The Benefits of a Broad Geographic Reach

Realty Mogul has long touted the benefits of its nationwide operations as part of a broader benefit – the ability to diversify across geographic markets. Yet some investors remain fond of investing in their own local markets, believing that they can “invest in what they know.” But are demographic changes reducing the advantage of local knowledge?

The country’s fastest-growing cities are now those where housing is more affordable than average, a stark change from the first decade of this century. Then, easy credit allowed cities to grow without worries about housing costs, and the fastest-growing cities had housing that was more expensive than in most places in the country.

Now, though, it seems that the tables have turned. The economy keeps middling along, and the ongoing under performance of the housing sector is a key factor in that persistent weakness. Even years after the Great Recession, the U.S. is building fewer than expected houses in view of other demographic trends.

Housing in the big cities hasn’t gotten cheaper, though. As a result, rising rents in coastal cities and the difficulty of securing a mortgage there have led to a boom for inland cities, which often offer the middle class an easier life and more spacious homes. As long as there are jobs to be had in these more affordable locations, people seem to be moving there.

Of people who have recently moved more than 500 miles, the share that said they were primarily motivated by housing has risen to 18 percent this year, from 8 percent in 2007. The chief executive of Redfin, the real estate listing service, has said, “Now we’re growing fastest in the middle of the country; we can’t hire people fast enough in Houston, in Dallas, in Denver.”

For investors, this could mean that their local knowledge of the environs of New York City or of the urban areas of California may be less useful than before; those areas may no longer be “where the action is.” While in the past high housing prices had been a sign of the local real estate market’s strength (because they indicated strong demand), now midlevel prices may have become a better predictor of growth, with high housing prices simply being more indicative of limited supply. Highly regulated cities like San Francisco, Washington, and New York may still see some growth because of their severe restrictions on building, but the fastest-growing cities now seem to be in areas where affordability is key.

The ability of real estate crowdfunding sites like Realty Mogul to present debt and equity investments across the country is of heightened importance in markets with such macroeconomic trends. Realty Mogul’s recent offerings have included a multi-family apartment complex in San Antonio, Texas, a shopping center in suburban Houston, Texas, and a self-storage facility in Fayetteville, North Carolina, each in or near some of the top areas with the most growth over the last five years.

As with all prudent investing, diversification is key. Even within the real estate sector, it’s important that investors allocate their assets across diverse geographies, property types, and quality levels. Realty Mogul offers investors opportunities that vary across (among other things) widely diverse geographies, giving investors the chance to participate in markets to which they wouldn’t normally have had access. Many of these opportunities are in areas that have proven to be high-growth markets in recent years. Variety can be the spice of life – but these days, in real estate investing it may also prove to be the path to success.

If you would like to learn more about the real estate investment opportunities at Realty Mogul, click here.