Can An Investment in Land Out-perform Stocks & Precious Metals?
Stocks:
Many more Americans own corporate stock than rural land. Why do we invest in stock, which is risky, rather than land, which is not?
1. Stocks are easy to buy and sell.
2. They’re easy to follow up and down.
3. Each company provides information, the quality of which varies.
4. Numbers and ratios associated with companies and stock lend a certainty to forecasts that gives investors confidence in their crystal balls. Quantitative analysis can always be confirmed by the next guy.
5. Investing wisdom is free for the listening, such as Buy and Hold. All such wisdom is true, except when it isn’t.
6. Some ordinary people occasionally win, just like in Vegas.
It was believed that oil stocks would rise with crude surging past $100 a barrel, but look at Exxon and Chevron — both down during the last year.
During this most recent stock-market malaise, Treasury bonds, commodities, real-estate investment trusts (REITS), gold and foreign equities have beaten U.S. stocks. These alternatives can be as difficult to understand as American equities, often more so. But stocks are easy to buy and sell, watch go up and down, etc.
Ordinary cash-strapped, middle Americans usually do better investing in rural land.
Precious Metals:
Traditionally, investors have looked upon precious metals and other valuables as long term hedges against political and economic instability.
During times when inflation has soared, when currencies have weakened, when stock markets - such as during the current period of instability - have plummeted, precious metals have been seen as more attractive. The degree of their attractiveness seems to directly correspond to the level of fear in the markets. Gold, of course, has been regarded as intrinsically valuable, accepted internationally and negotiable.
Unlike building land, gold prices can fluctuate due to political and international events and changes in specific countries. They are open to manipulation by speculators, as well as changes in technologies involving gold, such as usage in the automobile industry. For example, the price of gold has deteriorated by 40% over the past few years.
Demand for gold is variable and subject to fluctuations influenced by the factors above, but demand for investment land is only likely to increase, because the supply of land for sale is finite. This is a quality of land that virtually no other form of investment has. This is exacerbated by the population of the UK gravitating towards the south east of the country, with building land for sale being increasingly sought by builders, self-builders and other members of the public.
Land:
Unlike stocks and precious metals, land investments can be deciphered. Documents and numbers are reasonably transparent. Buyers can learn how to evaluate assets and liabilities. Professional help -- lawyers, surveyors, foresters, real estate consultants and auctioneers -- are available to help research property prior to submitting an offer.
Scoping a land purchase is not like groping for Braille in corporate reports. It’s more like checking things off a to-do list.
The market for rural land in most areas is transparent. Land of all types is a finite resource. Good land -- however defined -- is even more finite.
Demand for land grows because America’s population is increasing and the top one-third of our income distribution has discretionary cash.
To get one handle on land appreciation, look at farmland. Values of agricultural land -- cropland and pasture -- have increased steadily since the mid-1980s.
The current bubble in prices for corn, wheat and soybeans jacked up average cropland price during 2007. It is doubtful that corn-based ethanol will sustain the high prices for crops and cropland. Increasing global food consumption should prove to be a reliable driver of American farmland prices.
Land also gets tax benefits -- deductions, property-tax help and possible eligibility for a conservation easement or 1031 exchange -- that stockowners don’t.
Both farmland and timberland are now running counter to the slumping stock market. But the value of vacation homes -- which are usually more home than land -- have weakened slightly along with the decline in price and market for primary residential property.
So our hot stock-market tip of the week is this: Buy land.
Compiled from Internet sources
