The world changed a lot in 2020. So, how are affluent California investors managing their money now? What are they doing with it? What are they investing in, and not? How may have their priorities changed?
Daily life is certainly much different for many in America than it was 12 months ago. Depending on where you live and work, it may feel like you are living in the middle of an apocalypse, or just a really weird limbo time when it’s not the end of the world, but everyday things like work, eating, shopping or going to the dentist feel unusual.
The fact of the matter is, besides the masks, travel restrictions, and protests, many things haven’t changed much. Especially when it comes to investing. The public stock market still seems to be frothy and overvalued. Overall, the real estate market is marching up with increasing sales, higher prices, and plenty of demand.
There is still this nagging cloud of a potential recession on the horizon, but it doesn’t seem to have really turned into a crisis yet. New stimulus packages and the presidential election could send that into any direction.
One of the things that has changed is investor priorities. There are very few things which individual and institutional investors are truly bullish on today. Most are mentally and financially preparing themselves to weather the worst case scenario of a new 2000 or 2008 style crisis.
Whether it is high earning high-tech workers in Silicon Valley or retired investors with sizable retirement savings, there are four priorities showing up across the board.
- Increasing liquid net worth to be able to weather any cash flow gaps
- Moving to less volatile investments
- Investing in hard tangible assets that can’t go to zero
- Investing for passive income
Real Estate & The New Normal For Investors
One of the few things which investors remain incredibly bullish on is real estate. If anything, Realtors are enjoying the best year of their lives as many switch housing arrangements and investors plow their capital into this asset class, and out of banks and other riskier investments.
Still, some things have changed here too. Many have been woken up to the weaknesses and risks of investing in vacation rentals in urban centers. Offices have become dinosaurs; skeletons of a disaster stricken world. A prime example of this is the US Bank building in LA which sold for 34% less than last year in July. However, analysts predict that while the bottom has fallen out of the office market, residential rents will continue to climb.
A variety of factors are setting up a big tsunami of demand for new leases. This is provided that investors invest in more landlord friendly states and write smarter leases and agreements.
Other opportunities seem to be opening up too. Value add acquisitions of apartment buildings are in default on commercial mortgages. Additionally, office buildings are being reinvented as mixed use, with self-storage, apartments, onsite amenities, and even warehouse distribution space.
How are you managing your money differently now?