Why invest in real estate?

I thought it might be a good idea to start with some basics of why one should consider investing in real estate to begin with.  Lots of people have different opinions on this and this is not an attempt to sum up all the various reasons someone should think about this – it is an attempt to show you why I think it is valuable at this particular time.  Here are 3 reasons why I am doing it now:

1) Asset prices are low – Due to the recession and housing crisis housing values have dropped considerably over the past few years.  This shouldn’t be news to anyone, but many people are still hesitant right now.  They are paying off debt and putting money into savings because they are scared.  The problem is they are getting paid historically low rates on the savings they are accumulating and are paying off debt they were receiving historically low rates on.  If you separate yourself from the panic it is pretty easy to see that this is not a great way to amass wealth.  Housing is sitting there at as attractive a price as it has been in many people’s lifetime so it is time to get off the fence.

2) Rates are historically low – They have been increasing of late, but these are miniscule when you look at interest rates over a long time period.  They are so low that you could lock in a 30 year rate close to what inflation has been in many years in the past.

3) Real estate isn’t hurt by inflation – it is a good hedge against inflation because housing values and rentals will grow right along with inflation and in many cases are a big driver in inflation.  Now the key here is to buy property at the correct price and to buy property that will appreciate at least as much as the average purchase.  If you do that then you should have something that adjusts right with inflation regardless of how high that might be.  With our current monetary policy we could enter a highly inflationary period (at least for the US) – if that happens your savings in your bank account will look worse every year while your real estate values should adjust right with inflation.

4) Charleston is a growing area – A Census report just came out stating a third of US counties are now dying (http://news.yahoo.com/census-record-1-3-us-counties-now-dying-040238347.html).  This is happening when the US population as a whole is growing.  To me what this tells you is we are entering an age where people will live where they want as opposed to where they have a job.  This is certainly not true across the board, but it is and has been trending that direction.  Charleston is the type of place that will benefit from that trend and continue to grow while other SC counties and locations across the country will struggle.

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