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Thread: As safe as houses?

  1. #1
    Senior Member Array Lark's Avatar
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    Jun 2009

    Default As safe as houses?

    Buying a house used to be the big investment, what are the alternatives to "property"?

  2. #2


    The residential real estate market is still pretty much what it always was: A good long-term investment. You buy a family-sized house in the suburbs while you're raising the kids, and you pay off the mortgage over 20-30 years. After retirement and once the kids are gone, when you need money you can trade in the big house in the suburbs for a small flat in a retirement community and walk away with a big cash lump sum--the difference in the value of the two properties.

    The only way that formula doesn't work is if you buy more house than you can properly afford when you're still young and you get laid off for so long that you lose the house (and the real estate market is so bad that the money you've already paid into the mortgage has effectively disappeared). You can guard against that by not buying too big a house--build a little cushion into your calculations so that you can weather some financial downtime.

    By the way, it's probably more correct to talk about real estate rather than houses. Under modern conditions, the land under the house is often worth more than the house itself. So the land and the house are considered a package. And as they say, "God isn't making any more new land." That's basically the premise of real estate: That the land is pretty much guaranteed to appreciate in value over the long-term due to inevitable population pressures and urban development. (Condos don't directly involve land, but since they are part of the residential market they benefit from competing directly with single-family homes that sit on a parcel of land.)

    Also if you talk about the real estate market rather than houses, then you can partition that market into various segments: residential real estate (houses), commercial real estate (offices and malls), recreational real estate, vacation homes, etc. In some of the latter cases, the real estate can become like a short-term investment: Put a deposit on a vacation home, hold it for a bit while it appreciates, then sell it back into the market. That's what happens when an asset bubble occurs. At the peak of the housing bubble there were stories of guys on waiter's salaries with deposits on 6-7 houses, counting on flipping them for a big profit after just a couple weeks or months. In that kind of overheated market, something's gotta give.

    But your basic single-family residential property still remains pretty much what it has always been: Hold it for the long-term, pay off the mortgage, and then trade it for a smaller property when it's time to retire and pocket the cash difference in value.

  3. #3
    Senior Member Array Lark's Avatar
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    Jun 2009


    I was thinking the other day about how I'd like to rent accomodation but actually buy some property like a business centre or studio building which I would use for small business or other meetings and training to generate a revenue stream.

    I want to get out of the working daily game as soon as I can. There's a lot about my circumstances which could make that possible, its pretty simple, I dont have a great deal of needs and I dont have any dependents either and dont plan on settling and having a family any time soon.

  4. #4


    You could look into REITs--real estate investment trusts. They buy up a large pool of commercial properties and then generate an income stream from them. You, as a small investor, then buy shares in the trust. But the usual cautions apply. It's an investment like any other. The economy goes through cycles. Some parts of the economic cycle are good for real estate (commercial or otherwise) as an investment, and other parts of the economic cycle are not. But REITs can certainly be part of a diversified investment portfolio.

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