While the primary focus here at InvestorPlace is on publicly traded securities, there’s no denying that real estate investing is king. Say what you want about your favorite blue chips. At the end of the day, everyone needs a roof over their head, giving the residential and commercial property sector permanent relevance. However, it’s tough to get involved unless you’re a well-heeled accredited investor. Fortunately, Caliber has brought this exciting opportunity to the everyday individual interested in a tremendous growth narrative.
One of the more promising companies available on equity crowdfunding platform SeedInvest, Caliber specializes in multi-family housing, commercial properties, self-storage units and the hospitality industry. As you know, many people are interested in real estate investing, but they lack the capital to do so.
Further, this segment features many pitfalls. Unlike a speculative stock that you buy with dumb money, a mistake in the property market can linger for years.
A Multi-Port Bridge
Essentially, Caliber acts as a multi-port bridge. First, the company levers the combined capital strength of both accredited and non-accredited investors, seeking out properties that are in viable, high-demand markets. This facilitates cash flow through asset management, as well as profitability through disposition. Second, the organization’s management team is loaded with talent, guiding stakeholders to properties that make sense to them and for the company’s longer-term objectives.
Better yet, demand for alternative investing has been growing rapidly, according to information from Caliber’s SeedInvest pitch deck. Indeed, through my own investigation, the value of alternative investments has been edging higher since the mid-2000s. More importantly, growth only flatlined for two years during the housing bubble that pre-dated the Great Recession.
Put another way, alternative platforms such as real estate investing have proven to be resilient, even during the worst of times.
That’s something to note if you’re considering Caliber. With the novel coronavirus pandemic impacting everyone’s lives, you want to make sure you’re putting more of your money in proven industries, not cyclical (or volatile) ones that can collapse due to various headwinds.
Advantages to Investing in Caliber
As I alluded to above, one of the pivotal benefits to real estate investing as opposed to stocks is the former industry’s fundamental nature. What we’re talking about is pure supply and demand. Yes, any market can experience exuberant irrationality. But more often than not, real estate is simple and direct – if you operate in a high-demand market, people will come, and they will all need housing.
In addition, more people means greater opportunities for businesses, whether for employment or for retail consumption. Again, companies will need a physical footprint to serve demand, which ultimately benefits organizations like Caliber.
On the flipside, you can’t quite say the same about stocks. For example, Forbes contributor George Schultze stated that the speculation on bankrupt companies during the new normal is proof that markets aren’t always rational. I couldn’t agree more. The immediacy (and convenience) of profitability is both the allure and the risk behind capital markets.
A Much Slower Pace
However, with real estate, because prices generally evolve at a much slower pace than Wall Street, it’s in some ways easier to avoid trouble because headwinds are telegraphed. Even in the most extreme situations, it would take a long time for a real estate market to undergo a paradigm shift.
Those are the general advantages to real estate investing. Specifically for Caliber, prospective buyers may be interested in these three key factors:
- Smart Strategy – Rather than chase markets where people are, Caliber is establishing a powerful presence in where people are going, particularly millennials. Therefore, it’s absolutely no coincidence that the company has set roots in Nevada, Arizona and Texas. According to SmartAsset.com, these three states are in the top 10 favorite states where millennials are moving to. Given the demographic tailwind, you can expect Caliber to enjoy decades of relevance.
- “Free” Markets – In addition to regional traffic, Caliber’s management team has focused on growth in business and investment-friendly governments. For instance, it avoids what it terms “rent control” markets. Though it might seem controversial at first, we must remember that governments should not impose policies on only one side of the ledger. Often, landlords have obligations too and rent control typically only addresses tenant concerns.
- Financial Substance – It’s one thing to have a glitzy marketing campaign; it’s quite another to have the substance to back it up. Fortunately, that’s what Caliber is all about. Among its many fiscal highlights, the company has an annual growth rate of 39% (from $29 million to $144 million) over the five-year period ended Dec. 31, 2018. Also, last year, the real estate specialist became profitable, distinguishing it from many other competitors.
Risk Factors to Consider
As compelling as the real estate investing narrative is for Caliber, there are always risks to any opportunity. And that’s especially true for equity crowdfunding. Because of its small nature, companies on private investing platforms don’t feature as much information as you would find for a blue chip. Therefore, it’s incumbent to perform your due diligence.
Further, I frequently state that a majority of startups fail. I’ve heard many stories of seemingly groundbreaking organizations crumble because of mismanagement, unforeseen industry disruptions or in the worst cases, fraud. No, I’m not suggesting that any of these things could happen to Caliber. Instead, I’m just pointing out the harsh reality of private investing.
According to some sources, 90% of all startups fail. So, you don’t want to take any opportunity on SeedInvest.com lightly.
For Caliber, I believe one of the biggest risks is the obvious one: the novel coronavirus and the resultant new normal. With the possibility of a prolonged recession, the valuation on the housing market may face a correction down the line.
Also, for the commercial property front, some demand loss might occur as many businesses have discovered that they can operate reasonably well remotely. So, we can expect as a risk factor if many companies decided to downsize, which wouldn’t be helpful to Caliber.
To be fair, Caliber’s storage unit business is incredibly viable because baby boomers are downsizing now that their children are out of the house and their responsibilities have diminished. And that was the case before the pandemic.
However, Covid-19 has also penalized the hospitality industry, which would definitely be a headwind to Caliber’s strategy. Therefore, it’s possible that the company’s portfolio could bounce around, resulting in little net progress if any.
Real Estate Investing for the Masses
Despite the risks, I still go back to real estate investing being king. Unless a piece of property is declared unlivable or dangerous, homes and commercial infrastructure almost never reach zero value. Even in a badly deflated market, you can do something with real estate. Obviously, you can’t do anything with stocks if they fall to zero – and many do.
So, if you acknowledge the risks with Caliber, you may want to consider partnering with this company. For more information, visit its SeedInvest profile here.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.