Don’t forget; when you’re buying a home or property, you aren’t just buying a place to live, recreate, or conducts business. You’re investing. And in many ways, the property, or properties, you purchase will be the most stable asset(s) you’ll ever own!
Let’s face it, most people have bought into the idea that “secure assets” are found in the stock market, or bonds, or some other investment strategy that historically proves to fluctuate without any way to guarantee favorable outcomes. We know that the stock market can go in the tank any day; the bond market can blow up without warning; even the price of gold goes up and down without rhyme or reason. We also know that markets like stocks, bonds, and gold, tend to move together: when one goes up the others go up. But when one goes down, well, you know.
The thing about real estate is that it almost never bottoms out at a net zero. Except for land that’s experienced some catastrophe, like Chernobyl after the nuclear meltdown, you can always bank on property maintaining value. It may go up in value. It may go down. But it’s almost always worth something.
Let’s take the financial crisis in 2008 as an example. If you graph it, you can see that housing prices took a big dip. But they’ve come back, returning to a steady upward trajectory. Whereas stock portfolios (booms aside), bonds, and other assets are still highly volatile, real estate has recovered and is on a more predictable track. So a “buy and hold” strategy is usually pretty wise.
Now keep in mind, that strategy isn’t just wise for personal use. Even in the worst days of the subprime mortgage shake down in 2009 and 2010–when home owners were having to move out due to foreclosures—people still needed a place to live. That’s one of the reasons the rental market is so strong right now. And don’t forget, when we’re talking rentals we aren’t just talking apartments. There are plenty of opportunities to rent single family homes, which people do for any number of reasons—working jobs that move you from city to city, or not wanting the full responsibility of home maintenance, or who knows what else.
To speak briefly though to the duplex or apartment rental market, the basic principle applies; more doors always equals less risk for you as an owner. And if this is something you’re interested to pursue, it’s good to know that you can get a regular residential loan if you own or occupy one unit of a four unit building. Now you can’t do that with a 300 unit apartment. But you can with a smaller multi-unit property. Once you establish the necessary capital with smaller properties, then you can start thinking about purchasing larger properties that provide more security over the long haul.
While all of this talk of property investment can feel daunting, think about this basic illustration to appreciate the larger point. If you want to invest in stocks you can’t get a loan to do that. You can with real estate because banks understand the stability of property assets.
How does all of this that impact you? It depends on what you’re looking for. If you’re looking for a place to live you definitely have short term needs you need to account for. But be smart about your purchase and take the long view into account. If you have the ambition and capital to invest real estate, it might be worth thinking about liquidating some assets and going with the buy and hold strategy that can pay off in the end.
On both fronts, call (608 516 5984), email (firstname.lastname@example.org) or DM on social if you want to explore property purchase as a form of investment.