All Forum Posts by: James Park

@Angel Hernandez

I don't know anything about you, but someone asked the same question last week and here was my answer. The wisdom here is to invest in what you have great wealth of knowledge in. 

The Tale of two old friends of mine.

Friend A
I have a friend from college who grew up from a solid middle class family who made his first million from scratch. He now possesses the financial IQ and investing experience of the how to turn his first million net worth into $3M, then to eventually into $5M. He is a man with a financial plan and he is a multi-millionaire today.

Friend B
I have another friend from college who inherited a million dollars from his wealthy Asian parents overseas and grew up from a affluent household of privilege. He ended up spending and losing much of his million dollar inheritance from bad investments in businesses he had little knowledge of, trading stocks, buying real estate right before the crash. He lacked the financial IQ and investing experience that my other friend possessed. If both my friend A and B, lost everything, friend A would know exactly how to rebuild the million again, but my friend B wouldn't have a clue.

If i won the lottery, and suddenly had access of $1,000,000 dollars in tax free money. I would allocate this money the following way, but not invest all of the money at once. I would carefully allocate the money in a gradual manner.

30% allocation: $300,000

My own business (S Corporation) - highest risk, highest reward. If there is a business idea you are passionate about and you have great wealth of knowledge and industry experience in the business you want to start, I would give it a shot. This is one category, I believe one can quickly accelerate their networth faster than real estate. I would expect a return anywhere between 25 - 50% annual. 26% annual return will double your net worth in 3 years.

30 % allocation: $300,000

I would allocate this amount to building a solid single family homes rental portfolio in a "A" school district zone in a high growth emerging area. I would expect average returns of 15% - 18% from my real estate investments.

20% equities and stocks : $200,000

Right now the stock market is over heated and is not a good time to buy now. I would wait for a substantial correction in the DOW or S&P 500 and take a buy and hold strategy. If you have no investment knowledge in the equities market, I would recommend buying the S&P Index 500 which will beat the performance of 80% of all fund managers over the long run. If you are an experienced investor and believe you are among the talented top 20% who can consistently outperform the S&P 500 year after year, I would create my own hedge fund with the $200k. Investing in the S&P Index 500 I would expect an average return of 11%/year over the long term horizon.

20% cash and money market : $200,000

Cash is king when we are headed into a deflationary market environment. Cash in hand will give you peace of mind if the market suddenly turns for the worse.

If was forced to invest out of state. Without having to think about it, I would probably concentrate my investing dollars in Dallas / Fort Worth.

1) Population is estimated to grow over a million from 2010 - 2020.
2) GDP is one of the highest
3) 0 state income tax and overall good public school system
4) One of the lowest unemployment in the country
5) One of the highest salary in the country and the low cost of living.
6) Dallas/Forth Worth Real Estate market was practically recession proof during the 2006 - 2012 downturn while Real Estate in the rest of country practically fell off a cliff.

These are all attractive features of why Dallas is a good place to invest.

For those investor who invest in either or both Atlanta and Dallas markets. Let's discuss some similarities and differences of the two markets. Pros and Cons.

Although I would like to believe where I live and invest (Atlanta) is the best market to invest. I believe that Texas has slight edge over Georgia in terms for the buy and hold investor. Sort of like a big brother, little brother relationship.

In terms of population inflow from 2010 - 2013, Atlanta ranks #7 with a population growth of 236,214. It appears both Houston and Dallas will have a population growth over a million by 2020. 

TaKorea : Korean Tacos huh? This should be very interesting :)

@Azeez K. Thanks for setting up this meetup! looking forward to it!

@Joe Villen

To give you a visual of @Matt Rosas point is like buying shares of the REM REIT that pays high annual dividends of 12.79% yield, but deteriorating asset value over time. Joe, people demand and population growth is everything when it comes to real estate values. The bay area real estate will have no value if there is no human demand to live there.

I grew up in the northwest suburbs of Chicago as little boy in the 80s. I was able to witness the vibrant growth of this area. I would frequently visit my favorite restaurants, favorites places to shop, favorite hang out places with my high school friends.

It wasn't long ago when I visited my hometown and to my surprise it became a very different place from what I remember growing up. Almost as if the area had turned into a ghost town. The area was no longer vibrant, all of my friends I grew up with had moved away. I saw many of my favorite restaurants and shopping centers close down which I could have never imagined back then as they were always there while growing up.  

In real estate, what happened in the past, is not necessarily a indicator of what will happen in the future.

euve

Attached is the 2013 demographics profile of Forsyth County.

Don't just chase cash flow markets, but look for good under valued cities with a bright future. By bright future, I mean 

1) Population growth
2) Vibrant tech community and tech jobs
3) Sustainable Job growth and entrepreneurial soil.
4) Great year-round weather, mild winters & an excellent lifestyle.
5) Low business, sales, and property taxes
6) International city
7) Immigration gateway city, melting pot of all cultures
8) No history of natural disaster

Atlanta possesses all 8, and is known as the NY or the LA of the South. From the chart below Atlanta is the 3rd lowest valued housing market after Detroit (#1) and Cleveland (#2). The population has decreased in both Detroit and Cleveland between 2010 - 2013, but Atlanta's MSA population grew by 236,214 between 2010 - 2013. Atlanta's housing appreciation by Dec 31st, 2014 should be right around 7.1% and should get back to its July 2007 peak price by 2016. The 2% rule does not mean much to me, if my property becomes almost impossible to unload in the future or if the asset value deteriorates over time. 

@David Cohen

David, it is not just the Korean demographics but the Asian demographics as a whole including Indians and Chinese. Atlanta's largest Asian demographics are the Indian, then the Korean, then the Chinese. This theory of Asian demographics influence on real estate prices have been touched upon several times in BP so i will not repeat it here. Below is Jay Hindrichs post which explains this concept well.  

Jay Hindrichs wrote:

The Asian influence in RE values is indisputable.. I actually grew up in Cupertino we moved there in 1962 and I graduated Cupertino high in 74.. There were maybe 10 Asians total in our high school of 2k... Today its probably 60 to 75% Asian.. As well when I return I look at the stores that we used to shop in and they have all been converted to Asian markets. The Asian community by and large is well educated highly driven and is nuts about Real Estate and owning it. Look at Vancouver B/C same dynamic happened there when the Hong Kong lease expired in 1997 huge influx and the accompanying huge run up in values. But as @J Scott save some cataclysmic event Bay Area is not going anywhere and values will be what they are set by supply and demand.. And the just incredible job market that is there. I lived in Palo Alto for 10 years.. town of 60k with a work for of well over 100k and its just not HIgh TEch its Stanford, Ford Philco and others.

I have also touched upon the Korean migration patterns here.

http://www.biggerpockets.com/forums/48/topics/1441...

Now, rather than just talk about theories, let's talk about real numbers. 

Below is the ranking of the top 11 high schools in the state of Georgia. The dark red color in the map above is the #3 ranked Northview High School. This is the first Asian majority high school in the state of Georgia and there are subdivisions here that are made up of 95% Asian households. The city of Johns Creek had about 11% Asian population in 2007, today that % is close to 30% and growing. If you look at the spreadsheet below,  the lower the "D" ratio, the higher the demand of homes in this school cluster and easier for the seller to unload their properties due to low inventory and high demand. I see a strong correlation of a lower "D" ratio, faster appreciation, and the concentration of Asians in that school cluster. In the northern suburbs of Atlanta, the schools are what drives the demand and prices in real estate.