Mark Twain took a long-term and somewhat
philosophical look not only at life but real estate. Looking through Mark
Twain's eyes, there's a strong case for continuing to invest in tight real
estate markets such as Bay Area real estate.
Real estate is always a good investment, Mark Twain once said, because "God
isn't making it anymore!" With talk of a "bubble" in high-priced real estate
markets such as the Bay Area, New York City, and Boston, it's important to
remember that when it comes to the laws of supply and demand, no other
investment can quite match real estate.
Reasons for Investing in Bay Area Real Estate & Other "Bubble"
Markets
- Intrinsic value from intrinsically short supply. To paraphrase Mark Twain,
not only is there not going to be any more supply in the real estate market.
There is going to be plenty more demand: millions of babies born into the
world each year who will probably be willing to pay for a roof over their head
at night–and while they're at work, eating at a restaurant, or doing anything
else.
- Bubble market corollary: Not only is the supply of real estate in terms
of acreage not going anywhere; developers are increasingly unable to create
more real estate (in the form of bigger buildings or more buildings on
existing lots) in tightly-packed and tightly-regulated markets such as Bay
Area real estate.
- Relatively stable investment potential. Real estate sometimes loses value,
but never completely, even in the worst case. If Mark Twain had filled a time
capsule with twenty shares of cable-car stock and twenty deeds to San
Francisco houses, which would be worth more today? Twenty, thirty, and a
hundred years from now, personal computers may become museum pieces and oil
may only be needed for squeaky door hinges. But people will still need houses,
offices, nightclubs, restaurants, and every other kind of roof over their
heads.
- Bubble market corollary: The "bubble" markets are unlikely to lose
demand relative to other markets since they are so "in demand" not only in
the US but around the world. In many countries around the world, saying
you're from the US is unfortunately a way to end a conversation. But saying
you're from San Francisco, Boston, New York, Miami, or Los Angeles will
usually only bring a smile and many interested questions.
- Revenue potential. Not all stocks pay dividends, but almost every real
estate investment has the potential to generate a regular stream of income.
Whether you are buying investment property from afar, or just renting out a
spare bedroom, the money you make on rent may provide a cushion against any
drop in values.
- "Bubble market" corollary: high-cost areas also have the highest average
rents.
In closing, sure-fire investments are in even shorter supply than real
estate–in fact, there aren't any. Any investment will inevitably go down,
sometimes momentarily, sometimes for longer stretches. However, keeping in mind
the relative risks of investing in real estate versus other investments, real
estate investments are still attractive for long-term investors who appreciate
the intrinsic benefits of investing in real estate, even in pricey markets.
Important disclaimer: the above article is provided for your reading pleasure
only and is not intended to provide investment advice. All examples are
hypothetical and intended as illustrations, not guidelines. Opinions expressed
in this article are not necessarily those of the owners.
About the author: check out Joel Walsh's guide to investing in Bay area real
estate: http://www.bayarearealestateadvisor.com Joel Walsh encourages you to seek personalized real estate and
investment advice from qualified professionals, such as these:
homes for sale:http://www.bayarearealestateadvisor.com
