, but it aired on PBS.

Austin is still the capital. It still has an eclectic music scene. And it still has some of that university-town charm reminiscent of Boulder, Colorado, or Madison, Wisconsin thanks to the University of Texas and its passionate college football fan base. But Austin has outgrown all those convenient labels, and it keeps growing. No wonder the multifamily real estate market is so hot there, and why young out-of-towners are flocking there to find their little corner of this burgeoning city.


From Silicon to Citizen

U.S. News & World Report named Austin the No. 1 place in the U.S. to live two years running. So the secret is out.

Young people often come to town for education — the University of Texas at Austin is considered one of the top IT schools in the country and is certainly one of the greatest educational bargains to be had — but stay because Austin is also where the jobs are.

Many Fortune 500 companies — tech firms, in particular, have regional offices in Austin: Amazon, Cisco, eBay, Google, IBM, Intel, Oracle and PayPal leading the list. General Motors is also a major employer. Two homegrown companies — Whole Foods and Dell — still have worldwide headquarters in the area. Now that Whole Foods is owned by Amazon, maybe we should be including it as just another tech company that found a home in Silicon Hills, as the cluster of high-tech companies in the city is commonly known.

“[T]echnology companies have announced expansions in the metro,” according to Yardi Matrix. “Among them is Apple’s $1 billion, 133-acre development that’s slated to house 15,000 employees once fully operational, as well as WeWork’s rumored $1 billion mixed-use development that’s likely to encompass 3 million square feet of office, residential, hotel, shops and restaurant space.”

The New Neighbors

Millennials are a big part of the story when it comes to Austin’s growing population, but they are not the only drivers. Surprisingly, there’s less than a two-year age difference between the average resident of Texas and the average resident of the state’s capital, according to, which pegs an Austinite as 32.7 years old on average. The much bigger difference is in household income: $66,696 in town compared to a $56,565 statewide median. Austinites are more likely than most other Texans to be employed in management or sales and are twice as likely to be in information technology. They’re also more than twice as likely to have finished four years of college or to have attained a graduate degree. That would go a long way toward explaining why their home prices are also double those of the average Lone Star State tract.

There are other quirks of Austin’s demography. First, its residents are particularly non-religious. Unaffiliated residents far outnumber all denominations combined; this is one of the few cities in the south where there are more Catholics than Evangelicals, and where mainline Protestants have been able to maintain their relatively small numbers. And, for whatever it’s worth, the plurality of Austin residents have never been married. Also, compared to other large American cities, Austin displays a fairly low degree of ethnic diversity. There are relatively few black households; in fact, African-Americans barely exceed Asian-Americans in Austin — not what one might expect from an area that was dotted with thriving, predominantly black “freedom towns” during Reconstruction. Today, though, almost half of all Austin households are white, while roughly one-third are Hispanic.

But there are other kinds of diversity — musical tastes for one. It would be hyperbolic to say the live music scene in Austin is beyond compare, but you’d have to drive 12 hours to find such a talent-heavy and genre-spanning performance space elsewhere. Just follow the signs to Nashville. It should also be noted that Austin has probably the liveliest LGBTQ scene in the mid-South.

Austin does indeed have something for everyone — at least for everyone who defines themselves by their biography rather than their history. During the late 19th century, Austin promoted itself as “the City of the Violet Crown,” at once a commentary on the glowing colors of the hills right after sunset, and a classical reference to the Greek epic poet Pindar’s description of ancient Athens. But these days, the town’s unofficial but universally recognized slogan is “Keep Austin Weird.”

Finding Space

Let’s start with Austin’s biggest draw: its bars. This is no joke: the 78701 ZIP code — comprised of Downtown, North Side, the Medical District, Rainey Street Historic District, the Seaholm District and the eastern portion of the Market District — tops City-Data’s list of ZIP codes with the most alcohol-serving establishments. The post office that serves Austin’s urban core delivers mail to more watering holes than the one that serves New York’s East Village (10003) or New Orleans’s French Quarter (70130) or the next three down the list — which are all in Chicago. This is even more amazing when you consider that Austin’s Downtown — aside from a couple of 700-foot condo towers — is much more commercially zoned than those other neighborhoods, so the resident-to-bar ratio is truly astonishing.

Austin is home to roughly 1 million people — more like 2.2 million if you include the entire Austin-Round Rock metropolitan area. That’s big enough to make it the 11th-largest city in the U.S. Unlike most big cities, though, the current wave of development has more to do with filling in the gaps in the landscape than with changing the center-city skyline.

In 2017, Forbes gave the South River City neighborhood a second-place ranking for “Best Cities and Neighborhoods for Millennials,” which raises the question: Where exactly are they moving in and around Austin? lists what it considers to be Austin’s five top Millennial magnets:

  • East Austin only looks low-rent. It’s one of the pricier neighborhoods, given its proximity to the offices, government buildings, sports arenas and aforementioned bars of the Downtown area. Small, independent businesses — a touchstone of life in Austin — abound in this hipster redoubt.
  • Hyde Park, three miles up I-35 from Downtown, maintains a slower pace but shares the city’s penchant for quirky, homegrown businesses.
  • South Congress, or SoCo, has developed its own nightlife a half hour’s drive south of downtown. It’s also a bit pricier than some neighborhoods closer to the urban core.
  • South Lamar, a less developed, more open neighborhood on the way from Downtown to SoCo, might be the best place to find a bargain apartment.
  • Old West is, as the name implies, west of the urban core, just past the UT main campus. Because of some very strict zoning laws, multifamily development is very limited and thus high-occupancy unit rents are sky-high by local standards.

That’s Not All

These neighborhoods, though, are more on the wishlist for new Austin residents than on their realistic home-hunting tours. “The three most active submarkets had a combined confirmed sales volume of $422 million in 2018,” Yardi Matrix reports. “East Central Austin ($182 million), San Marcos/Kyle ($133 million) and Sunset Valley ($107 million).”

Still, growth remains impressive, even if it might be slowing down at this point in the cycle. “Steady hiring in Austin since 2009 has resulted in the creation of more than 300,000 jobs, attracting thousands of new residents over the past several years,” Marcus & Millichap reports”. The positive net in-migration of an average 40,000 individuals during each of the past five years has placed additional strain on the housing market as single-family and multifamily developers have struggled to keep pace with rising demand… New home construction and multifamily deliveries are anticipated to dip during 2019, while strong demand factors remain in place. As a result, vacancy will stay below 6% this year, marking a decade below this threshold.”

Austin at a Glance

  • Construction (projected, 2019): 7,500 units, down from a steady 9,000 per year from 2014 to 2018
  • Occupancy rate (January 2019): 94.5%, up 60 basis points year-over-year.
  • Annual rent (year-end 2018): $1,353, up 4.5% year-over-year; another 2.0% increase projected over the course of 2019

Sources: Marcus & Millichap, Yardi Matrix

Sharestates Recently Funded Projects in Austin

Sharestates has been forging new relationships with borrowers in the Austin metro area and recently funded a few noteworthy projects there. Click the button below to view some recently funded Sharestates projects in the Austin area!

real estate crowdfundingSam Dogen is a millionaire. What makes him different than other millionaires is the age at which he retired–34. Even more startling than that, he now regrets retiring at such an early age.

One of the reasons he regrets retiring so early is that he could have researched career opportunities in other sectors. As a finance professional, he could have written his ticket anywhere. He could have taken a risk on a new startup or continued climbing the career ladder at Fortune 500 companies. Instead, he retired.

To put things into perspective, Benjamin Franklin retired at age 42. Franklin’s second career was largely public. He parlayed his experience as a publisher into stints as a political mover, diplomat, inventor, scientist, postmaster, and writer. Had real estate crowdfunding existed in colonial America at the time, he might have tried his hand at that too. His interests were quite varied.

As speculative as that is, that’s precisely what Dogen said he should have done instead of retiring. Specifically, he stated, “I could have leveraged my interests in real estate and technology to start a real estate crowdfunding company–or, at the very least, join one.”

Joining one would have been less expensive in the long run and more lucrative in the short term.

Why Real Estate Crowdfunding Makes For Great Passive Income

Real estate crowdfunding has been around for about a decade now. Returns on investments average between 8.5 percent and 19.1 percent. Equity investments tend to offer higher returns, but they’re also riskier. These results are dependent, however, on the types of real estate investments, one puts one’s money into and the platforms where investments are held. While no platform can guarantee results, real estate crowdfunding has proven itself to be a solid asset class.

One of the key benefits to real estate crowdfunding is diversification. If you’re a serious investor, you likely already have capital tied up in certain assets. You might have investments in stocks and bonds, commodities such as gold and silver, and maybe even physical real estate. Among some investors, cryptocurrencies are popular. Real estate crowdfunding offers another asset class to help investors diversify their portfolios, and it can act as a hedge against downturns in the stock and commodities markets. These are some of the reasons investors seek passive income through real estate crowdfunding.

Of course, passive income works for anyone who is currently retired, planning retirement, or simply trying to supplement their income. As passive income, it offers serious private investors solid returns and awesome deal opportunities.

Don’t Retire Yet: There’s Money To Be Made

Just as Benjamin Franklin didn’t put all of his eggs in one basket, I wouldn’t recommend you do that either (and there were fewer baskets for eggs in the 1750s).

When it comes to retirement, it doesn’t happen on its own. Planning is required. Putting one’s money to work in any investment means spending time to perform some due diligence on that investment. In the case of real estate crowdfunding, it also means performing due diligence on the platform. Investors should be prepared to judge each platform by its management team, its underwriting practices, and the quality of its deals. When you decide to invest in real estate through any crowdfunding portal, that money becomes a part of your retirement portfolio, and when it comes time to retire–at whatever age you happen to be at the time–you’ll have one more passive income account to draw upon to live your life of Riley.

Dallas might not appear to be the kind of town younger adults would flock to. While there are jobs aplenty, they aren’t always the kind of jobs that appeal to people trying to optimize their career choices. While the cost of living is fairly low, the same could be said, and more strenuously, for Houston or Austin or pretty much anywhere else in Texas.

But appearances deceive. The building boom goes on, the jobs flood in, and the younger workers flood in after them. The art and nightlife scenes surge from one end of the Dallas-Fort Worth metropolitan area to the other, and the construction is literally non-stop.

This town has known booms and busts and, at this moment, the boom is definitely on.

Good place to start

Last year, RealPage reports, Dallas eclipsed its cross-state rival Houston for the distinction of hosting the most new-home construction in America over the course of the current cycle. (You can’t say “nearby rival”. Texas is unbelievably big. In terms of landmass, it’s France with a side of Switzerland.)


[caption: Dallas’s Southfork ranch. From the old TV show. If you’re looking for a starter apartment, though, here are some other ideas. Credit: Sf46]

Dallas, the financial capital of the Southwest, also hosts major headquarters operations for State Farm, Liberty Mutual, Toyota, JPMorgan Chase, and Fannie Mae.

“The metro remained a national leader in job creation last year, with the addition of 102,500 positions for a 2.6% expansion, 90 basis points above the U.S. figure,” according to Yardi Matrix. “Charles Schwab broke ground on a 70-acre office campus estimated to house some 8,600 employees once completed, while Infosys Ltd.’s tech innovation hub in Richardson is set to hire 500 people by 2020.”

Dallas’ economy continues to expand. As job growth increases, Dallas will benefit from strong (positive) net migration trends. Improvement in the single-family market is a viable threat to the rental market, however, the metro has one of the highest proportions of residents in the prime renter cohort (aged 20-34), which should keep renter demand strong as new residents come to the area.

Over the long term, apartment supply should remain on pace with demand due to favorable demographics driven by Dallas’ healthy economy, strong in-migration trends, and healthy amounts of new supply. Affordable housing and potential oversupply are things to keep track of as they could hinder the metro’s expansion.

Turn of the Millennials

Millennials — and now Generation Z — have picked up the scent. The prime renter cohort population in the Dallas-Fort Worth metro, those ages 20 to 34, is expected to expand by 1.7% through 2023, according to Fannie Mae. A survey reported by the Dallas Morning News names the Dallas-Fort Worth area the third-best American metro — trailing only Houston and Atlanta — by overall value to Millennials.

“Anecdotally, it seems to me that many [of Dallas’s Millennials] would actually rather live in Austin than Big D, if given the choice,” then-28-year-old Eric Webb wrote for the Statesman, Austin’s local paper a couple years back. “There’s something a bit cooler about the land of South by Southwest and breakfast tacos than the home of a highway knot called the ‘mixmaster.’ However, something has drawn a not insignificant number of my fellow twentysomethings up to the northern hinterlands of Interstate 35, and I don’t think it’s Six Flags.” Webb didn’t come up with an answer, just an observation. Perhaps in the time since that story appeared, he read the Moody’s report stating that Dallas offers twice as many technology jobs as Austin, which is a far better-reputed tech hub.

But that only goes so far toward understanding Dallas’s Millennial appeal. There really is a lot going on around Dallas that attracts younger residents. Northwood Hills is known for its Belt Line restaurant row, which is long on good eating and short on pretension, according to Move Matcher. And of course, there’s the walkable hub of Intown, or the nearby artsy bastions of Bryan Place and Deep Ellum. Over in Fort Worth, Magnolia Avenue offers much the same vibe. Still, many Millennials eventually end up in such traditionally suburban areas as Lake Highlands to start families. 

Room to the North and West

Dallas was the only market in the nation to land three submarkets in the top 15 for apartment completions during the current cycle,” Kim O’Brien writes in RealPage. “Additionally, two of those submarkets were in the suburbs, quite the feat on a list featuring mostly downtown, urban core areas.” Kim referred specifically to Frisco and Allen/McKinney, which are north of Plano, in addition to Intown. Actually, Intown is starting to lag in comparison with its exurbs, if not in comparison with other urban cores.

Builders are also paying close attention to the so-called Mid-Cities, the population clusters that fill the gap between Dallas and its nearest neighbor (again, Texas is huge) Fort Worth, 30 miles to the west. Mid-Cities submarkets of note for new residents include North Arlington, North Irving, South Irving, Haltom City/Meacham, Hurst/Euless/Bedford, Central Arlington and Northeast Fort Worth/North Richland Hills. While still within the Dallas city limits Bishop Arts District, a major Millennial hub, serves as the gateway to the Mid-Cities.

Wide, Deep Market

“The “value-add” product remains the most sought-after. Because of this hunger and the lack of available properties, deals in the Class B and C sectors have achieved record pricing levels,” according to ARA Newmark’s Brian O’Boyle. “In the last four quarters, the metro basically absorbed all the units that were delivered, but over the next four quarters, I am expecting absorptions to lag slightly behind the deliveries”.

This isn’t necessarily bad news long-term for the multifamily market. Dallas remains one of those towns where it is still measurably cheaper to rent than to pay a mortgage. According to Yardi Matrix, mortgage payments currently account for 20% of aggregate income, while rents account for 17%. So it looks like it will be a long time before the Dallas multifamily market finds itself in retreat. It will, eventually. Boom-bust-boom-bust-boom is just how the Lone Star State rolls. But all indications suggest that Big D is a long way from that tipping point today.

Dallas at a Glance

  • Construction (spring 2019 estimate): 28,000 units underway, 33,000 more planned
  • Vacancy rate (year-end 2018): 6.5%, rising steadily since 2015 and now exceeding the national average
  • Annual rent (year-end 2018): $1,180, up 1.0% year-over-year

Source: Fannie Mae

Sharestates Recently Funded Projects in Dallas

Sharestates has been forging new relationships with borrowers in the Dallas metro area and recently funded a few noteworthy projects there. Click the button below to view some recently funded Sharestates projects in the Dallas area!

interest ratesThe conventional wisdom is that when the Federal Reserve, America’s central bank, cuts its target interest rate, mortgage applications go up. When it raises them, mortgage applications go down.

This makes intuitive sense. Like we all learned on the first day of Economics class, the demand for anything goes up when the price of it goes down, and interest is just the price we pay for money.

But we at Sharestates did a little homework and found that it’s more complicated than that. The fed funds rate is not just a dial to turn up or down the amount of money American households spend on home buying. So if you’re expecting a flood of new demand just because the Fed changed direction recently, you might be underwhelmed by the response.

“Previously, on ‘Squawk Box’ …”

The Fed — specifically the decision-making group of system governors and regional presidents known as the Federal Open Market Committee — decided at the end of July to lower the fed funds rate by 0.25%. What makes that boring little nugget of monetary policy newsworthy is that this followed nine straight rate increases over three years.

The FOMC usually raises — and rarely lowers — interest rates during economic expansions. A slow rise in these rates has the effect of limiting how much money companies and households can borrow. This, in turn, keeps companies and households from spending money they don’t have. That, in turn, keeps a lid on inflation because the fewer dollars that are in circulation, the more each dollar is worth.

But what if the opposite is happening in the economy? What if there’s panic on Wall Street, companies are going bankrupt, millions are losing their jobs and unsold inventory is just sitting on loading docks? Then the FOMC would tend to lower rates so that the money companies and households still have is worth more and, as they spend it, the economy is stimulated and eventually recovers.

That’s exactly what the central bank did in the autumn of 2007 when it got its first hint that something was wrong with the economy, i.e., when sketchy mortgages started to lapse into default. The FOMC announced one rate cut after another until mid-2009 when there was nothing left to cut. The monetary authority took the unprecedented step — unprecedented by Washington, at least, although it’s been done elsewhere — of lowering the fed funds target rate to a range below 0.25%. That is, the rate was essentially zero. It stayed there for around seven years until the FOMC took the hesitant step of raising the target range’s upward limit to 0.5%.

So why now?

The central bankers inched that limit up, a quarter percent at a time until it reached 2.5% early this year. That was a testament to both the strength of this economic cycle and its unprecedented length. We are in the midst — let’s hope it’s the middle and not the end, but who knows? — of the first decade-long economic expansion ever. But it’s still going strong despite its age.

The Fed has two jobs: keep unemployment low and keep inflation low. It’s been doing the first part perhaps too well. The unemployment rate is below what economists call the “natural” rate — that is, the proportion of workers you’d expect to be between jobs even under the best conditions. You could say the U.S. is in a state of labor shortage. Inflation is holding to a narrow band around 2% per year; any less and it would cause a disincentive to invest in anything because you might not be able to get back more money than you paid in.

So why, if everything is going so well, do we need a lower fed funds rate? There are a couple of ways of answering that, but they both come back to the same root cause: politics.

President Donald Trump has publicly scolded Fed Chairman Jay Powell for not making this move earlier, but his reasons are open to interpretation. We’ve heard a lot of theories, from electioneering under the banner of “Dow 30,000” to the positive effects lower rates would have on Trump Organization cash flows. Or it could just be that Mr. Trump believes that, at the present moment, lower interest rates are what’s best for the U.S. economy. Considering the man holds a bachelor’s degree in economics from Wharton, he must know that rate cuts aren’t always indicated, so maybe there’s another, more likely reason.

That reason would have to do with the trade war with China. Lower fed funds rates mean more dollars in the economy, and more dollars means that each dollar loses a little value and thus leads to inflation. A less valuable dollar makes U.S. goods more affordable as exports to other countries.

This trade war was one of the reasons the FOMC cited for making their move in July, suggesting it was a threat to the economy’s continued growth. To be fair, it’s not the only one — the messy divorce between the United Kingdom and the European Union has recession written all over it — but the tensions with China are impossible to ignore.

So you can say that Powell & Co. flat-out caved to pressure from the Oval Office, or you can say that it reacted to an economic reality caused by the administration’s trade policy — a campaign issue that earned Mr. Trump just enough Rust Belt votes to put him over the top in 2016 and which he needs again in 2020 — with a prudent macroeconomic fix. But either way, we have to concede that the root cause of the rate cut was indeed politics.

Still, that doesn’t mean it’s a bad idea. During the expansion of the 1990s — the dot-com boom — the Fed zigzagged three times, cutting the target rate before resuming incremental increases. A lot of people made a lot of money in those years, and the recession that followed was fairly shallow and short-lived. If the Fed is zigging and zagging again, then everything is pretty much as it should be.

If the central bank continues hacking away at the fed funds rate indiscriminately, though, that might make equity investors happy while the good times last but it would call into question the independence of the Fed. All FOMC members are political appointees, and now and then an ideologue or party apparatchik has been nominated and confirmed in the role. But they’ve mostly been tweedy, academic types less comfortable with playing to their bases than with playing with databases. If today’s Fed governors continue to lower rates from here, they might be seen — correctly or not — as having given up the independence from presidential politics that their staggered, 14-year terms provide. Should that happen, then America’s monetary policy could be determined solely by one person whose incentive is to make sure a recession doesn’t happen until after an election, rather than that it comes when it may but do as little damage as possible.

What does this mean for mortgages? Not as much as many think

But we are where we are, and the media is full of commentary about how great this move is for mortgages and, presumably, builders. But we’re not so sure.

Much of this stems from the Mortgage Bankers Association August 7 report that says mortgage application volume rose 5.3% in the week immediately following the Fed action. And we’re not saying that’s not good news. It’s just not overwhelmingly great news either, for several reasons.

The first of those reasons is, it’s only one week. Buying a primary residence is the biggest decision most heads of households make, they tend to be very careful about it and there’s bound to be a flash-to-bang lag. And sure, home buying tends to slow down in August, but not dramatically, not in the first week. According to the Census Bureau, August new home sales actually exceeded those of July in five of the past 18 years.

But while we’re on the topic of seasonality, what we at Sharestates were surprised to learn is that interest rate changes have much less to do with mortgage applications than the annual ritual of summer house-hunting. But we pulled some data together and that’s what it tells us:

Target fed fund rates are precise percentages prior to 2009 and subsequently the upper limit of a range. Sources: Mortgage Bankers Association, Federal Reserve Bank of St. Louis

Careful observers will notice that this chart doesn’t present actual fed funds rates or mortgage originations, but rather the quarter-over-quarter changes in these metrics. They’ll also notice that, with the exception of 2009, when the fed fund rate plunged to near-zero, its quarter-over-quarter change hasn’t provided a significant, observable stimulus to quarter-over-quarter changes in home-buyers’ mortgage apps. And that spike probably had more to do with home prices collapsing after the financial crisis rather than interest rates cratering. Since 2013 — and from 1997 through 2007 — mortgage apps simply went up by a predictable margin every summer and went down by a predictable margin every winter.

Let’s go there for a moment. Those careful observers will also notice that the data only include mortgages taken out to actually buy homes, not to refinance. It’s telling that the MBA’s data saw re-fis rise more than double home-buying mortgage app volumes in that first week of August. Also, let’s remember that the rate cut was rumored for some time, and it’s to be expected that home buyers might have been sitting on the sidelines waiting for the Fed to take action. That the MBA had reported three straight weeks of mortgage app declines in July 2019 — again, during peak home-buying season — supports this interpretation.

One more point to make about why lenders and builders ought not to rely on the Fed for market support: There’s a huge disconnect between the fed funds target rate and what home buyers get charged for their 30-year fixed.

The fed funds rate is what the largest banks charge each other for overnight deposits. It’s a fraction of the prime rate, which is the best rate banks will lend to anyone who isn’t a bank. Mortgages, even though they’re usually the lowest rates individuals will ever see, will still be higher than that, and changes won’t ever be one-to-one proportional. When the fed fund target dropped 0.25%, the conforming mortgage rate dipped only 0.07%. So the incentive for homebuyers to wait on the fed is pretty minimal, especially considering that re-fi is an option, and living in a 700-square-foot condo with three kids is not.

Also, let’s be clear what the MBA is counting in terms of volume: It’s how many billions of dollars worth of mortgages are approved, not how many units are sold. Our analysis for this post didn’t go so far as to determine how changes in fed funds correlate with changes in the number of mortgages as opposed to their aggregate value, but that might be a study for another day.

It’s clear though that if you’re looking for an economic indicator to let you know whether you should be building more multifamily buildings or how many units you should be dividing them into, fed funds really won’t give you those answers.

If you’re looking for good news, though, we’ll leave you with two hopeful notes. First, real wages — hourly pay minus inflation — have been growing since 2015 and seems to be picking up steam. Second, the University of Michigan’s consumer sentiment index has been trending up — not shooting up, but trending up — and it’s in a healthy place. That is, consumers are about as happy now as they were in the mid-1980s, or during Ronald Reagan’s second term or when Nokia began selling the first mass-market cell phone in early 1997.

Also in early 1997: The fed funds target was raised a quarter percent to 5.5%, compared to today’s 2.00-2.25% range. Just sayin’.

A Bankrate survey last month highlights Millennial attitudes toward real estate investing. As it turns out, they’re favorable towards it. More favorable, in fact, than toward cryptocurrency, gold, or even stocks and bonds.

In terms of generational interest in real estate as a long-term investment, millennials score the highest. For Baby Boomers, it’s 30 percent; Generation X, 31 percent; the Silent Generation, 23 percent; and Millennials, 32 percent to 34 percent depending on their income bracket. Even Millennials making less than $30,000 per year are more interested in real estate as a long-term investment than members of other generations. That’s good news for everybody.

Why Real Estate is a Good Investment for Millennials

While it’s true that the stock market has yielded higher long-term returns on average than real estate, real estate does have its advantages. It’s hard to say no to average annual 8 percent returns, but real estate investing can yield incredible short-term returns. Here are just a few of the advantages of investing in real estate:

  • Investing in real estate builds long-term equity
  • Certain types of real estate investing can yield tax-free gains
  • Owning rental properties can lead to passive retirement income
  • Real estate acts as a hedge against inflation
  • It also is a good hedge against a down market in stocks
  • Real estate is an appreciable, physical asset
  • Investors can see respectable returns without investing the full value of the property
  • Real estate allows you to diversify your portfolio

Real Estate Crowdfunding is a Good Investment When Your Assets Are Illiquid

One of the challenges of investing in both the stock market and real estate is you need to have a fair amount of liquid assets to invest. If you want to put $50,000 into stocks, you need $50,000. If you want to buy and hold real estate, you need to invest at least enough liquid assets to secure a loan for the rest. That can be anywhere from $10,000 to several hundred thousand depending on the market and the value of the real estate you are buying.

Real estate crowdfunding provides another avenue for passive income by allowing Millennials to invest in real estate through fractional ownership. It’s also a great short-term investment with long-term implications.

For example, if you want to invest in a $500,000 commercial real estate development project, you’ll need a large amount of capital to make a traditional investment. These types of investments are typically limited to the number of investors who are allowed in on a deal. You need to be liquid, and your money is tied up until the development is completed.

With real estate crowdfunding, however, you can get in on a deal like this with thousands of other investors. Each of you puts up a minimum amount of investment and you receive dividends when the property sells if it’s an equity investment. Your returns are based on the value of the real estate property at the time of sale. You can also get into real estate crowdfunding with debt. The concept is the same. You and several hundred other investors put money up for a project and receive ongoing dividends as passive income when the interest on the debt is paid off each month.

With real estate crowdfunding, you can invest in any number of projects simultaneously and keep investing your returns over and over as new projects are presented and funded projects close. And many investors are realizing returns close to stock market returns–in the 8 percent to 12 percent range. Millennials interested in real estate investing for the long-term should consider real estate crowdfunding as an option to traditional real estate investing that requires more liquidity to get started.

From the outside, Charlotte, N.C., might look like a “typical” American city. It tapers out from a central district into neighborhoods, suburbs, exurbs, and countryside. The racial and economic mixes are pretty consistent with the country at large.

But there’s something unique about this city. Once a tiny village with just a half dozen houses, it became the crossroads of the slow-moving traffic across the Piedmont plain and eventually a major industrial city. But the pace was always consistent with the rest of the bucolic South.

And yet, unlike most the rest of Appalachia, it never got left behind for long. While their cousins up in the hills might blame their problems on “elites” along the coasts, Charlotteans went about the hard slog of becoming elite while remaining true to who they are.

When you peel away the layers, then, it becomes clear that Charlotte is not what America is today. If we’re lucky, though, Charlotte is what America someday will be.

And a new generation is betting their future that Charlotte is where the next economic boom will find a home. There are reasons for that.

Charlotte has a lot to build on

Charlotte’s old settlers are — and this isn’t a pejorative — rednecks. It’s what Appalachian-Americans, whose Scots-Irish ancestors arrived in the 1600s and 1700s, often call themselves. At the time their families came over, many Scottish Protestants wore red collars to signify their religious allegiance. When they arrived in America and went about the hard, outdoorsy work of building new communities, the image of a sunburned neck was conflated with the symbol of their choice of church and the American redneck tradition began. The group has had its struggles with poverty, ignorance, and intolerance, but equating all of today’s rednecks with these stereotypes is misguided and unfair.

Charlotte has been a transportation hub almost since its establishment in the mid-1700s. During the Civil War, it was one of the Confederacy’s principal railheads. In the 1960s, it became the birthplace of Henson Airlines which, after a few name changes and rebrandings and mergers and acquisitions, became a part of American Airlines. Charlotte is the carrier’s major southeast U.S. hub to this day.

But what really gave Charlotte an economic head start was an accident of geology. In 1799 — 50 years before the California gold rush — the area around Charlotte was the site of the first major gold find in the United States. Mining companies were formed, business types moved in and the new U.S. Mint opened up a branch office there.

Eventually, the Civil War disrupted the mining and minting businesses and, by the turn of the 20th century, the vein had been nearly tapped out. Still, there was enough of a financial community established there that Charlotte maintained its status as a banking center.  Today, Charlotte hosts the world headquarters of Bank of America as well as the East Coast headquarters of California-based Wells Fargo. As such, it is the second-most important banking hub in the United States, surpassed only by New York.

Finance isn’t the only industry to make its home in Charlotte, though. Hardware and building supplies retailer Lowe’s is based there, as are electronics manufacturer Honeywell, steelmaker Nucor, Duke Energy, and many other sizable companies.

Work brings workers, and greater Charlotte’s population keeps growing. Currently, around 860,000 live inside the city limits, and almost one out of every five moved there since 2010. Since 1850, not a decade has gone by without the U.S. Census reporting double-digit growth. If you include the surrounding areas, Mecklenberg County, which contains Charlotte, has well over 1 million residents and the combined statistical area has more than 2 million.

So who are these people who keep moving into town? Where do they come from, and what are their prospects in this ever-expanding metropolis?

Turn of the Millennials

To start with, they’re young.

According to, the average North Carolinian in 38.7 years old but the average Charlottean just turned 34. She — the city is 52% female — manages a household income of $61,017, compared to the statewide median of $50,584. She makes her money in management or sales, and very likely in the finance or insurance industries. She has at least an associate’s degree and probably a bachelor’s. If she expresses a religious preference, it’s evangelical Protestant, but she’s twice as likely to express no persuasion at all. Ethnically, it’s difficult to generalize about a typical Charlottean. White people still comprise the plurality of the population, but black people will soon exceed their numbers if current trends hold. Her marital status is also anyone’s guess. She is slightly more likely to be single, separated, widowed or divorced than she is to be married, so just go up and ask her.

And there is little doubt that, if she moved to Charlotte from out of town, she falls into that generation known to marketers as Millennials. There’s no firm definition of what a Millennial — or “Gen Y’er” or “Echo Boomer” — is, but those born in the years from 1981 to 1996 are generally considered as such. Some of us just refer to them as “grown men and women who’ve been out of school for years and are creeping up on middle age.” Sorry to be so cynical, but the data suggest that Millennials are both more narcissistic and less narcissistic than previous generations and that they are simultaneously less politically engaged and more likely to vote. So, let’s just call them what they are: individuals. Adults. Workers. Earners. People minding their own business, which involves building a career and a family in a town of other people building careers and families.

But there do seem to be a lot of them and, according to a SmartAsset study, many are finding new homes in Charlotte. In one recent year, the city saw a net gain of 11,000 Millennials. That’s more than relocated to any other second-tier city including Seattle, Austin or any other youth-vibe town you can name. According to mortgage processing service Ellie Mae, they account for 38% of new mortgages in Charlotte. That’s not all that big a number, which suggests that maybe they’re choosing to rent. Maybe they owe so much on student loans they have to rent.

So where are they choosing to live?


Pittsburgh-based research firm Niche conducted a study of the top neighborhoods for young professionals in the Charlotte area. They were judged, according to the Charlotte Business Journal, on “access to coffee shops, bars and restaurants, diversity, crime and safety, walkability and cost-of-living grades”.

Top honors went to the Fourth Ward, toward the north end of the urban core, which is a trendy neighborhood known for its pulsating nightlife and mediocre schools. Two out of three residents are in rental units, paying a median $1,454/month in rent. That said, there are actual houses to buy in the Fourth Ward, unlike the rest of the city center. It’s followed by First Ward, a mixed-income zone with rents $300 a month less but, somehow, with better schools.

Those wards are often considered part of the Uptown central business district. The Second Ward is the historic black neighborhood, portions of which have been revitalized with the construction of city and county offices. Its old name was Brooklyn but, for reasons best not to contemplate, Niche just refers to this area as “Uptown,” to distinguish it from the other wards. It’s still on the best-for-Millennials list, though. So is the Third Ward, which is probably what people think about when they say “Uptown”. It’s the core of the Charlotte skyline, where the major hotels and restaurant rows are, as well as the convention center, and Bank of America Stadium is where the Carolina Panthers play.

The rest of the list winds around the outside of the John Belk Freeway. Such communities as Wilmore to the west, Dilworth to the south, Optimist Park to the north and Cherry to the east are also competing for early- to mid-career professionals. Farther east along the Independence Freeway Elizabeth beckons, and Sedgefield waits to be discovered off Interstate 77 to the south.

That’s not all

One need not be a Millennial, though, to have a reason to move to greater Charlotte. But whatever the new arrival’s demography, renting is almost certainly their first step, and quite possibly their next.

“The metro’s addition of 52,000 new residents this year will result in household growth that doubles the national pace,” according to a recent Marcus & Millichap study. “Robust demand will also come from fewer tenants being able to transition to homeownership due to a lack of entry-level homes for sale amid rising interest rates and values. Even as the need for apartments expands, deliveries will ease from last year’s pace, tightening vacancy to its lowest point of this cycle, supporting rent growth.”

What’s bringing them is jobs. “Over the past year, employers in Charlotte added 29,200 positions across the metro,” according to Institutional Property Advisors. “The unemployment rate has continued to compress, falling into the low 3-percent range.” That’s not just below the national average, it’s below what’s healthy. That’s a labor shortage, so people who are looking for work and don’t want to head up north are going to seriously consider the Carolina climate.

The market for rentals in Charlotte is tight now and keeps getting tighter.

Charlotte at a glance

  • Construction (projected, 2019): 7,700 units, down from 8,500 units last year but consistent with the five-year trend
  • Vacancy rate (projected, year-end 2019): 4.2%, down 50 bps year-over-year
  • Annual rent (projected, 2019): $1,166, up 4.7% year-over-year, following up 2018’s 6.9% surge

Sources: Marcus & Millichap