Stability Has Inherent Value

Written by Posted On Tuesday, 03 March 2020 06:50
Stock price decline, last 5 days. Stock price decline, last 5 days. Courtesy Google search result

Investing in anything has inherent risks associated with it. Stocks are subject to market fluctuations that are often driven by nothing more than someone’s opinion. Real estate sees it’s ups and downs. Money markets, who really knows how those things work? I mean if someone really knew they’d be a billionaire by week’s end!

Even not investing has risks. Loses are tallied up by not keeping pace with inflation. Or if your cash filled mattress falls prey to an unexpected house fire then your retirement is up in smoke.

So what’s the best investment strategy? Where should your money go to secure your future?

Well this is by no means an exhaustive evaluation of all your options but it is the opinion of the author that real estate is your best bet for reaching your long term goals.

Set aside the very profitable long term tax shelters of real estate ownership. Let’s not even consider that a tenant will pay off your initial cost of purchasing a property. Forget that rental income can be used to set you free from a 9:00 to 5:00, j-o-b.

Lets just look at one single, very narrow reason the author believes real estate is superior to any other form of investments: Stability.

Just like us, when we get a cold or the flu, we crash fast! And that is literally what has happened the past few days in the market. In little more than 2 ½ days the market saw a nearly 12% dip in value because it caught the Coronavirus. Or at least someone thought it might catch it.

Now it has gained back roughly half that value in the couple of days since but who is to say it won’t repeat the losses the next time someone sneezes on the trading floor.

In comparison, it took almost 18 months (2008-2009) for real estate to see a decrease in value of roughly 31% nationally. Keep in mind, many markets across the country did not see anywhere near this decline in value but the coasts saw massive corrections that drove this national average to the 31% decline overall.

Many markets across the US saw no more than 15-20% declines in real estate value in this same 18 month period. That means the rate of decline was not a cliff but a gradual slide. Picture a rolling hillside.

Meanwhile the stock market in less than a 6 month period (2008-2009) lost roughly 33% of it’s value! Watch your step, cliff ahead!

Stability. For this reason I invest in real estate. Those that weathered the real estate storm of 2008-2009 have more than made up for the losses they encountered in that short period of decline.

As for my friends who held on in the markets, they too have climbed back to being at least even, but often times they have only stayed parallel with inflation.

Real estate on the other hand, tenants have paid down 10 more years of mortgages, we’ve taken advantage of tax shelters every year and I’ve used rental incomes to be set free from my 9:00 to 5:00.

But I said I wasn’t going to talk about those other advantages. :)

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Doug Price

With over 20 years of professional experience, Doug has been involved with home remodeling for much of his professional career helping homeowners make the most of their homes. More recently, Doug has started investing in real estate to improve communities through the purchase and renovation of under performing real estate.

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