As any good financial adviser should, I am always on the lookout for investment opportunities that represent favorable risk/reward trade-offs.  More specifically I am interested in investments that would benefit by, instead of being devastated by inflation.  Unfortunately, when I consider what investments might benefit from inflation, only a few come to mind: commodities, precious metals and real estate.

Most investors I meet have little if any inflation protection in their portfolios leaving them vulnerable to either the devaluing of the dollar or outright price inflation.  Unlike commodities, real estate offers cash flow and potential appreciation.  Of course real estate is a broad term which could refer to raw land, apartment complexes, strip centers, office and single family homes.  Since everyone has to have a place to live correctly purchased residential real estate has the lowest risk of all types of real estate.  The decision matrix for investing in real estate goes something like this: what type, where, and when the market conditions are right.

Central Texas has a very favorable market for rental property.  Data for cities is kept in what is referred to as Metropolitan Statistical Areas (MSA’s).  Austin is part of the Austin/Round Rock/San Marcos MSA.  Austin has enjoyed one of the most robust residential real estate markets in the county.  From 1999 to 2009 Austin MSA was the fastest growing in TX totaling 41.4% for the ten years vs. 18.2% for all of Texas.  Source http://recenter.tamu.edu/mreports/2010/AustinRRock.pdf

The health of a particular real estate market is measured by the increase or decrease in average home prices and the number of months of inventory in the MLS system.  The Austin Board of Realtors keeps monthly statistics on the number of homes for sales, the average selling price and calculates the amount of “inventory” by dividing the total number of listings and dividing it by the number of sales per month.  As of October, Austin had 6.8 months of inventory and an average selling price 4.6% higher than 2009.  See the chart below: or (http://recenter.tamu.edu/data/hs/hs140.asp)

Austin Real Estate Activity

This next chart, provide by Texas A&M’s Real Estate Center show the nine year price history of the average home in Austin, including the dot com crash of 2000-2002.

More About Austin

U.S. Census data shows that the Austin is adding 50.000 new residents per years since 2006.    Employment is up 2.7% year over year as of October 2010.  According to the Bureau of Labor Statistics, Austin unemployment is 6.8% compared to 9% for the nation and .3% lower than a year ago.  2011 is expected to bring 19,000 net new jobs.

Our process

A number of factors are used to locate and purchase potential properties.  Some of the criteria includes:

1.      price per square foot

2.      rent per $ invested

3.      age of property/condition

4.      location – is it mostly homeowners or renters?

5.      selling price compared to “true market value”

Each property will be carefully screened by a team of professional investors.  A list of candidates will be provided to investors to consider along with all the data we have compiled.  It is recommended that all investors form an LLC to own the house in order to shield them from personal liability. Investors should use the real estate professional of their choice as we were not licensed to conduct purchases and sales of real property.

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Online PR News – 27-September-2010 – David Disraeli, president of the Austin Chapter of SOFA (Society for Financial Awareness) is partnering with Travis COunty to provide financial education to Travis County Employees. The first workshop was held September 23, 2010 and was based on David Disraeli’s Book “What to Do With Your Aging Parents”.

“What to Do With Your Aging Parents”

SOFA is a 501c3 non profit speakers bureau based in San Diego. Mr. Disraeli has been in financial planning for 24 years and in addition to being an author and educator, provides financial, estate and tax planning with an emphasis on Eldercare.

Want a free consultation? Just call – 512-535-2674 or email david@lifepln.com

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