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PENSCO Blog

Fresh alternative asset insights and the latest news on real estate and private equity investing.

As Panama Canal Widens so Does Opportunity to Invest

City

  |  By Chris Shanahan, CISP®

I visit Las Vegas about once a year, and as my flight prepares to land at the airport I’m always amazed at the sprawl I see from my window. Far beyond the famous Vegas strip, there are now rows and rows of neatly carved subdivisions that spread out across the Mojave Desert.

I thought of this type of housing growth that takes place in unexpected places when PENSCO held a breakfast recently to discuss real estate investing. Buying single-family homes to hold as investment properties in self-directed IRAs is a popular strategy and many of our clients are looking for places to purchase their next rental property.

PENSCO Real Estate Breakfast Roundtable in session

 

Numerous media outlets and real estate-related companies publish lists of markets to consider if you are looking into buying a rental property. There was one from Forbes titled “Best Buy Cities: Where to Invest in Housing in 2015,” while earlier this year I blogged about RealtyTrac’s residential rental property forecast.

At the PENSCO breakfast, speaker Adiel Gorel of ICG Real Estate Investments, discussed one housing market that he is keeping a close eye on: Jacksonville, Florida.

 

While single-family housing investors may simply seek out markets where home prices are depressed, Gorel said it’s important to take other factors into consideration. For instance, he’s interested in Jacksonville because of a reason that might not be immediately obvious: the Panama Canal.

Under a multi-year, multi-billion dollar project, the Panama Canal is being widened and deepened so it can accommodate larger ships. Boston Consulting Group estimates that 1 million additional cargo boxes will go from East Asia to East Coast ports by 2020.  

Many East Coast ports are improving their harbors to accommodate larger ships, and the port in Miami is undergoing a $2 billion capital-improvement plan that included building an underwater tunnel to give trucks faster access from its port to nearby highways.

The port of Jacksonville, or JaxPort, wants to deepen its harbor to 47 feet from 40 feet to accommodate larger boats and remain competitive with nearby ports, such as Savannah and Charleston.

Upgrading JaxPort could have a ripple effect on Jacksonville’s economy, Gorel said. If the port can handle larger ships and more of them, that could spur job growth, an influx of new businesses and increased demand for housing.

Gorel’s link between Jacksonville and the Panama Canal is a reminder that housing growth can come in unexpected places and from unexpected demand, just as it did in Vegas. At first glance, it might be unclear how the Panama Canal could make Jacksonville an attractive market for investment properties. But reading the headlines and understanding how infrastructure investments could impact a community and future demographic trends is one way to find new markets to consider, Gorel said.

For investors interested in holding real estate in a self-directed IRA it’s always recommended that you understand how market dynamics might shift over time. For instance, for all of its growth Las Vegas was hit hard by the economic downturn, although home prices are now stabilizing.

Conducting ample due diligence before making a buying decision is always advised. If you are interested in learning more about holding real estate in your IRA, please download our guide: