It’s everywhere: GAS PRICES! ENERGY CRISIS!
However, this blog post is different. Turn on the tube to CNN and hear about how “We’re trying very hard to find a viable source of alternative energy to reduce our dependency on oil.” Personally, you can simply buy an electric car (right now). Those savings can be significant, but they can only go so far for your finances. Besides saving money, consider making money off of $4 per gallon gas. Assuming you don’t own Exxon or BP, here are some ideas:
The Contraction of Real Estate Demand – Sprawl Reversal
In this instance I don’t mean “contraction” in terms entire real estate markets losing value, I mean “contraction” in the sense of density. Before recent gas prices started changing the world, suburban sprawl was rampant in the U.S. The easy to obtain mortgage financing provided by the growth of the housing bubble only multiplied sprawl. In cities across America, middle class people found themselves moving to the outer suburban areas where they could have a 4,000 square foot house with a 3 car garage. They were all sipping lemonade on their huge front porches, admiring their white picket fences, and trading stories about flippers and spec homes just before getting sucker punched by gas prices and their rising Adjustable Rate Mortgage payment.
As the “look I’m rich, I swear!” house of cards finally fell, many middle class Americans are finding themselves in one of two categories:
- The party’s over – Makes major lifestyle adjustments including less cars, a smaller car, smaller house, shorter commute, and generally lower household spending.
- I hope this sorts itself out – Holds on to the bitter end, and eventually loses their house to foreclosure and defaults on other consumer loans.
Additionally, consider the trend in many downtown areas of major cities: Lofts and Mixed Use Developments aka Live/Work/Play Communities. These types of properties are growing in popularity.
So, let’s take a quick look at what the law of supply and demand tells us about housing:
Suburban McMansions
Supply is steady + Demand decreases = Price decreases
Central City Neighborhoods
Supply is steady + Demand increases = Price increases
So in terms of an investment strategy, whether you are speculating for appreciation or planning for rental income (or doing a mixture of both), expect suburban areas to falter and continue declining while central city areas are (relatively) flourishing.
Investing in Energy (directly)
Option A – Picking stocks / Investing in potential
Find a publicly traded company who is involved in solar energy. Now cross your fingers and hope they make it.
Option B – Investing in applied technology
Discard the hopes and crossed fingers, and move on to the actual solar panels that are being sold and installed. Find a company that sells and/or installs solar panels on residential and/or commercial property. Offer to buy the equipment for their customers to lease from you. Now their sales pitch to their prospects can be “We’ll install this for FREE, you just pay a lease payment that results in overall savings. The equipment lease payment is a lower amount than your monthly energy bill savings.” The salesman will like this. The property owner will like this. You will profit.
Consider these solar panels from the property owner’s perspective. Many of these installations pay for themselves. In other words, if you buy solar panels that will last for 20 years (many have a 20+ year warranty) and the energy savings will exceed the equipment cost in 8 years… the solar panels pay for themselves in 8 years, and savings will be enjoyed the remaining 12+ years. The great part is that every new trend goes through stages. Our society is currently in the early stages of solar panel acceptance and use, so that savings potential can be profit for you as an investor if you buy the equipment and lease it to the property owner who is unsure about buying it themselves. Of course this only works when you crunch the numbers and find a solar panel distributor/installer whose system price and warranty create a profit/savings margin.
If you had to choose between hope and a plan, which would it be?
