One of the aspects of running a Real Estate Investment company that I love the most is getting to build personal relationships with our investors. While some started as friends first, others were investors first and then became friends. No matter the status of our relationship, the nature of this business means we get to know people on a pretty personal level and, frankly, get to have conversations that many people might not have with even their best friends.
We get to know their investing goals. Their investing experiences–the good ones and the bad ones. We learn what their typical investment size is, their retirement goals, and a lot more. We really value the depth of the conversations we can have that are just inherent to being in a financial investment space. Because things are so personal, we also get alerted and involved when someone has a life event and needs to change/update/transfer their investment into a new vehicle. Unfortunately over the past couple of months, we’ve had to process a change of legal status related to an investor passing away. Coupled with some recent personal connections where we’ve collectively attended a couple of funerals, we’ve been talking a lot internally about these life events and the impacts to our business. Certainly, we want to continue to be responsive and attentive and help the family as they deal with a loss.
On a macro scale though, we have been thinking and reading about the large-scale shift that seems to be coming. The Great Wealth Transfer is the term that has been coined, and in today’s article we want to dive into the topic a bit more–and talk through how we see that impacting our business.
According to Cerulli, The Great Wealth Transfer is the forecasted hand-off of trillions of dollars from the Baby Boomer Generation into the hands of Generation X, Millennials, and Generation Z adult children and grandchildren over the next twenty years. Experts peg the transfer of over $84 trillion through 2025, however, $12 trillion of that sum will go towards charities. The switch of ownership will not only include cash, but also equities, real estate, and other forms of wealth–along with the existing and active investments in place when they pass. With our booming growth and attractive living conditions, Texas will be at the forefront of this shift. And at Wildhorn we want to make sure we’re talking about it and prepared for it. It will impact who our investors are, what their attitudes and motives for investing are, and how we should be prepared to talk with them.
The most direct impact of the Great Wealth Transfer is the influx of capital into the hands of Generation X, Millennials, and Generation Z. As these generations inherit wealth from their Baby Boomer parents and grandparents, they will have the opportunity to invest in assets that promote long-term growth and stability. This “additional” or “new” capital that is inherited may represent the first real opportunity to have disposable and investable capital. Or it may just add to their existing holdings. Real estate, historically one of the most reliable investment options, can expect a huge surge in demand once the capital increases–more specifically, real estate investment in Texas. The Lone Star State boasts a robust and diverse economy, with major industries like technology, healthcare, finance, and energy contributing to its stability and growth potential. This economic strength has led to a steady demand for housing and commercial properties. Major cities like Austin, Houston, and Dallas have already experienced rapid population growth and a thriving job market, making them among the most attractive cities to buy property in. With young adults’ preferences for urban living and booming job markets, many will immediately look to Texas for real estate once the transfer is in full swing.
As previously mentioned, urban properties will be highly sought after as younger generations inherit their wealth. This shift will come with more and more urbanization and revitalization projects across cities in Texas. Properties in cities that are underutilized or old will be redeveloped into vibrant, modern living spaces appealing to young adults and professionals. This will not only enhance the real estate market but also contribute to the culture and economy of these urban areas, attracting even more residents and businesses.
Another possible effect of the Great Wealth Transfer on the real estate market in Texas could be more sustainability-minded real estate investment decisions. The younger generations typically tend to be more environmentally conscious than their older counterparts, so Texas could potentially see more green building efforts in the future. This could include more eco-friendly developments and properties with LEED certification or those that boast renewable energy sources like solar panels. This shift towards sustainability could prove to be a long-term change that is set to redefine the real estate landscape in Texas.
While the capital increase is a positive sign for the real estate market, it also raises concerns about housing affordability in Texas. As demand increases, so do property prices, potentially pricing out lower-income residents. This is particularly evident in Texas cities like Austin, a residential hotspot where rapid gentrification is making housing prices the highest they’ve ever been. Policies and initiatives will have to be explored such as more affordable housing projects and zoning laws to ensure that the benefits of increased housing do not come at the expense of affordable housing.
The bottom line is that the Great Wealth Transfer will undoubtedly reshape the entire real estate investment landscape, not only in Texas but in the entire US. The real estate market is poised for significant growth, however, that does not mean that it won’t come with its issues. One thing to keep in mind is that with an increase in investment comes challenges with housing affordability and equitable development. The other underlying matter at hand is whether or not these younger generations are even looking toward the real estate market to invest their newfound money. There are many other options available when it comes to investing money including but not limited to CDs, stocks, ETFs, 401ks, etc. Whatever the case may be, the real estate sector in Texas stands ready to embrace the opportunities and tackle the challenges that come with this historic transfer of wealth.
Sources:
https://www.bankrate.com/investing/the-great-wealth-transfer
