Tag Archives: Real Estate

“Buy property”

Really? That seems like an odd thing to advise at a time like this. But read David Dreman’s argument:

One last investment that should work out well over time: Buy property, if you live in a place with a forest of for-sale signs. The housing crisis is terrible, but it won’t last forever. If you can get a mortgage, and if I’m right about inflation, you will eventually be paying it back with 50- or 60-cent dollars. Pay 20% down on a house that rises 40% in five years and you’ll triple your investment, assuming you can cover the interest and maintenance with rental income. If prices rise above the rate of inflation, a reasonable possibility given how depressed they are now, your return will be still higher, possibly significantly so.

William Baldwin of Forbes comments:

Shrewd advice from an accomplished money man. But, at the same time, it’s dispiriting that he’s right. The way to make money is not by financing progress but by speculating against the ability of the Federal Reserve to do its job.

Gambling by investors is a good thing, if by that we mean gambling on the next Orville Wright or Steve Jobs. But the gamble against the dollar is something different. It’s one in which your windfall profit is matched by a windfall loss for the fellow on the other side of the table–the unfortunate saver who lent you the money for the house.