Gold pays no interest. At least properties pay you rent. Therefore you should own properties right? That’s the conventional wisdom.
Yes the first two statements are true. But we need to be careful about drawing the conclusion that you should own rental properties.
Now is one of those rare times in history where – even after collecting rent – holding real estate will cost you more than holding gold.
Real Estate is crashing and will continues to head towards a bottom that no one can pin point.
Things We Know
- Our Dollar has lost over 41% over the last 8 years and is trending lower. It’s real Simple: As they print more Dollars the supply grows and value of the Dollar drops.
- Oil prices are climbing back towards it's all time high and looking like there is no top or slowing in sight. In fact energy analysts can not even explain the recent rise in the oil price. There is no pick up in the US economic activity and there is no massive drain on the supplies.
- The Stock market is netting you a "fat" return of 6% or less per year on average (refer back to #1... do the math: 41% divided by 8 years, and factor in inflation...get the point?)
Conclusion
Yes, gold pays no interest. It’s one of the many knocks against gold. But don’t forget, its been one of the best investments in the last ten years and the cost of owning gold is darn near zero.
Right now rental yields are lower now than at any time in history – by a wide margin. That affects you as an investor because it puts you in a negative cash flow position meaning that you have more money going out than you do coming in. There’s 2,000 years of history to show that gold is the best thing to own during bad inflationary times.
