In a rapidly evolving technological landscape, many individuals express concerns that artificial intelligence (AI) could eliminate numerous jobs, particularly in lower and middle-income brackets. There is a growing fear that AI will disproportionately benefit the wealthiest, leaving many struggling to find stable employment. This apprehension is echoed by billionaire investor Ray Dalio, who suggests that the dependence of the bottom 60% of Americans on the top 1% is increasing as the economy transforms.
Dalio highlights a critical issue: approximately 60% of Americans lack basic literacy skills. This raises the question of how they can compete in an economy that increasingly values knowledge and skill. Compounding these worries are alarming statistics, including a report from J.P. Morgan revealing high unemployment rates among recent college graduates and stagnation in job growth within fields susceptible to AI.
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Real estate: a resilient alternative
Amid these pressing concerns, the role of real estate in this shifting landscape warrants examination. How robust is income derived from real estate, whether through active management or passive investment? A reassuring fact is that most real estate investment niches remain largely insulated from the encroachment of AI. For instance, flipping a house is intricate and nuanced, involving numerous steps that require human oversight.
The intricacies of house flipping
House flippers understand that this endeavor transcends mere renovation; it involves collaboration with various professionals, such as bank inspectors and contractors, to navigate the complex landscape of real estate transactions. Although AI tools can enhance certain tasks within this domain, they cannot replace the human touch essential for successful operation.
Similarly, rental investors employing the BRRRR strategy—buying, renovating, renting, refinancing, and repeating—face numerous challenges that AI is ill-equipped to manage. From securing financing to conducting property inspections, the multifaceted nature of rental investing ensures that it remains a business reliant on human judgment and expertise.
Passive investment strategies
However, not everyone aspires to be an active real estate investor. Some individuals prefer passive investment opportunities that yield substantial returns without hands-on involvement. A popular approach involves partnering with seasoned real estate operators who manage the complexities of property investment on behalf of passive investors.
Collaborative investment opportunities
For example, a co-investing club recently collaborated with a house flipper, providing funding for a series of renovations in exchange for a share of the profits. Additionally, partnerships with developers have facilitated the construction of single-family homes, allowing participation as silent partners in these ventures.
The club also engages in syndications, enabling partial ownership of larger real estate projects, such as apartment complexes or industrial properties. This collective investment strategy allows contributions of smaller amounts, typically around $5,000 each, rather than the substantial sums usually required.
The tangible nature of real estate
Recently, an investment was made in a land flipping fund, where the operator manages around 50 land parcels annually, achieving an average turnover of about 4.5 months. Due to the nature of these transactions, bank loans are not an option, prompting the operator to raise funds privately, resulting in a consistent return of approximately 16% through quarterly distributions.
Alternatively, private lending through secured notes offers another avenue for passive investors, with returns ranging from 10% to 16%. These notes are secured by a lien against real property, ensuring a level of protection for investors. As with other real estate ventures, these businesses cannot be easily replaced by AI, underscoring the intrinsic value of human involvement.
Dalio highlights a critical issue: approximately 60% of Americans lack basic literacy skills. This raises the question of how they can compete in an economy that increasingly values knowledge and skill. Compounding these worries are alarming statistics, including a report from J.P. Morgan revealing high unemployment rates among recent college graduates and stagnation in job growth within fields susceptible to AI.0
Dalio highlights a critical issue: approximately 60% of Americans lack basic literacy skills. This raises the question of how they can compete in an economy that increasingly values knowledge and skill. Compounding these worries are alarming statistics, including a report from J.P. Morgan revealing high unemployment rates among recent college graduates and stagnation in job growth within fields susceptible to AI.1
