Demographic Investing is a strategy designed to target the regions around the country with the greatest potential for growth and invest in the goods and services that the country’s largest population groups are likely to consume.

There are 3 major population groups to take into consideration when discussing Demographic Investing:

1. Seniors – represent about 12% of the US population (roughly 34 million Americans).  These individuals are 65 and older, the parents of the Baby Boomers, and are living much more active and longer lives than the generations in the past.  According to the Society of Certified Senior Advisors, “The population aged 85 and over is currently the fastest growing segment of the older population…this is of great importance because of additional assistance needs and healthcare that is required.”


2. Baby Boomers – represent about 27% of the US population (roughly 78 million Americans) and are born between 1946 and 1964.  Baby Boomers are now starting to reach retirement and control about ¾ of the financial assets in the US.  They are spending a great deal of money on preventative and elective healthcare (i.e. cosmetic treatments).  The children of this generation are approaching adulthood, so condos and luxury apartments are common places for these empty-nesters to move into.  According to the Department of Health and Human Services, “From 2010 to 2030, the population aged 65 and over is expected to grow by 75% to over 69 million.”


3. Echo Boomers – represent about 26% of the US population (roughly 76 million Americans) and are born between 1982 and 1994.  These are the children of the Baby Boomers.  They are now just starting their own households and bring a strong demand for apartments.  According to Multi-channel News, “Within the next few years, Echo Boomers will take over 25% of household purchasing budgets.”

Where are these groups going?

According to the US Census Bureau, “Between 2000 and 2030, 88% of the nation’s population growth is projected to occur in the South and West.”  The Southern and Western United States has seen the largest population increases for seniors.  The Echo Boomers are fueling new demand for apartments in the South as they are starting new households and enter adulthood.  The top ten fastest growing states are Arizona, Nevada, Idaho, Georgia, Texas, North Carolina, Colorado, Florida, and South Carolina.

How can you capitalize on these trends?

There are great opportunities for investors to reap the benefits of these trends by matching up the needs of these groups with the best growth markets around the country.  Housing and healthcare are basic goods and services consumed by these groups and continue to provide opportunities to capitalize on these major demographic trends. 

Class A apartment housing is in great demand for these populations groups in certain regions of the country and the children of the baby boomers (echo boomers) will be coming of age in next decade and enhance the demand for rental units.  In areas experiencing rapid growth, the supply of housing will be unable to accommodate the rising number of young households.  There is an even bigger increase in the number of older renters (55 and up) than younger renters (under 35) and the majority of this demand will take place in the South.

Healthcare is another essential industry with long-term fundamentals.  As America’s population continues to expand and grow older with baby boomers entering their 60’s, investor can find ways to take advantage of this shift.  Since these boomers are living longer than generations in the past they are more likely to use more healthcare services. 

Many investors are zoning in on these trends by investing in demographic-favored products and services by purchasing stock in related companies or by owning the buildings in which they operate.

Remember all investment strategies carry elements of risk. Demographic investing is no different and carries with it market risks as well as specific investment risks.

An investment into a 1031 Exchange – Tenant In Common (TIC) should only be made after careful evaluation of the TIC Sponsor. After all, it is the TIC Sponsor who usually negotiates the purchase of the property, obtains financing, manages the property and distributes income to the investors. There are several key elements to consider before you choose which Sponsor to turn your money over to for your 1031 Exchange replacement property.

Experience and Track Record

The experience of a TIC Sponsor is extremely important. Typically, a Sponsor with a solid track record and several years of experience can give an investor a greater level of confidence than a new Sponsor just now trying to tap into this growing, competitive market. An investor should also examine the experience of the key personnel of the company to determine how effective these individuals have been in acquiring, managing and eventually selling institutional quality properties in various real estate climates. In most cases, Sponsors are going to be private companies and may limit the amount of data it discloses to the public. So the evaluation of the key principals can be crucial in determining the strength of the Sponsor. Currently there is only one Sponsor, Grubb & Ellis, which is a publicly traded company.

Location and Asset Class

It is important to choose a Sponsor who knows how to select appropriate markets for investing and has the experience to avoid those with too much risk. A good Sponsor will look to acquire quality assets that have solid credit tenants in markets where there is low or declining vacancy and strong demand for space should a tenant leave.

The Accuracy of Projected Returns

If you looked at the projected returns of all 1031 Exchange - TIC offerings in market place, you may find some properties that appear similar can have significant differences in their projected returns. It is important not to simply choose one over the other based solely on a higher projected return. It can be much more beneficial to an investor to choose a property generating a 6% cash that actually produces that 6% than being mislead into a TIC showing an 8% cash flow that is really only generating 4%. Some sponsors will attempt to inflate first-year cash-flows in order to compete in the marketplace. An experienced sponsor should be able to justify their pro-forma assumptions by presenting investors with their multi-year track record for accurate projections and performance.

For further information on 1031 Exchange – Tenant In Common investments or to receive a PPM on current TIC offerings, please contact 1031 Alternatives Group at 866.405.1031.