Finding Hidden Gems in Smaller Markets - Job Growth

Updated: Jan 1



I helped a friend to a knee surgery at Harborview... I am glad the surgery went well and it's been a busy week. Besides looking at multifamily deals from Crexi and connecting with brokers, I am studying the deflation vs inflation debate; timing can not be better. As soon as the Fed chair Jay Powell retired the term "transitory" to describe inflation, real-time crude oil prices and interest rate sinks as the new variant grip the market and a disappointing job report. The bond market is telling a different story and said no to the inflation narrative. The market volatility prompts me to make a new video series about my long-term investing thesis... to separate out the short-term noises and focus my thoughts on the long-term signals. Hope you enjoy my first video!


- Henry

What’s on My Mind this Week


I am making a new video series about my investing thesis… and it’s going to be about demographics, population, job growth, policy reactions.. and how these factors influence my investing. You can watch the first of this video by click on the picture below.


Summary:

  1. The millennials are entering their peak spending age, but they are so burdened with debt they do not have the same spending power as the previous generations.

  2. Labor force participation rate will remain low as the boomers are retiring from the workforce, and the cure for the lack of worker is rising wages which could have a positive effect to real estate investors.

  3. The Fed will keep rates low to keep away from asset price deflations, and my midterm view is interest rate will remain low.

How does this information help with my own investing? I keep going back to what my mentor Johnathan Twombly said, “…this is a long term trend that as long as you don’t grossly overpay or make the mistake of buying something that is going to cost you to hold….don’t do that. If you have the long view you don’t need something for immediate cashflow. As long as you buy an asset for a price that is cover the cost.. just natural process to play itself out.

The best part is you don’t have to chase the hottest markets in the South. I recently researched 9 submarkets in Washington State and Idaho (excluding Seattle and Boise), and I found almost all markets have job growth faster than the US (0.5%). On average these submarkets grow at 1.19% or 2.4x faster than US for the last 10 years; in the next 5 years, these markets are forecasted to grow 1.9x faster than US per Costar research. Investors will do very well in these submarkets while there is less competition from institutional investors. As a demo, I’ll continue to write about these smaller markets in the future newsletter. Let me know if there are interesting markets near you as well and you can follow along using the same process. Have a good weekend!


Cities10Y Job Growth

(US 0.5%)5Y Job Forecast

(US 0.7%)Bellingham, WA1.10%1.10%Mount Vernon, WA1.10%0.80%Wenatchee, WA1.10%1.00%Tri Cities1.40%0.80%Spokane, WA1.20%0.80%Olympia, WA1.70%1.20%Coeur d' Alene, ID1.90%1.00%Walla Walla, WA0.40%0.30%Bremerton, WA0.80%1.40%


- Henry

Sharpe Investor Group Portfolio Update

ATM Fund Update

  • December tranche is open to investors now!

  • To recap, you will get

  • 20%-22% cash-on-cash return without any leverage

  • ~$20,000 tax in year 1 (assuming 40% tax bracket and you have passive income to write off)

  • 10-12% unlevered IRR every year

  • ZERO leverage and significant risk reduction

  • Check out our Playlist


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Yan Yan - yan@sharpeinvestorgroup.com

Henry Yuen - henry@sharpeinvestorgroup.com


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