Warren Buffett has famously said that “Time is the friend of the good business, and the enemy of the poor one.” We have taken it one step further by saying that Time, Natural Disasters, and Socialism are the friend of the good investment.
The reason why Income Property places investors in such an advantageous position is because it indirectly benefits from all three of these factors: Time, Natural Disasters, and Socialism.
Benefitting from Time
It is well known that time marches on. And as time continues to march, it creates benefits for us as income property owners. The reason for this is because cash flows accumulate over time, and values increase over time. By taking a longer-term perspective, we free ourselves from needing to worry about whether values are up or down by 1% vs. 2% this year. Over time, prices regress toward fair value for the market. Being the owner of a property that is financed with fixed-rate debt places time on our side.
Benefitting from Natural Disasters
Natural disasters happen. Nobody wants them to happen, and many people are frequently unprepared for them when they do occur. The financial markets hate natural disasters, since they place severe downward pressure on earnings for construction and insurance companies. However, when natural disasters do occur, the resulting re-building effort creates additional demand for basic materials such as lumber and energy. This indirectly pushes the price of existing real estate higher since the replacement cost of the structures increase as the cost of the building materials escalate. Much of long-term financial success comes down to being robust against market disruptions that decimate ordinary investors. Income property can provide this opportunity.
Benefitting from Socialism
It’s no secret that the government is too large, too intrusive, and spends money at an unsustainable rate. For many businesses, this is very harmful, since the crushing impact of government regulation stifles business activity. However, excessive government can indirectly benefit income property investors. The reason for this is because governments that over-spending frequently resort to “monetary expansion.” (Commonly known as printing money) This inevitably results in more money chasing after fewer goods, services, and property. By owning real property, you place yourself on the favorable side of this phenomenon.
