Two Approaches to Real Estate Investing
Traditionally people buy property for two reasons: to make money or to protect money.
I’ll look at the second one first. Investment real estate is immobile. In fact, that quality is why the French and Spanish call it what they do (“propriéte immobilière” and “bienes inmuebles”). That means that real estate doesn’t disappear and doesn’t expire. Its value may go up and down, and its title may be stolen, but it never ceases to exist.
This characteristic can make land a reliable place to stashcapital. These qualities can make property a healthy place to stash funds, especially for women or men who bring in enough wealth from other activities. These buyers desire exceptional real estate property that is safe and stable. They are in most cases not concerned the return on the investment. They really want realty that will actually, over the long term, stay valuable. This could be metropolitan real estate property or rustic property. The primary necessity is usually that it be in a location where rule of law and minorities or foreigners are respected.
One type of this style of person is a Chinese business person who has earned plenty of cash in China’s recent economic expansion, but who doesn’t have faith in the destiny of the state. It’s important to appreciate, in this instance, that a 50 year old Chinese was born in 1961. If his parents were associated with the Party at that time, and had acquired some authority, there is a high probability that they experienced some significant problems when the Cultural Revolution began in 1968. One example of this can be found in Xi Jinping, said to be the next President of China. His father, once a Vice-Premier, and former Communist guerrilla, was purged in 1968.
Things are completely different now, and that fact is not lost on many of China’s new wealthy. It can change back. They do not trust Chinese society and want a secure place for their assets. Foreign real estate property can fill this need.
One more example of this is the classic one of crime. Proceeds of crime placed into property remain safe. This is one of the grounds behind money laundering statutes. It has been contended that cash produced by cultivating marijuana has assisted to falsely raising Vancouver area real estate costs.
Those are two extremes of the spectrum, but what they both have in common is a need for wellbeing and sanctuary, and a lesser amount of interest in profit and capital gain.
The same qualities apply to prosperous people searching for an inflation hedge. If local variations are removed. The critical point is income. The aspects of safety and immobility are gravy.
Sometimes there’s a clash between the two schools of thought, although it isn’t always in existence. When properties are attractive to buyers seeking growth and income they can be doubly irresistible to investors searching for stability and safety. But, when investors searching for a safe retreat decide to compete with people trying to generate income, the safety seekers will always the income seekers. They commonly have more money and are not inhibited by income investment strategies. This is something that has happened in Vancouver, where the Chinese have crowded classic income investors out of the market place.
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