Traditional vs. alternative – how to invest in the Bay Area?

As the new decade is starting to unfold, many investors are thinking of how to start it off on the right foot and find the perfect opportunity to multiply last year’s earnings. Whether you’re a Bay Area resident or you’ve heard that this is one of the best locations in the U.S. for investments, San Francisco and the surrounding area can be a great place for you to make a profit. The San Francisco Bay Area has a GDP of $535 billion and, with a growth rate twice as high as the rest of U.S. cities, it would rank 19th in the world, even compared to national economies.

This immense growth has definitely put the Bay Area on investors’ radars, but what specific part of the region’s economy makes for prime investments? Should you stick with traditional investment opportunities such as real estate, or should you take advantage of San Francisco’s innovative tech scene and invest in one of its many startups?

Luckily for you, both of these are viable options. Whether you prefer traditional investments or you’re more interested in exploring alternative investments, you’ll find the Bay Area to be a great location. However, depending on your long-term plans, risk appetite, and desired return on investment, there are some things to keep in mind.

2020 is still a good time to invest in Bay Area real estate

According to a recent PwC study, San Francisco and the Bay Area remain one of the most attractive destinations for real estate investors in 2020, along with emerging markets such as Austin, Nashville, and Boston, which have growing economies that attract the young workforce. In fact, the Bay Area has become even more attractive, because prices have been slowly coming down from the 2018 highs. Compared to two years ago, property prices are down up to 15% and the median single-family house is now easier to afford. If in 2018 you would have had to pay around $930K on a home, now the price is down to $875K.

It’s also worth mentioning that mortgage rates have dropped, so this may be a good time for you to explore the Bay Area residential market. You can expect some competition, however. Experts estimate that the first half of 2020 will see a surge in real estate investments because the employees of companies that went public in 2019 will be able to sell their shares and redirect the money somewhere else.

Even if the U.S. economy stalls next year, San Francisco will continue to be a safe location for real estate. In fact, with geopolitical uncertainty at the horizon, experts expect the real estate sector to grow thanks to risk-averse investors.

If you’re looking for an apartment, consider San Jose, in the Southern Bay Area. Here, the number of new apartments is expected to triple and Google’s plans to transform 60 acres and become the largest private employer in the Bay Area will attract young residents. Millennials, who are now in their 30s and have been saving for a down payment, are ready to make their first real estate purchase and, to them, San Francisco is more attractive than New York and Washington. At the same time, Gen Z, who is graduating from college and entering the workplace, will flock towards the giant tech employers in the Bay Area, so rental properties are expected to become more popular too.

That being said, properties in the Bay Area are still very expensive and they’re not the best idea if you’re looking for immediate return on your investment. In general, primary residences should be held for at least ten years if you want to make a profit and, for rental properties, the recommended holding time is a minimum of two years. If you find the high costs of Bay Area real estate too off-putting, then you can consider smaller suburbs, which require a smaller initial investment but can generate the same returns as more expensive homes in San Francisco or San Jose.

Bay Area startups foster innovation and attract record investments

Whether you’re more interested in alternative investments or you want to diversify your portfolio, the Bay Area offers plenty of opportunities, as it continues to be at the center of the tech world and attract most VC investments.

The Bay Area is an innovation hub where you can find both tech giants and promising new start-ups. Leveraging the power of emerging technologies such as AI, Big Data, augmented reality, and Blockchain, local startups are revolutionizing healthcare, finance, and the fight for a cleaner environment. If you believe in the future of tech, or you’re a seasoned investor who practices high leverage Forex trading and is familiar with alternative investments, the Bay Area can be a land of opportunity.

In 2019, San Francisco emerged as one of the biggest competitors of Silicon Valley, drawing record sums of capital despite its much smaller size. It’s not exactly a surprise that most funding goes towards the tech sector. For example, Copper, which develops CRM software for companies that use G Suite, became one of the fastest-growing private companies in the U.S., gained $102 million in funding and was even backed by funds from Google Ventures. Another example is Harness, an AI-based platform that helps developers release apps much faster thanks to machine learning. But, apart from tech, other industries are booming too: Grove Collaborative, which reached Inc’s 5000 List, is a subscription-based service for sustainable household products. Branch International, which secured more than $264 in funding and already has offices in four countries, helps users gain funding via a mobile app.

Whether you believe in the potential of new technologies or you want to support an idea that resonates with you, there’s always a startup you can fund in the Bay Area. Just remember to do your research and invest in a company whose mission statement you trust, but also has realistic growth chances.

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