Why I Like Real Estate, Part IV
Posted on Feb 13, 2008 under Real Estate |This is the fourth part in the Why I Like Real Estate Series. If you haven’t already, take a look at Part I, Part II, and Part III.
For my fourth reason, I’m just going to come out and bluntly state it. I’ve never seen real estate go to zero. This may not seem like that big of a deal to some of you, but it’s a huge benefit. I’m not saying that I’ve never seen real estate decline in value, I have (and am currently). What I am saying is that I’ve never seen real estate go completely sour and lose 100% of it’s value. It just doesn’t happen.
I have, on the other hand, seen plenty of other investments do just that and ultimately be worth less than the paper they’re written on. This isn’t to say that other investments are bad and no good, it’s just a fundamental difference that should be taken into account. You can look back and find many different companies that have gone bankrupt or what have you, and have left their investors completely empty handed.
Real estate is different and will maintain at least some value. It’s a tangible investment and something that they aren’t making any more of. I don’t want to mislead anyone though, and have you think that you can’t lose money with real estate because you can. The point that I’m making here is that the value of the underlying asset will not go to zero. It may go up, it may go down, but not to zero. It’s that simple.
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by Matt, on February 14 2008 @ 9:01 pm
While an investment in real estate will never go to zero investing in something safe like mutual funds is also never likely to go to zero. If anything you’re less likely to loose a large portion of your money this way. Without good knowledge you can invest in overpriced real estate and loose a lot the moment you buy.
by fiscalmusings, on February 14 2008 @ 10:16 pm
I understand what you’re getting at, but I’m not looking at real estate only from the capital appreciation/depreciation perspective. There is so much more you can do with it than just buy and hope to flip. Rental real estate can provide great cash flow while giving the opportunity to sell for a profit later as well.
The interesting thing about mutual funds is that the broad diversification not only makes it safe from going drastically, but it also keeps it safe from going up drastically. Just something else to consider as well.