Doubling Up and Trading Down


Adaptation is a key to success.

In this era of accelerating change, the biggest will not win.  The strongest will not win.  The richest will not win.   The most established will not win.

The future belongs to the most adaptable.

success-adaptation

Ecuador yatchak teaching about being in harmony with nature.

Ecuador’s history of adapting is one reason why many Americans, Canadian and Europeans are moving there.

This is also one reason why I invested in Ecuador rental units and am now investing in real estate whose utility can shift in the USA.

There are five ways to survive and profit during rapid change in investing markets.

Invest in equities.

Invest in commodities.

Invest in multi currencies.

Invest in your own micro business.

Invest in real estate.

Real estate and micro businesses are Merri’s and my favorite two of the five because we can see the opportunity more clearly…. exert more control… add our imagination and build value in our own way.

One area of real estate opportunity is in trading down. Ecuador has done really well because real estate prices have been so low and the cost of living… especially taxes and such are even lower compared to the Western world.

In the US there is great opportunity investing in real estate that can trade down… by changing from single family to multiple residential use.

Here are excerpts from the December 28, 2010 article “Doubling Up’ in Recession-Strained Quarters” by Michael Luo.  Recession Creates Spike in Multifamily Households.  Of the myriad ways the Great Recession has altered the country’s social fabric, the surge in households, where relatives and friends have moved in together as a last resort, is one of the most concrete, yet underexplored, demographic shifts.

Census Bureau data released in September showed that the number of multifamily households jumped 11.7 percent from 2008 to 2010, reaching 15.5 million, or 13.2 percent of all households. It is the highest proportion since at least 1968, accounting for 54 million people.

Even that figure, however, is undoubtedly an undercount of the phenomenon social service providers call “doubling up,” which has ballooned in the recession and anemic recovery. The census’ multifamily household figures, for example, do not include such situations as when a single brother and a single sister move in together, or when a childless adult goes to live with his or her parents.

For many, the arrangements represent their last best option, the only way to stave off entering a homeless shelter or sleeping in their cars. In fact, nearly half of the people in shelters in 2009 who had not previously been homeless had been staying with family members or friends, according to a recent report, making clear that the arrangements are frequently a final way station on the way to homelessness.

A New York Times analysis of census “microdata,” prepared by the University of Minnesota’s state population center, found that the average income of multifamily households in the records fell by more than 5 percent from 2009 to 2010, twice as much as households over all, suggesting that many who are living in such arrangements are under financial siege.

US real estate prices are really low especially compared to other Western nations.

Trading Down means that there will be more people who can only spend less.  The day of a one person or one family home for everyone may be gone.

I have been approaching this idea of altering utility in real time in numerous ways.

See below ideas on how to earn in real estate in Ecuador or the USA.

Real estate… imagination… research for value… creativity… and a bit of elbow grease create five powerful profitable combination… even in… these depressed times.

Merri and I like investing in real estate… especially in places like Florida and Ecuador where prices have or had fallen so dramatically and created so much value.

Prices are down and may fall more, but the demographics support growth.

Unemployment can continue to stall Florida’s real estate recovery. Plus there was a huge wave of 5 year balloon mortgages in 2005… that may create another wave of defaults.  So real estate in Florida could take another hit.

Keep these short term facts in mind but look at the long term demographics.

A USA Today article “Where will everybody live?” By Haya El Nasser outlines three significant facts about this.

First, the American population has risen from 200 million to 300 million in 39 years. At present growth rates the next hundred million will come in only 34 years!

Second, today each American owns 20% more developed land (housing, schools, stores, roads) than 20 years ago. By the 1990s 1.7 acres of land was developed for each additional person.

Third,  more people need more space.  100 million additional people will need 70 million new homes and 100 billion square feet of non residential space.

There will be more people, maybe with less money, for awhile so they’ll need a lower cost place to stay.

Inflation supports real estate investments plus people would like to have high quality.  Many people will choose quality over space… take a nice small unit over a big not so nice place.  Construction costs are not going to fall!  Normal inflation and increased demand from emerging markets for cement, steel, timber and other basics assure this. Plus environmental concerns will continue to slow acceleration of supplies as well.

Another reason for real estate investments in the US is changing utility.  For example, my mom’s home neighborhood which was once the bastion of suburban WASPs is now filled with Mexicans, Chinese and Ukrainians. Our builder friend tells me that at least half his home buyers are first time immigrants who use a family plan (the whole family comes over, pitches in and buys a house together). This means that a single house is once again becoming more popular as a place for two, three or even four generations to live together rather than just one.

House lots used to be 5,000 square feet minimum. Now they can be 2,500 square feet. That’s a big change in utility.

Technology is altering the concepts of time and space so…property (like the farm we live on) that was once pretty useless, or land in the desert like the dry part of the land in southeast Oregon suddenly has a new utility. This is especially true for tens of millions of boomers who will be highly mobile when they retire.

Next, we need to compare US property prices in global terms. Sometimes the forest is hard to see because of the trees and real estate values are hard to see because of local comparables.

Prices of housing in the US may seem high, when you compare them with US house prices of five or ten years ago.

What happens when we compare US real estate prices to those in other industrialized countries like France, England, Denmark and such instead? The thought. “We ain’t seen nothing yet” may arise!

We do not flip real estate.

Flipping is a concept to buy and quickly resell for a great profit… but this is usually pure speculation. Most flippers end up broke!

We believe in value added real estate investing.

Add imagination to your real estate investment.

Combine the miracles and talents that lay within you. By all means study how to be a better investor or business person each and every day. Use the benefits of modern technology. Create a common sense approach to searching for good value in investments. Develop external disciplines. Don’t spend more than you have. Work. Save. Invest. Hire professionals to help you study the markets. Even study economics and finance if you wish.

But match each of these external steps by also looking within. You are unique. You are a fountain of wealth…get to know yourself better. Tap the incredible power, knowledge and experience you already have. Your wealth not only will grow, but will become better, an everlasting flood of abundance that makes your ordinary journey through life an extraordinary process you’ll never want to end.

This why we purchased a beat up, old hotel in a state of great deterioration.Cotacachi progress

We spent two years making it beautiful and it is now it is thriving and full of life.

We bought a broken down office building that sat empty for years and changed it from this to…

11_Ecuador_Real_Estate

into this…  three wonderful rental units.

cotacachi-ecuador-condo

We bought seven half finished condos…

and completed them.

We bought this old farm house almost falling down… roof caved in and…

ecuador-florida

made it beautiful.

small-town-usa

Our current project is in Florida where we purchased 16 acres… with orange groves… and a house in bad repair.

The process of fixing has begun. First this garage… had a guest house that had been almost…

fixer-upper-gary-scott

abandoned.   Now it looks like…

gary-scott-real-estate

this.  Outside and…

Gary-Scott-guest-house

in.

Gary-scott-fixer-upper

This process fills part of Merri’s and my creative desires as it…

invest-in-real-estate-gary-scott

adds fun and value into out lives.

You can adapt real estate! Real estate… imagination… research for value… creativity… a bit of elbow grease create a powerful, profitable combination.

There is great change in the world that is almost certain to create inflation that will ruin the finances of a huge number of people. The shift will most likely come rapidly after some economic spark creates terror that stampedes markets and economies.  This shift will create opportunity for those who create “trade down” real estate.

Plus most of all… for us… real estate investing and fixing is fun and fulfilling.  This is the goal to pursue… earn in fun and fulfilling ways!

Gary

Learn how to adapt and gain success in health and wealth at our upcoming International Investing and Business Conferences.


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