We all thought 2021 would be a banner year for real estate, and it was. What we did not know is that 2022 would be even more dramatic, with prices soaring across all our Balco Management key markets. There is no serious asset class that comes close. That said, not all investors are maximizing the opportunity. As with any booming market, we are seeing too many investors who think they can bypass the experts and, in this market, simply buy or build anything anywhere and still profit.
As with the gold miners in the Gold Rush Klondike, too many investors fail to grasp the research, deep understanding and complexity that must go into truly profitable real estate investment. It is easy to see why some investors think they can sidestep the experts and do it themselves. In Austin, Zillow predicts home prices will rise 28.7% in 2022. Miami, which saw a staggering 49.5% increase in home sales in 2021, is expected to see values rise by 20.1%.
These returns would seem to suggest real estate is an idiot-proof investment. But even in such a robust market, those who don’t partner with genuine experts are likely to at best get suboptimal returns, and at worst incur substantial losses. Not all the work and effort that went into digging mines in the Klondike led to millionaires. The gold rush yielded more losers than winners and became a byword for amateurs who thought they could get rich easily.
Deep expert knowledge is vital to avoid the risk of a stranded investment. For example, failure to appreciate the specific importance of zoning can lead inexperienced land investors into costly delays and negotiations that can last years. Most of us are aware of construction sites in our own communities that have been sitting for months or years as these complexities get ironed out.
Beyond zoning, it is also important to note whether any potential land investments are located within a protected wildlife zone, flood plain, or in an area with building restrictions. Preliminary research is a vital component to investing in land, and Ballard’s prioritization of shorter-to-medium term returns leads the firm to take a surgical, highly knowledgeable and informed approach that circumvents these potential problems.
For example, Austin is the hottest market in the country, with Miami not far behind. However, both cities have experienced serious delays in issuing construction permits. Countless developments, including a 1,058-acre upscale housing project in suburban Austin that includes a golf course and clubhouse, a water treatment plant, a wastewater treatment plant and amenities, has been significantly delayed by an overwhelmed permitting bureaucracy that must consider each and every “not in my backyard” (NIMBY) objection to any new construction or modification.
These delays are costly and unnecessary. Balco has a deep, experienced knowledge of all our core markets, and a proven track record of adeptness at expediting permits. This in-depth understanding of the many complexities of municipal government, permitting, public policy and, above all else, the complications around zoning and any intended efforts for rezoning, make all the difference between profitable yields and the risks of losing money in a rising market.
Balco invests in all aspects of the real estate investment continuum, whether raw land, land under development, or existing developments of all kinds. They all harbor the potential for robust growth and appealing returns. But each has its own level of complexity that requires experience and expertise, in-depth knowledge of local issues and concerns, micro-level analytical skills that will know the potential of specific neighborhoods and streets, and the ability to navigate the process and expedite it.
For most investors, the specter of going it alone in real estate investing is a temptation that carries substantial risk. But irrespective of the type of real estate investment, success depends entirely on working with the right partners who have a strong foundation of knowledge, experience, a passion for data and a commitment to strengthening the communities in which they operate.