DSTs and the New American Boomtowns

In our previous blog we waxed eloquent regarding progressively governed cities and states endless cycle of; policy failure, scapegoating and higher taxes.  Unfortunately, this toxic mix potentially condemns income property owners to a form of stygian perpetuity where property values appear to move endlessly lower and taxes only higher.

If the losers here are cities like, Seattle, Portland, San Francisco, Los Angeles, Chicago and New York, who are the winners and how do you get there?  To name just a few, the new American boomtowns are places like Salt Lake City, Austin, Denver, Indianapolis and Nashville.  And they all share one thing in common, they’re in red states.

It appears then that an environment characterized by pro-growth, pro-business, pro-law enforcement, pro-family attitudes and respect for private property and capital formation does serve as a beacon for job creation and opportunity.  Who’d a thunk it?

Furthermore, none of these new commercial and lifestyle Meccas were aggressive with their business lockdown during the pandemic.  This allowed them to capitalize on the chaos and carnage created by their more liberal metropolitan brethren.

I guess America’s Governor, Andrew Cuomo isn’t the smartest guy in the room after all.  What the heck, he has an Emmy and book deal.

Moody’s Analytics expects these top performing cities to consolidate their gains in 2021.  “Coming out of the pandemic, and out of this recession, their edge is probably only going to get larger.”

Most of these cities went into the pandemic well positioned to benefit from others losses.  They were certainly not immune to Covid 19 and its effects.  However, due, at least in part, to their pro-business, pro-growth policies, they were able to avoid the multiple shutdowns which have crippled other cities.

In many of these locales there was a strong shared effort to keep businesses open.  The Chamber of Commerce worked closely with city and state officials to keep things moving forward in as normal a manner possible.  They were not, as is so often the case in progressively governed cities and states, at loggerheads with one another.

Starting out with fewer business restrictions than blue states, these communities tended to experience less dramatic increases in unemployment and corresponding economic dislocation.  As such, employment bounced back much more quickly.  This is amplified by the continuing in-migration of high wage jobs, particularly in tech and finance and their significantly lower living costs when compared to larger population centers on the west and east coasts.

Even in those places that aren’t viewed as tech hotbeds or that boast a thriving night life scene, these communities are still good places to start businesses.  This is in large part due to the fact that they are not burdened with a governing class ideologically antipathetic to wealth creation.

Now that you know where to go with your money, the question is how best to get there?  In order to do so, as an income property owner you must get outside your experiential box.

By experiential, we mean involving or based on your own experience and observation.  The hands on learning you have acquired over years of property ownership and operation is invaluable.  This is particularly true if you wish to remain in active management.

However, both time and circumstances change inexorably.  As such, they are impossible to stop or prevent.  Time changes you both physically and mentally while the circumstances you own and operate real estate in can and do alter dramatically.

As we have said many times before, managing your own dirt in your 20s-30s-40s & 50s isn’t so bad.  However, we diminish noticeably in our 60s-70s & 80s and this can make active management a real trial.

Fortunately, DST property programs are there to relieve you of this responsibility if you so choose.  As the only truly passive option available inside 1031 exchange, it bears serious consideration. 

Programmatically, they can also help you escape losers such as Seattle, Portland, San Francisco and New York and migrate to the new business hubs located far from the coasts that appear to be emerging as beacons for job seekers and businesses.

Our use of the work programmatic here is intentional.  This is key to the emancipatory nature of DSTs.  As an income property owner, the anticipated sale and replacement of your dirt is a daunting task.  This is because everything has to be done manually.  Following close, you are required to do everything yourself; replacement property identification, due diligence, financing, etc.  The list is endless and your choices limited.

DSTs shatter this paradigm.  They create a new model by literally automating the way in which you search for possible replacements.  You can filter them by function, geography, leverage and cash flow.  And unlike when you limit yourself to local markets, there is seldom a real shortage of inventory.

Finally, with decades of experience in the commercial real estate industry, many property providers enjoy a national footprint.  This means they bring knowledge and access to many of those growth markets previously mentioned.

In most cases, they are ahead of the curve identifying these trends and already have boots on the ground from an ownership and operation standpoint.  You simply need to take advantage of their presence and expertise.

With DSTs available to accredited investors, you need not be the last one out of Seattle, Portland or San Francisco to turn out the lights.


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