The Unique Advantages of Casino Investment Opportunities
Hi there, I’m Justin Ryan. During this article, I will discuss a powerful piece of learning that has served me very well. As a real estate investor I have always been very selective in choosing my investments. In today’s softer real estate market, I am even more selective. During this selective process, my goal is to stack one positive strategy on top of another, until I have created a slam-dunk, no-brainer investment opportunity. One of these positive factors is investing in casino investment opportunities. During this article, I will explain why.
Casino Investments create huge amounts of revenue
As we all know, for the real estate investor, or any investor, money makes the world go round. For the real estate investor, the viability of his real estate investment is largely impacted by the amount of disposable income that buyers and tenants have available in that particular real estate market. The biggest check that a person writes every month is to their mortgage company or landlord. This check gets written every single month. This is why investing in real estate has always contained certain advantages when compared to investing in other types of products.
When real estate buyers have more money to spend, they can afford “more house”, and they are also much more stable. When there is a phethora of qualified wage earners in a market, it makes things much more profitable for the real estate investor. It expedites our exit strategy. It maximizes our profit because these qualified buyers are in competition for the unique product we selected. Overall, it really helps the real estate investor to invest in a market where people make above average wages, and make them consistently.
Now, it doesn’t stop there. The buyers who are really large wage earners in the market do not rent properties, they buy properties. In order to be able to rent our properties effectively, we need to focus in a market where employees are most likely to earn decent wages, AND still rent properites.
There is one particular type of employment market where this happens consistenly. The casino gaming market. For example, in Biloxi, Mississippi, there are thousands upon thousands of casino employees. Over 60% of them rent properties. Even though many of them can afford to buy properites, they have always been in the “rental” mentality. This is a very positive factor for the real estate investor. It creates a situation where there are individuals who earn good wages, but have no desire to own a property. These are the type of individuals who make excellent, long-term residents.
Invest in an area that contains an undefeatable economic force
The casinos in Biloxi, Mississippi have been consistenly generating between $80-90 Million per MONTH. This is a huge amount of revenue. This revenue “trickles down” to the wage earners in the casino, and also to other businesses that support the casino industry. When it comes to areas that contain an undefeatble economic force, casino gaming markets are about as good as it gets. There are so many industries that really get hurt when economic times are slow (the automotive industry is a prime example today). The real estate investors in the Michigan market today are in rough shape because of the automotive slow-down. There are now far fewer high-income jobs in Michigan, and because of that, far fewer people are able to afford to buy good homes. The slow-down that occurred for businesses has now directly impacted the real estate market. The key to avoiding this problem is to invest in geographic areas that contain an undefeatable economic force, i.e. businesses that stay relatively immune to economic slow-downs. One of the industries that maintains it’s cashflow the best, even during an ecnomic slow-down, is the casino gaming industry.
As invidivuals, none of us have control over the economy. The economy is always going to do what it’s going to do. But what we can do is ask ourselves an important question: What are the differnet types industries that have historically done well during an economic downturn? The casino gaming industry is one that has consisetnely performed even during economic downturns. Having this knowledge is very significant, because it allows us to focus within markets that contain a high proportion of this type of industry. So that even when the economy is at its worst, we are focused within the markets that contain the right type of recession-resistant industries.
Casinos are very consistent and stable
The economic stability of casinos creates something for the real estate investor: a stable tenant base. Some of my best tenants in the Detroit market were casino employees. The reason for this is because casinos are very stable. And the stability of casinos creates a stable supply of tenants. This is another advantage of selecting casino investment opportunities for your portfolio.
The Biloxi market is my favorite casino gaming market. This market has been very stable and consistent. There has been an increase in gaming revenue every single year in the Biloxi market with the exception of course of the year Katrina came through. Here are the revenue numbers going back to when gaming first started in Biloxi:
| 1992 | $77,538,532 |
| 1993 | $254,360,478 |
| 1994 | $448,895,233 |
| 1995 | $483,219,711 |
| 1996 | $509,208,624 |
| 1997 | $526,904,595 |
| 1998 | $576,299,880 |
| 1999 | $775,086,287 |
| 2000 | $848,348,584 |
| 2001 | $877,303,161 |
| 2002 | $878,440,927 |
| 2003 | $879,414,135 |
| 2004 | $911,450,443 |
| 2005 | $657,171,615 |
| 2006 | $845,203,708 |
Hurricane Katrina came through in August of 2005. Every single casino was closed for the entire 4th quarter of 2005, and the market still did $657 Million. What’s even more astounding is that the majority of the casinos were closed for a huge portion of 2006, and the market came back to $845 Million.
It is this type of consistent revenue that I absolutely love to see in a real estate market. In order for a market to continue growing, and continue offering strong investment opportunties, there absolutely must be a source that continues to kick new dollars into the market year after year. The casino gaming industry is one that fulfills this element extremely well.
Not every casino market is good
As powerful as the casino gaming industry is as a revenue generator, you need to realize that this doesn’t automatically make a real estate market a good one. The impact of casino gaming is one factor, but it sure isn’t the only one. For example, there are casino markets in our country right now that I woudn’t dream of investing in. Many, many other factors apply, and this is how we make our living as real estate investors; by sorting through all of the data to identify which markets are the most desirable to invest in.
Biloxi is an excellent example of how the casino presence has combined with many other indicators in the market. This overall set of many factors is what has put Biloxi where it is for the real estate investor. Five to seven years from now, the Biloxi market is going to look like a mini-Las Vegas. Things have just started. And the long term picture is a very exciting one.
Now you understand the many advantages of having casino investment opportunities in your portfolio. Right now the Biloxi market is by far my favorite. Myself and my partner, Wendy Patton are planning another trip to Biloxi very soon.
Contact us if you’d like to learn more about our next trip. We will be analyzing several casino investment opportunities during our next trip.