There are many ways to store wealth in these turbulent times. We have seen a rush for precious metals in recent months as well as a decline of around 10% in the value of the dollar against the euro and the Swiss franc.
Equities have continued to advance and real estate in high demand areas remains strong. Other wealth stores such as fine art, gemstones, collectibles, etc. are outside our domain, so we’ll leave this discussion to the experts in those areas.
Over the centuries, real estate has been a store of wealth in many different forms. There is the concept of a land bank where a developer will buy large tracts of land and hold it for decades. As the suburbs expand around large cities, what was once cheap farmland is becoming very expensive property for homes and condos.
Mineral rights, railway rights of way, and even Tahoe Regional Planning Agency excess coverage that you own are examples of things related to property that can also be stores of wealth.
Areas such as Lake Tahoe, where supply is limited and demand grows in the long run, have historically been an excellent store of long-term wealth. The real estate market will experience ups and downs during times of recession and recovery. But, over the long term, the value of the vast majority of Lake Tahoe properties has risen remarkably well.
The recovery was long and slow after the Great Recession, but house prices in all categories are generally above their pre-recession highs.
When you think of property as a store of wealth, you have to decide what your intentions are. Are you considering commercial or residential property? Is this going to be purely an investment that you praise all the time? Or is it a vacation home from which you may or may not earn rental income? Will it be your primary residence making the reserve of wealth a single factor with the overall enjoyment of the property?
Are you paying cash or using financing to leverage your investment? How long do you plan to keep the property? Will it be easy to resell the property when you need the money at a later date? Real estate in your portfolio can be a great store of long-term wealth. But it’s not something you can rely on when you need cash. Everyone should balance their personal cash flow needs with their wealth accumulation goals to ensure that they never have to rush real estate.
One of the reasons that real estate has always been a good store of wealth is that it tends to do well in times of inflation. House prices will generally rise at least as inflation rates, if not faster. So while cash depreciates in times of inflation, real estate can be a hedge. However, high risk real estate investments such as overturned houses or slumlord type properties should not be viewed as stores of wealth.
One of the most important factors that makes Incline Village real estate a good store of long-term wealth is the extremely limited supply associated with the huge population growth in California over the past 30 years. With nearly 12 million people living within a four hour drive of Lake Tahoe, demand far exceeds supply.
There is US Forest Service land on three sides and the lake on the fourth. And let’s not forget the fact that there are very few undeveloped properties in our community. Most importantly, keeping the environment of Lake Tahoe pristine, preventing the spread of invasive species in the water and on land as well as anything we can do to maintain the clarity of the lake will go a long way in making Tahoe property. a good store of wealth.
Don Kanare is the founder and Sabrina Belleci is the owner / broker of RE / MAX North Lake.