Originally published July 2023.

Another instalment in a series of articles detailing how to design a secure, income-producing portfolio.

It was in the most unlikely of locales that I first learned how to win with hard assets. The year was 1988, and the place was Galveston, Texas. At that time, I was working in commercial real estate in Boston. My brother was in medical school in Galveston, and I decided to take advantage of all that Gulf sunshine and go down for a visit. While I was there, it occurred to me to tour some real estate in nearby Houston.

Boston at that time was in the midst of perhaps the greatest boom the city has ever seen. Michael Dukakis was governor and the biotech industry was exploding. Condos and office buildings were springing up all along route 128. Prices were through the roof. Down in Texas, meanwhile, I walked through buildings that appeared in every way to be identical to ones back in Boston. I looked at buildings where the going rental rate was $1,000 per unit, just as it would have been in Boston. But to buy the building outright would cost $3 million in Boston, while in Houston, I discovered, the price was around $500,000 – a sixth of the Boston rate.

I had a sudden realisation that I could do more business per square foot in Texas than Boston, despite boom conditions in the latter. The cost structure plus the taxes, not to mention wages for maintenance and management, were all much lower down in the Lone Star State. On top of that, it was an especially opportune time to buy in Houston, because an energy bust had caused a regional economic downturn, which pushed down prices. Yet there was every reason to think Houston would bounce back.