Investing In Shiny Objects Versus Investing In Demand

Andrew Lanoie is a Best Selling Author, Investor and Podcaster at The Impatient Investor, as well as Co-Founder of Four Peaks Partners.

How much confidence would you have in an investment that wildly fluctuated in value on an almost daily basis? An investment that unpredictably fluctuates in value serves little value because very few people would rely on it. Why invest in something that can drastically fluctuate? Does this type of investment even exist? Yes, it does and it’s called Bitcoin. 

After its last boom in late 2017, Bitcoin dropped over 60% between January 2018 and February 2018 in what became known as a “crypto crash.” Recently, Bitcoin has been riding another boom. However, since hitting a record high in early January 2021, Bitcoin has been on a roller coaster ride, surging and plunging in double-digit percentages each time. But this hasn’t stopped investors from flocking to it. 

When it arrived on the scene just over a decade ago, Bitcoin was hyped as the future of currency, touted for its convenience and security. Flash forward 11 years and Bitcoin has yet to become either convenient or secure as it’s currently only accepted with any regularity on the dark web and it’s been subject to billions of dollars in theft since its inception. Investors are always chasing shiny objects like Bitcoin. It’s a media darling, getting all the press, clicks and social media mentions. However, the latest Bitcoin bubble bursting is not a matter of if, but when. Regardless of Bitcoin’s future, another shiny object will eventually take its place in the eyes and hearts of investors.

While retail investors were distracted by the stock market and Bitcoin during pandemic-gripped 2020, another asset class flew mostly under the radar. While many industries suffered due to the economic downturn induced by Covid-19, there was one market sector that held up particularly well amid the chaos: multifamily housing. Although the multifamily segment as a whole hit some bumps “as many owners lost rental income plus ancillary income from waived fees, deferred rents and delinquencies,” multifamily housing saw less deterioration than in past recessions, according to a recent report by CBRE.

Within the multifamily segment, there was one subsegment in particular that maintained occupancy rates and saw a rent increase as opposed to the contraction experienced by other segments: affordable housing. Among affordable housing, mobile home parks were a shining star; so much so that institutional investors were moving into the segment like never before.  

So while Main Street investors were chasing investor demand, betting on where the mobs were heading next, institutional investors were chasing consumer demand. Consumers may cut back on many products and services during a recession, but they will always need the basics: food, shelter and transportation. That is why affordable housing has consistently outperformed many other commercial real estate segments. It’s always in demand, even during a recession. 

Affordable housing may not be new or sexy and may not get much airtime, but it offers its investors reliable, consistent, nearly recession-proof income as 2020 has just proven.   

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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