The Bottom Can't Fall Out of a Basement (in a Good Rental House)

by Tim Herriage

The Bottom Can't Fall Out of a Basement (in a Good Rental House)

by Tim Herriage

by Tim Herriage

The difference between real estate and exchange-traded assets is that no one really needs Bank of America shares to live. Food, water, and shelter are always in demand. Even if your property values have dropped, you still own something and in the case of a rental house, a valuable business with cash flow. The house is still there, and either you or your tenants are living under its roof. There is always the utility, and in the case of a rental property, inflation protected income.
The principles and values of real estate investment are generally understandable; anyone who has ever rented or bought even one home can grasp the basic tenets. You can crawl around an attic tweaking timbers, or see with your own eyes whether or not a water heater is rusty. You know if a neighborhood is nice or not, and if you would want to live there. Are there people with jobs who want to rent houses?
Property values can almost never go to zero and with wisely bought rental property always attract tenants who pay rent. Stocks, bonds and funds don’t do this. Understanding how exchange and income real estate assets compare should be fundamental to an investing education.
WHO’S PLAYING WHOM?
On the last day of June the Dow Jones Industrial Average was back within 250 points of its 2016 high after crashing nearly 1000 points on 6/24/16 the day following the Brexit Leave or Remain referendum. (6/8/16 Update: Today Bloomberg predicts the S&P and other indexes are on track to reach a 3 month high erasing overstated Brexit losses.)
The argument is not that stocks are good and real estate bad, but rather how easy/hard it is to make quick buy/sell decisions and trades in exchange traded assets or stocks, bonds and funds versus how hard/easy it is to make buy/sell decisions in rental real estate. The former leads to volatility (the stock market roller coaster) while the latter, alleged lack of liquidity, (unless you can borrow against the property easily,) is considered a downside.
The Wall Street PR megaphone has ensured this information is lost in the noise. As a wise investor you should NOT. If you want to learn how to invest in rental real estate without the responsibility of self management, contact us.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Top