Over 70 years ago, the psychologist Abraham Maslow wrote a landmark paper called “The Theory of Human Motivation.” In it, he proposed that humans at different stages of development are ruled by different sets of needs and motivations – and that the basic needs such as food, safety and shelter must be met before any others. Rental real estate investing taps those basic needs.
As Jason Hartman says, “Everyone needs a home,” and that’s a major reason why he advises investing in rental properties above all other kinds of investments. The need for safe shelter is pre-eminent among the majority of people in the United States and similar countries, and those who can’t purchase shelter must rent it. The housing collapse over the past few years saw record numbers of homeowners lose their houses to foreclosure and created another class of renters, joining the more typical renter groups of young professionals and those unable to buy property in the first place. Taken together, these groups outnumber homeowners in some areas of the country.
Because of the demand for rental housing, rents are increasing too, creating opportunities to find good investment properties in many areas of the country – and for applying Commandments Six and Seven of Jason Hartman’s 10 Commandments of Successful Investing, which summarize the key principles of his approach.
The sixth of these commandments, “Thou shalt diversify,” joins the seventh, “Thou shalt be Area Agnostic,” to express a key principle about investing in general, and in real estate in particular. Diversifying – investing in as many properties as possible, in a variety of markets –reduces risk and maximizes return. This approach offers some protection against the economic ups and down of both local and national economies and saves investors from putting all their proverbial eggs in the proverbial basket.
And the term, “Area Agnostic” points out the best way to diversify. Just as in the religious sense, an agnostic isn’t attached to a particular set of beliefs, preferring to keep an open mind about all possibilities, an “area agnostic” remains open to opportunities everywhere, not just in the local area. This attitude of openness also applies to the advisor an investor chooses to work with.
The second commandment for investors says, “Thou shalt find a professional investment counselor.” Since an investor needs to find a qualified expert who can guide the investing process, one factor in choosing that counselor is a willingness to be just as agnostic in terms of potential markets as you are.
This avoids conflicts of interest and opens up more opportunities.
As Maslow observed in the early 1940s, shelter is a basic need of the human creature – one which must be met before many others. And as Jason Hartman advises, opportunities to provide that shelter can exist in any area, if investors and their advisors remain area agnostics, open to all possibilities for good investments in many different locations.
The Jason Hartman Team