Investment Properties’ Unique Advantages Revisited

    11-5-investmentIt’s the perpetual ebb and flow. Sometimes the popularity of investment properties in Midlothian begins to rise, sending them toward the head of the pack against rival investment ideas. A Midlothian investment property’s basic allure has always been its unique attribute as the most “real” of real goods (investment property is pretty close to the very definition of the word ‘substantial’). But as a haven for capital, its place in the pecking order of investment ideas depends a lot on the performance of the competition—especially stocks and bonds.

    When the predicted long term returns from the stock market begin to look lackluster, or if market factors begin to seem more volatile than usual, investment property gains in comparison. When the uncertainty gauge starts twitching upward—and that seems to be happening lately—some of the underlying benefits Midlothian investment properties offer get renewed attention. Items that register in the calculus—

    Item: Inflation hedge

    Because rental rates can rise with (and lately, ahead) of inflation rates in general, that constant worry is less of a factor. Investors factor in the real inflation rate (not always the official one) when they look at their portfolio’s performance.

    Item: Cash flow

    Properly managed, a Midlothian investment property can produce ‘dividends’ that are substantial without diminishing the value of the principal investment. (There’s no board of directors to make sweetheart deals with management, either!).

    Item: Predictability

    Investors know that no one can guarantee what the future will bring—but it’s harder to picture a time when people won’t need shelter than one where they won’t be bidding up stocks or bonds. The rental performance of any one Midlothian investment property may be more reliable than another (a mid-range apartment complex vs. a top-notch luxury residence, for instance); but in overall predictability, investment property rates highly.

    And then there’s one that’s sort of counter-intuitive:

    Item: Flexibility

    Everyone is familiar with the most obvious inherent drawback to investment properties: namely, their relative lack of liquidity. You can sell stocks or bonds rapidly because their markets are comparatively transparent and active. Capital is ‘stuck’ in real estate until buyers appear. But what that analysis doesn’t take into account is that the equity manifested in Midlothian investment properties can actually serve as a lower-risk springboard for financing other opportunities. Real estate can be relatively easy to borrow against since its value is less volatile than, for instance, that which buying stock on margin entails—especially when ‘iffy’ market conditions suddenly develop. Furthermore, the deductibility of mortgage interest makes this form of financing less expensive.

    If this fall finds you reevaluating your own portfolio, I can show you some of Midlothian’s investment properties that offer exciting possibilities. Call me!

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