JANUARY 13, 2023

By Wen Shiau 

As real estate investors, one of our most asked questions by potential investors is why Cypress Capital invests in expensive, highly regulated, highly taxed states such as NY and California. For full disclosure, our investment thesis is to Invest in Residential properties in US Tech-Centered cities which include NY, SF, and Austin.

The argument as recently espoused by the Wall Street Journal’s Editorial Board, WSJ Editorial Board The Blue State Exodus Continues Dec 27, 2022, uses the below census data to show that California and New York are losing the most citizens while Florida and Texas are gaining the most. It is also without doubt that these Blue States have higher state income tax, more regulations, and higher cost of living than Red States such as Texas and Florida. As citizens living in a city or as an investor in real estate, we understand the benefits of lower living costs and business costs; however, costs are not the sole driver in making living or investment decisions. Take home pay and net property income are the basis for making living and investment decisions.

There are other competing facts and one of the most glaring is that NY and San Francisco are ranked #1 and #3 cities in the world for the number of billionaires. The World’s Wealthiest Cities, by Number of Millionaires January 4, 2023.

If it were true that Blue States are being hollowed out due to excessive taxes and regulation as alleged by the WSJ, why would the billionaires in NY and SF and their poor cousins, the 345,600 millionaires reside in the Big Apple? Why wouldn’t they move to Florida and save not only in state income tax, but lower property tax, and sales tax?

We believe that the competing narratives Blue or Red States are a false choice, rather the choice is to include both Blue AND Red States.

– As Sergey Brin has stated, SF has become too expensive to start a company but entrepreneurs come to Silicon Valley “to scale that opportunity” in terms of capital and engineers.

– As investors, we wish to capture the entire life cycle of startups when they are young in less expensive Austin and when they want to scale in NY or SV. We want Texas AND California AND New York.

– We reject the thesis that the cost of living is the sole determining factor in deciding where to live. It’s the economic opportunity that matters most. Moreover, one may argue that the quality of life may be far better in expensive cities where one may find the venues for sports, music, art, food, and people.

– The alpha and the omega of any business is the quality of its people. The VP of Amazon said in response to why Amazon initially chose NY as HQ#2: Because that’s where the talent is. And despite AOC’s denial of tax breaks to Amazon, it continues to expand in NY.

– Deep Tech is alive and dominant in California. OpenAI, the company behind ChatGPT, and the National Ignition Facility are based in SF and Livermore, California, respectively. AI and Fusion have taken over 50 years to come to fruition. Today, it’s a question of when and not if we will have these technologies.

– Lastly, Manhattan’s population is now higher than pre-pandemic according to a new study from Placer.ai Post-Pandemic Migration Trends in NY January 3, 2023. This is on top of the historical increase in rents last year, rising 33% on average from January 2021 to January 2022, NYC rent surge March 7, 2022. Never bet against NY!

Cypress Capital invests in residential properties targeting the 345,600 and 276,400 millionaires in NY and SF, respectively, an extremely large and wealthy base of potential buyers and renters of our homes. Austin is growing in its Tech wealth. These cities are where venture capitalists invest and where unicorns are formed.

In the months, not years, to come, we believe we shall see the best investment opportunities of the past decade in real estate investing in NY, SF, and Austin.