U.S. Millionaire Investors Are Turning to Real Estate, Precious Metals in 2014

February 13, 2014

THE YEAR OF REAL ESTATE?

wealth-survey-2014

U.S. Millionaire Investors Are Turning to Real Estate, Precious Metals in 2014

According to a recent survey released by Morgan Stanley, a majority of U.S. millionaires expect real estate to be best alternative investment to own this year. According to Bloomberg:

“About 77 percent of investors with at least $1 million in assets own real estate, according to a survey released today by the New York-based investment bank’s wealth-management unit. Direct ownership of residential and commercial properties was the No. 1 alternative-investment pick for 2014, with a third of millionaires surveyed saying they plan to buy this year. Twenty-three percent said they expect to invest in real estate investment trusts, the second-most popular choice.”

After the massive run-up in stocks in 2013, it appears the nation’s smart money may begin moving money from an overvalued stock market into both U.S. residential and commercial real estate.

Certain types of commercial real estate properties are being eyed by wealthy investors:

Self-storage properties are among commercial real estate investments wealthy individuals are buying… Retail shopping centers are seen as less attractive as more consumers shop online through companies such as Amazon.com Inc.”

While FTMDaily does not foresee a massive upside for U.S. real estate prices as a whole in the coming years, we expect the the rental market in the U.S. to remain robust. America’s consumer debt levels — especially the $1 trillion+ student loan debacle — threaten to turn the nation into a land of lords and serfs.

Some worry that U.S. real estate is either in — or is nearing — bubble territory. But my reading of the data doesn’t point to an existing bubble. Consider this 10-year chart of new home sales in the U.S.

That doesn’t look like a bubble, but instead a long and protracted emergence from a credit bubble-inspired crash. (Sure, places like Las Vegas and Phoenix look frothy. But there are plenty of other places, especially in the Midwest, where prices are just right for those seeking long-term cash flow.)

Against a backdrop of rising interest rates and tightened credit standards, overall home sales will continue to struggle in the years ahead. This spells opportunity for those who are eager, not so much for capital gains, but for cash flow. Rental real estate, when purchased correctly, can lead to a lifetime of dependable cash flow. Additionally, this rental income is not fixed, but flexible: Raise the rent payment and raise your income. In this respect, rental real estate, when purchased for cash or on a fixed interest rate loan, can provide real and lasting protection from inflation.

In the final analysis, we view the purchase of U.S. rental real estate in select areas of the country as a wise move in 2014.

Want to learn more about real estate investing? FTM Insiders have access to our entire library of income and investment ideas.

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