Our economy is currently in a recovery mode from the housing bubble burst that occurred in October 2007. This means that we have been in that mode for 10 years this month. That makes the recovery “long in the tooth” in a matter of speaking. Ten years is longer than we usually experience between economic downturns. It follows that there is a lot of advice being passed around on just what one should do to protect their assets. Many economists and money managers will tell you what to do with your assets (especially cash, or stocks and bonds,) before this occurs. Investors with substantial assets like these are genuinely searching for “safe havens” in preparation for a shocking jolt in the markets or the declining value of the dollar.
The leading Safe Haven recommendations are Gold (or gold and silver), land (raw or improved), and fine arts. Most will recommend having enough cash on hand to meet emergencies in the event of job loss or other unforeseen or unexpected cash flow interruptions.
The Safe Haven we have in Texas is a plentiful supply of land and other improved real estate. Land is the most basic foundation of all real property. There is a fixed supply. It’s here to stay, and no more is produced. There are many factors that affect the value of land, and most are related to its use, or potential use. Investors often seek land for future personal use or land in the path of growth offering future potential that will increase its value. The most important consideration is that, whatever the use when all else is destroyed or has no value, the land is still there, and has value. And historically – increasing value!
Another excellent investment is residential housing. FHA reports that single-family homes nationwide, over the past several years have appreciated at the rate of 6% annually. And in contrast to raw land, rental income combined with the tax benefits of depreciation allowances, and the deduction of ALL expenses related to the property, can reduce ownership out of pocket expense substantially. These tax benefits, when combined with the recognized appreciation of the property, and a good tenant can sometimes reduce the total cost to near zero. The low-interest rate of loans currently combined with current high rental rates simply adds to the icing on the cake for those making this investment in the current environment. Always choose the best location affordable to get better quality tenants and best appreciation. Affordable means a price where market rents make the property a good investment.
Good property management is key to ensure that the property is cared for, and tenants stay happy. Happy tenants renew often, saving you vacancy, lease fees and the normal expense of prepping the property for the next tenant. Cash flow is generally better on multiple properties.
To make this investment strategy work, you need a good Realtor to find your property and show you the ropes. If your investment strategy includes a commercial real estate component, we have highly skilled commercial specialists with Stanberry Commercial.