If you are a rental property investor, you’re actually a commodities investor! Think about it. Isn’t a structure built on land simply a collection of various commodities arranged in a particular order by professionals to resemble a house, apartment building, or strip mall?
Let’s take a look at the building blocks of a house. Wood, metal, copper, stone, etc. It’s the combination of these basic elements into a finished product that makes this whole income property thing work.
This concept is one we refer to as Packaged Commodity Investing.
The value of a rental property can be broken down into two components. The first is the value of the land, which seems to be declining in most markets. The second is the value of the improvement or structure, like a house, that sits on the land. Improvement values seem to be increasing as the cost of energy and building materials rise. With an extra 2.5 billion commodity consumers in the rising middle class of countries like China and India pushing the price of commodities ever higher, it seems like a no-brainer to get into Packaged Commodity Investing in the form of rental property.
It’s all about supply and demand. While there may be momentary blips going up or down, expect the long term trend for commodity prices to be slanted firmly upward.
