The author of this blog comes up with a compelling argument of why the buy and hold strategy may be back for acquiring residential real estate. Well, what about raw land? He points to three key indicators of a viable buy and hold strategy in residential real estate:
1. – Long term population trends must be rising.
2. – The cost of construction will continue to rise over time.
3.– Normal rules for supply and demand will dictate value in the housing market.
In raw land the investing return chart would look like a gradually ascending straight line and then immediately shoots way up once a developer enters the market. Housing is much more slow and steady. Almost like comparing a blue chip stock like IBM to a penny stock that costs very little, but has tremendous upside potential (or you may not see any return).
I think the days of buying a house as your largest investment are officially done. Kaput. Over. It really never made much financial sense. Emotionally speaking it’s fantastic. Good schools for the kids, nice lawns and you can make as many improvements as you like. Yet, once you factor in the property taxes, interest costs on financing, repairs and maintenance, property insurance and all the other headaches associated with home ownership it makes more financial sense to rent. This article spells out the reasons renting makes more sense today.
Nevertheless, owning land has none of the headaches of home ownership and all of the benefits of investment leverage and seriously higher return on investment potential. Plus, you can always make improvements just like with housing and enjoy your land forever without any of the maintenance costs. They say land is the basis of all wealth well. I think it’s also the basis of happiness with an investment as well. You can’t take your kids camping on a stock or bond!
In short buy and hold land and you’ll be happy, your family will be happy and eventually your bank account will be happy.
