The 20th century was one of great growth in America. Many people came to our great country for the ‘American Dream’. We have liberties like no other country in the world or in history. Many people came to seek out this dream and used homeownership as a sign of their new found independence. Homeownership and having property rights is a wonderful privilege that we as Americans should appreciate.
Over the course of this country’s history many individuals have made a tremendous amount of money through owning land. People have taken different approaches in ownership; raw land, multi-family, spec building, and simply just living in the home with their family.
Regardless of the reason for purchasing, if your parents owned property anywhere in the US fifty years ago the value has likely gone up dramatically. Here are a few reasons why owning real estate is a great strategy to build wealth:
- Demand – According to the US Census Bureau, the total US population is expected to reach 392 million people. This will be an increase of 50% compared with 1990. Think of areas that may attract more people in the future based upon jobs, cost of living, and climate. Remember, 100 years ago there was nobody living in areas like Las Vegas, Los Angeles, and South Florida.
- Other People’s Money (OPM) – This is a term that was brought out in recent decades but is a long lived concept. Using other people’s money will help you leverage to own more property or any at all. Buy a home with 20% down, break even most of the way, and in 30 years the property is paid off leaving you with nothing but pure income and equity.
- Rates – Rates are at historic lows. Now people have been saying this for years but they really are. Clearly, these low rates will not last forever. Every $100,000 you borrow will cost you only about $500/month on a 30 year fixed with no points.
- Inflation hedge – Did you know that a nickel 100 years ago is equivalent to a dollar to day. Over periods of time we have had steady inflation. Real estate is an excellent hedge against inflation. In fact, those that own a lot of real estate actually make a ton of money during inflationary times. Sure, the cost of gas and butter go up but those that have significant real estate holdings build wealth by inflating property values.
Clearly there have been cycles in the past. Property values have plummeted in the past and will certainly go through another cycle of highs and lows. However, owning real estate is a great long-term strategy to build wealth. If you have good credit and enough for a down payment you ought to consider adding real estate to your investment portfolio. If you have cash, or can get access to cash, and are seeking returns, real estate can offer some very high yields vis-a-vis renting.
Keith Munsell 
