Traditionally, gold has always been the first choice refuge of surplus wealth in unstable economic times and even in this highly educated day and age, that myth is still avidly pursued. The fact is, real estate over the last several hundred years has and continues to dramatically outperform gold as the staple refuge of informed wealth.
Of course, there are many contrasts to each of these investments but if you consider the benefits of both products a little more carefully, you will understand what we’re saying here. The bottom line is though, the last place you want to park your surplus wealth is in a bank.
Whether you are in your aggressive years or in the twilight of your career, there is no other way for your future’s security but venturing into some form of investment and more often than not, the investment road is twisted, forked and pitted with dilemmas which even savvy investors secretly fear to tread.
Gold is easily stolen, especially if you physically hold it in your home or in a secret “safe” location. Once word gets out you’re holding gold, life gets a little tougher right there. If you invest in gold on paper or through intermediaries, you end up right back at trusting the banks or similar institutions and historically that’s not a very sound idea. All you have to do is consider the behavior of Goldman Sachs, Bank of America, et al in the last five years to fully grasp what we’re saying here.
Real estate on the other hand is much harder to steal unless of course you screw up your title paperwork which occurs occasionally – but only when you’re careless with it.
The main disadvantage of choosing RE over gold is the fact that gold is inanimate, needs no attention once you acquire it. You buy it and where ever you leave it, it will just sit there awaking your next decision. A nice piece of cash flowing RE is live and animated to the point of having a personality. Therefore it has to be nurtured. That means some work will be required, even if it means just reviewing a report and taking a few decisions once or twice a year, depending on how much nurturing you want to do. The fact is, the more you nurture cash flowing RE or have someone competent do it for you, the better your rate of return.
That’s the heart of this issue right there – gold does not cash flow! It never has and it never will. Same as RE values, its pricing will pinball all over the place during economic uncertainty and sometimes as in the seventies and eighties, gold values will simply stagnate for decades. Yes, there are a lot of people who still think a stagnant investment like gold is “safe” and only the savvy investor fully understands the nature of the various types of inflation we’re living with. Inflation, which in the current economic climate has become almost an incestuous topic; the commentators and investment gurus simply refuse to acknowledge it as a serious consideration or just ignore it entirely as a factor of any investment strategy; a felonious error by any standards
Real estate is actually the better hedge against these various types of inflation. Rents are tied directly to income of the renter. For example and we’re using a generality here, people are happy to pay an average of 25-40% of their income/profit to keep a roof over their heads or businesses –we hasten to add that this is not so much the case with commercially let RE. However, if you look at any competent business plan for a business start-up that requires property rental, the numbers will speak eloquently for themselves.
The fact is, RE will respond more quickly to inflation, because with inflation, wages, income and product values increase as do your rents – if you’re nurturing your RE investment or you have someone capable and honest do it for you.
This income-generating versatility of cash flowing real estate investments has never been matched by the nuances of the financial investing in gold. Whereas gold investment still has the cost of marketing the metal to gain income by which they lose their future security, RE investors with stabilized incomes can readily source finances at any time without losing the ability to secure their financial futures.
There are variable risk determinants with some RE investments, but if nurtured competently, they balance out with the monthly cash flow that adds up to long term profitability. It you hold a stagnating but stabilized rental property for 10 or 12 years, your tenants will pay you back your investment in full and then you’re free rolling. With gold, its valuation only increases when world market prices shoot up. What’s more, the profits arising from the selling of gold are taxed immediately and there are no deferment options – unlike RE.
Gold investment cannot offer tax incentives or benefits no matter how much has been invested into it. Cash flowing real estate investments provides all the necessary discounts and standard deductions which investors avail from any other small-scale investments, like purchasing of stock dividends. In addition, cash flowing real estate counterbalances the overhead costs incurred in the investment process. In other words, when purchasing stabilized real estate, the investor will have the ability to either deduct a full, or at the minimum, half of the monthly amortization from the total price and thereby, eases the strains of any capital expenditure.
Stabilized cash flow really is better than gold!