Real Estate, The Best Long Term Investment
We're Not Making Anymore Land
We’re not making any more land any time soon. In fact, we might actually be losing land mass due to rising sea levels in the coming decades. A great deal of the land we do have is virtually un-buildable or very difficult to build on because of its extreme terrain. This alone has made land extremely valuable throughout human history and continues to do so today. This desire is intensified in modern society with the unprecedented levels of land development seen across the globe. So for the most part, land is a non-renewable resource and those who own it will have a valuable asset at some point depending on the prosperity of an economy. It’s important to remember that economies and civilization run through cycles. When the cycle comes back around for the upturn, you want to be the one standing there with the deed.
Land is a very versatile investment. By doing the right research and finding capital you can do just about anything with it to create some needed value (code pending): turn it into a park; build a house on it; develop retail space on it; or any mixture of these. The important point is to do your due diligence first to see what the possibilities are in a specific jurisdiction. An architect can help you gather all the pertinent information. You can also develop the land into an income property. Many people build homes, apartments, townhouses, retail & office space on land and then rent that space for a profit to those in the market for such a space. In this case the land and the property serve as an enterprise, generating revenue for the owner while providing a valuable asset to their community. In contemporary neighborhoods, real estate products that have a high demand but low supply are Missing Middle buildings - structures in between single family homes and large 30+ unit apartment buildings. With these simple, revenue generating buildings types great neighborhoods were begun by everyday folks. They were private landowners developing property and then capitalizing on that space to build wealth for themselves and their family while nurturing the neighborhood. Through a good market study and an understanding of zoning laws, property owners can turn their land into a solid long term investment. It takes money to get going. But like the songwriter 'Stretch Money' says “It takes money to make money”.
More Stable Than The Stock Market. Yes, I Said It.
Most of you are thinking, “how can this be true when we just experienced one of the worst real estate housing markets in global history”. You are correct. But there is a key difference between land and stocks. When a company experiences economic loss and depression it runs the risk of closing its doors forever (as we witnessed in 2008). But when land goes through economic depression, it simply gets devalued. It never ceases to exist (unless it goes underwater). It may be worth pennies but it’s still there. Since it still exists, it forever has the ability to experience economic gains once an economy rebounds (as we are witnessing now). The bigger issue is being able to maintain the land and/or property through said depression which can prove to be difficult. However, if you can manage that until the next economic upswing, you’ll see some worth-while gains. But you MUST "flip" your thinking and play the long game.
It's a Long Term Game
I’ve noticed a contradiction. We are obsessed with the house flipping culture - the act of buying property, doing the bare minimal amount of improvements and then selling it. We even glorify it on HGTV. We do this while at the same time complaining about the conditions and services of our neighborhoods and communities. Flipping is not a bad thing when it's done correctly. It should be used as a capital raising strategy, building funds for other more substantial land developments to be built in the same neighborhood. And there is the operative word: neighborhood. Flipping a house is a good way to make relatively small amounts of quick money. It is much less effective at improving a neighborhood and the ‘flipper’ misses out on the true ROI (Return On Investment) which comes by playing the long game. What does improve a neighborhood is a commitment to place and an investment of time and money in both the individual property and its surrounding community. When the neighborhood improves, the land inside that community also improves - tremendously.
In Detroit as we speak, people from outside of the state who understand this principle are buying property cheap. A good deal are flipping. But there is equally a good deal of people that are not flipping. They’re setting up roots. They are committing the next 5, 10, 15 years of their lives to not just improving their land but also the neighborhood, because they foresee the economic upswing coming. They are fixing up their homes piece by piece. They are planting trees on the street. They are cleaning out the alleyways. They are cutting the grass on their lawns and the lawns of unoccupied adjacent properties. They are buying the abandoned corner store at the end of the block and turning it into a record shop, or market, or coffee house. They are playing the long game. They are investors in neighborhoods and not buildings. This is how land equity and economic value can be achieved. Our only wish is that people who have lived in the city for generations realize this as well and begin take advantage of the opportunity before them along side the cohort of "New Detroiters". In order to improve neighborhoods, build wealth, and live better lives we need more commitment to place. We need more long term visionaries. People who are willing to invest in property for the long term and use a little elbow grease to make their communities what they need to be. It doesn’t happen overnight. But over time you will see returns on your investment and you will have created a great neighborhood in the process.