Author: CFI.co Blogger

Austin, Texas is in the middle of a real estate boom. Having been voted the highest growth market by Yahoo Finance in 2021, the city continues to draw tech professionals, artists, and everyone else that is looking for a better quality of life. Matthew Teifke from Teikfe Real Estate has been a market leader in the different Texan cities of Austin, Houston, San Antonio, and Corpus Christi.

Born and brought up in Texas, Matthew Teifke realized his passion for dealing in everything real estate from a very young age. The Round Rock native started early, gaining his real estate license at the tender age of 18. He was active in dealing with his family properties and was clear that this was all that he wanted to do for the rest of his life.

The principal reason for starting Teifke Real Estate was to bring financial freedom for everyone from buyers, and sellers to even agents and consultants. The company was formed in 2015-2016 by Matthew with the aim of catering to the Texan cities of Austin, San Antonio, Houston, and Corpus Christi.

With the belief that Texas was going to be the hottest real estate destination in the country in the coming years, Matthew brought in his friend, Alex Coffman. Alex was equally passionate about real estate and jumped on board to join Teifke Real Estate as Co-Founder. Together, they ventured into offering diverse real estate services for the Texan housing market.

The Growth of Austin, Texas as one of America’s Premier Real Estate Market

According to Matthew Teikfe, this was a long time coming. He states, “Texas has always been a great place to live, raise a family, explore employment opportunities and maintain an affordable standard of living.” He attributes that the interest of real estate investors in cities like Austin, San Antonio, and Houston is not something new.

“The potential was always there. People kept migrating to cities like Austin from different parts of the country. Look at the migration numbers that Austin sees every single day. People know that this can be a place that can help them live well on an income that would be difficult for them in places like San Francisco or New York City.”

Matthew is right. According to a report published by U-Haul, 145 individuals are moving to Texas every single day. The numbers match up and show that Texas has been attracting individuals from the West, Midwest, and other parts of the country. Fewer taxes (Texas does not have state personal income tax), sunshine, and larger living spaces are major factors.

There is no denying the fact that big tech companies are lining up to shift operations and offices to Texas. Look at Tesla’s Elon Musk who recently announced that they are investing more than $1.1 Billion in building a new headquarters in Austin. Oracle, Facebook, PayPal, AMD, and Texan native, Dell already are generating thousands of new jobs in the state.

As Matthew opines, “You have these young tech professionals that are moving in with their young families, children and pets and exploring great school districts in Austin. They work as software developers or game designers. They earn well, have always dreamt of having a house and want a far more relaxed living condition as compared to NYC or Silicon Valley.”

Teifke Real Estate: The Beginning of the Promise of Financial Freedom

There are tons of real estate companies in Texas. Matthew knows that. He still feels that what they are trying to do at Teikfe Real Estate is vastly different from what some of his peers are up to. More than just securing a commission here and there, Teifke Real Estate is geared toward achieving financial freedom for everyone that is involved in this ecosystem.

As Matthew puts it best, “Our goal is to help different real estate agents attain financial freedom. We want our sellers to get the best and most realistic prices for their properties. Likewise, we are also committed to helping all our buyers and investors get the best deals and prices on the market.” He truly believes that there can be a situation where everyone can be a winner!

This shows how Teifke Real Estate has been able to shape its various offerings. Let us shed some light on what they offer, as has been on the Teifke Real Estate website:

• Coaching present and prospective real estate agents
• Buying assistance with regard to residential, commercial, and investment properties
• Selling assistance for residential, commercial, and investment properties
• Assisting with construction, renovations, and remodeling work
• Sourcing deals and arranging finances for prospective buying or selling
• All-cash house purchases to help sellers that are looking for immediate help

Both Matthew and Alef run an excellent podcast on the real estate markets. Together they help enlighten and educate audiences on the ins and outs of buying, selling, and investing in the Texas real estate markets.

Matthew Teifke’s personal take on Austin’s Real Estate Situation

Every possible marker, news journal, or real estate magazine points to the growth in the Austin real estate markets. Matthew believes that this is the best time to get in on the action. You do not want to end up in a FOMO situation later on.

While the growth is there, it is still possible to get your hands on your dream house in Austin, Texas. “Look at the median house prices in Austin. It is still somewhere around $470,000 if I am not wrong. You give this another year or so and you are looking at a figure of $700,000. Just wait for Tesla to open and you will see 10,000 highly paid tech professionals in an all-out bidding war.”

Matthew is right. Prices are rising, but when you compare the house prices in Austin with somewhere like San Francisco, NYC, or even Washington, you see that the affordability factor is still there. Not for long though. Waiting is going to do no good since inventory is always in short supply as compared to the demand, which will always keep increasing.

Matthew suggests that if you have been an individual or family that was waiting for a high-growth real estate market, one where you will be able to double your investments in three to four years, Austin is the place to be right now.

We couldn’t agree more.

When you invest, no matter the larger economic conditions, you always want to ensure you’re diversifying your portfolio.

This is a concept that major corporations and wealthy people understand well. For example, corporations like UBS invest in blue-chip art. Many of these banks and global companies have full-time curators for their collections in order to diversify their investments.

While you may not be a multimillionaire or a global bank, the principles of diversification are critical to a good investment strategy. Your approach may also need some tweaking during periods of high inflation, like what we’re in now.

The following are things to know generally about inflation and how it might affect your investment strategy and approach to diversification.

An Overview of Diversification

A diversified portfolio is one with a broad mix of different types of investments. The longstanding wisdom was a 60/40 portfolio where you allocated 60% of your capital to invest in stocks, then 40% of your portfolio went to fixed-income investments, such as bonds.

There are opponents of this approach who feel there should be more stock exposure, particularly for younger people.

Overall, with a diversified portfolio, you might hold a wide variety of healthcare, energy, and tech stocks, as well as some from other industries. You don’t need exposure to every sector, but you should have a pretty varied portfolio made up of a healthy mix of quality companies.

You also want to have a combination of divided, large-cap, small-cap, growth, and value stocks.

Then, in addition to diversification in your stock portfolio, you want investments included in the mix that aren’t correlated. That means these investments don’t go up and down with the stock market.

Crypto, art, gold, bonds, bank CDs, and real estate are all examples of non-correlated investments.

What to Know About Inflation

Inflation is an increase in the overall price of goods and services. Inflation is measured as an annual percentage increase. The annual percentage increase is reported in the Consumer Price Index or CPI, which the U.S. Bureau of Labor Statistics prepares monthly. When inflation goes up, purchasing power goes down.

The rise of inflation affected fixed-asset values, and companies will raise their prices to compensate for their own rising costs.

As a consumer, you’re paying more across the board for goods and services. If you have certain assets, like a house, inflation can be a good thing. Your income may also rise, although maybe not enough to keep up with inflation.

Inflation increases the cost of living, and if it gets too high, it harms the economy.

The effects on the economy largely depend on the type of inflation. Walking inflation ranges from 3-10% a year while creeping inflation isn’t as dramatic. Running inflation indicates very aggressive pricing increases that might be leading to hyperinflation.

Rising prices might indicate the economy is growing very quickly. People then tend to stockpile and overbuy because they want to avoid future higher prices, and suppliers can’t keep up with demand, nor can wages. Everyday goods and services could be out of reach for many people in situations with severe inflation.

Inflation doesn’t always have to affect everything in the same ways. For example, during the financial crisis of 2008, home prices went down almost 20%, but gas prices doubled.

Mild inflation can be good for the economy because consumer spending is propelling economic growth.

The Federal Reserve sets an inflation target, with a healthy core inflation rate considered around 2%, taking out the impact of energy and food prices.

Other specific effects of inflation can include:

• Inflation can have negative effects on retirement planning. The amount you target to save has to go up in order to pay for the same quality of life. Basically, your savings is going to buy you less over time. You have to start saving as soon as possible for retirement to utilize compounding interest, and you should use other strategies as well to hedge against inflation’s effects.
• Treasury bonds are fixed-income assets that pay the same every year. If inflation goes up faster than the return on this asset, they’re less valuable. People will then try to sell them in response, bringing down their value further. The U.S. government has to issue higher Treasury yields to sell them, so mortgage interest rates often go up as a result. Higher rates lower the value of your investment, and the interest on national debt rises.
• If you have a fixed-rate mortgage, inflation can be beneficial. The value of the monthly payments you make on your mortgage goes down over time.
• If you have debt with a variable interest rate, you’re probably going to see that your minimum payments go up as inflation increases. This is most often the case with high interest credit cards but can apply to mortgages with a variable rate.
• If you’re trying to buy a house, inflation has negative effects because their prices will typically rise along with inflation.

How Do You Invest to Protect Against Inflation?

When you’re an investor, you have to think about the best ways to hedge against inflation. You can plan for it by investing in asset classes that outperform the market during times of high inflation.

The following are particular investments to consider to protect against inflation:

Art

When you invest in art, it is a good hedge against inflation, and it also diversifies your portfolio and reduces volatility.

Many investors assume they’re not wealthy enough to get involved in the art marketplace. In reality, it can be accessible for anyone.

There are even new platforms that allow investors to own a piece of blue-chip art, much like an ETF.

Art is an asset class not correlated to other major asset classes, so this means if you have traditional assets like stocks or bonds that aren’t doing well, your art investments are more likely to hold their value.

Since art can be a physical asset, it tends to do well in inflationary periods.

Of course, any investment carries risks, but unlike equities which are sensitive to movements in the market, the art market as a whole has been growing steadily.

There are downsides you have to think about, like the lack of liquidity. Selling a piece of art can be time-consuming, which is why options that allow you to buy fractional shares are appealing, in addition to the lower point of entry.

Gold

Gold can serve as a hedge against inflation, and some describe it as an alternative currency, especially in places where the value of the native currency is declining.

Gold is a physical asset that largely tends to hold its value.

If you want to invest in gold to protect against inflation, you have three primary options. You can buy the physical asset, meaning you buy actual gold. You can buy shares of an ETF or mutual fund that follows the price of gold, or you can trade in the commodities market. Trading futures and options in the commodities market is usually left best to highly experienced investors.

While gold is an option, it’s not a perfect inflation hedge. For example, when inflation goes up, central banks will usually raise interest rates. If you have gold, it doesn’t pay a yield, so it’s not going to have as much value as an asset that does, especially when rates are higher.

Commodities

Commodities are a category including things like grain, electricity, oil, beef, orange juice, and natural gas. Commodities also include foreign currencies and financial instruments.

Commodities are an indicator of future inflation, so as their price goes up, so does the price of the products it’s used to produce.

You can invest in commodities through an ETF.

They’re very volatile and highly dependent on supply and demand, so it’s best suited to more sophisticated investors.

Real Estate Investment Trusts (REITs)

A REIT is a company that owns and also operates real estate-producing income. When inflation rises, property prices and rental rates tend to go up. When you invest in a REIT, it’s a pool of real estate. As an investor, you’re paid dividends.

REITs can be good to include in your portfolio, particularly during inflationary periods, but they can come with some downsides. For example, when interest rates go up, Treasury securities become more appealing, taking funds out of REITs. REITs also have to pay property taxes, which can be as much as 25% of operating expenses.

Real Estate

Finally, investing in real estate can, in some cases, be a hedge against inflation. You can earn income by renting out a property because, as we’ve touched on, when inflation goes up, typically so do property values. That means if you’re a landlord, you may be able to charge more for rent.

You can keep up with rising inflation.

Of course, this isn’t a guarantee, and real estate isn’t liquid. Plus, if you buy a property, it’s going to require maintenance, and the costs can add up fast.

The best thing you can do when it comes to investing during inflation is to think about your goals and the direction you’d like to take and make sure you have a good mix making up your portfolio.