An area that is fully developed normally will have stagnant growth and is typically more attractive for capital preservation strategies [i.e. an investment that will fluctuate very little in value over time]. For example, an apartment complex in a highly desirable and fully developed community will have a high price tag and the cash-flow will provide very little return on investment. In other words, people are willing to pay top dollar for the area even if the cash-flow is low relative to the purchase price. However, although the complex may not grow much in value (the growth has already occurred and is now stable/stagnant), because of the desirability of the area and the ease of finding new renters should you have a vacancy it will typically lose very little value even in a market downturn. This is a perfect investment for someone that is not looking to grow their money but rather protect the money they've already acquired, hence the term capital preservation.
If you're looking for strong capital appreciation [i.e. an investment that will grow largely in value over time], high growth areas would be a great place to look. For example, if a growing city announces a new NFL stadium to be
One such high growth area is the Antelope Valley (AV). The principle cities in the AV are Lancaster and Palmdale. For decades the AV has been one of the fastest growing areas in the nation in terms of population increase. Additionally, the Antelope Valley has FIVE major multi-billion dollar industries; if one has a downturn the others keep growing. In case you're wondering, here are the five industries:
- Aerospace: The Antelope Valley (AV) is known as the Aerospace Capital of the World. This is the premier design and testing area for the USAF.
- Alternative Energy: The AV is the Alternative Energy Capital of the World. In 2012, more than 800 projects in 105 countries applied for the World Energy Globe, Lancaster won the prestigious award for the USA. This award, many other planned multi-billion dollar clean energy generation facilities, and several other factors have led to super-investors like Warren Buffet purchasing 5,400 acres of land in the AV for $2.5 billion in January 2013.
- Commercial & Industrial Land: The AV is prime for attracting Commercial/Industrial Office & Manufacturing in Los Angeles County. CB Richard Ellis (CBRE), the largest commercial real estate brokerage in the country, recently released a report stating that there was no practical space remaining in Los Angeles and surrounding areas for development and businesses. New and existing businesses looking to expand are moving to the AV, the last available land in LA County.
- Transportation: The transportation network in the AV is being planned to proactively meet the future needs of LA County. There are 5 freeways in the AV (3 existing, 2 planned). They are planning an Inland Port [shipping goods from the Los Angeles/Long Beach (LA/LB) ports via rail to the AV], to reduce traffic congestion in the LA core area and allow the LA/LB ports to grow. The AV is the only area in the country with plans for two High Speed Rails (HSR); the California HSR and the Vegas HSR (XpressWest). The Palmdale Airport, owned by LAWA (same entity that owns LAX), will be used for commercial and logistics and is in the center of the freeways, HSRs, and Inland Port.
- Housing and Redevelopment: Housing and Redevelopment is in full swing in the AV. The housing market is rebounding as foreclosures are at a five year low resulting in a shortage of inventory coupled with low interest rates and high investor demand. Lancaster was recently awarded a statewide honor, the California Award of Excellence for their successful redevelopment of the Downtown Lancaster area. Lancaster has well documented plans to spread their new look to other parts of the city.
To make large returns with low risk, investing in high growth areas that have multiple industries is a must. All too often beginners follow the crowd to the attractive yet overpriced real estate in already well-established areas where the BOOM has already happened. Learn about different high growth areas and exactly how to best position yourself for maximum gains: Event Calendar.