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Real estate: Property as a store of wealth (Opinion)

Weekly real estate update

Statistics gathered from the Incline Village Multiple Listing Service on Aug. 9.

Houses / Condos / PUDs

For Sale 54 / 21 / 8

Under $1 million 5 / 11 / 4

Median Price For Sale $3.255,000 / $925,000 / $1,995,000

YTD Sales 2020 124 / 117 / 37

YTD Sales 2019 87 / 86 / 33

New Listings 15

In Escrow 25

Closed Escrow 26

Range in Escrow $269,000 - $24,850,000

These statistics are based on information from the Incline Village Board of Realtors or its MLS as of Aug. 9.

There are many different ways to store wealth in these turbulent times. We have seen a rush to precious metals during the past few months along with a roughly 10% drop in the value of the dollar versus the Euro and Swiss Franc.

Equities have continued to move higher and real estate in those areas that are greatly in demand remains strong. Other stores of wealth such as fine art, precious gems, collectibles, and so on are outside of our realm, so we will leave that discussion to experts in those fields.

Over the centuries, real estate has been a store of wealth in many different forms. There is the concept of land banking where a developer will purchase vast swaths of land and hold it for decades. As the suburbs expand around large cities, what was once inexpensive farm land becomes very expensive property for houses and condos.

Mineral rights, rights-of-way for railroads, and even excess Tahoe Regional Planning Agency coverage that you own are examples of things related to property that can also be stores of wealth.

Areas such as Lake Tahoe where there is a finite supply and long-term increasing demand have historically made for an excellent long-term store of wealth. The real estate market will have its ups and downs during times of recession and recovery. But, over the long term the value of the vast majority of properties at Lake Tahoe have appreciated remarkably well.

It was a long slow recovery coming out of the Great Recession, but property prices in all categories are generally above their prerecession highs.

When looking at property as a store of wealth you have to decide what your intentions are. Are you considering commercial or residential property? Is this going to be purely an investment that you rent out all the time? Or is it a vacation home that you may or may not derive any rental income from? Will it be your primary residence making the store of wealth only one factor along with the overall enjoyment of the property?

Are you paying cash or using financing to leverage your investment? How long do you plan to hold the property? How easy will it be to resell the property when you need the cash at a future date? Real estate as part of your portfolio can be an excellent store of wealth over the long term. But it’s not something you can count on when you need liquidity. Everyone has to balance their personal liquidity needs with their wealth accumulation goals to ensure they never have to sell a piece of real estate in a hurry.

One of the reasons that real estate historically has been a good store of wealth is because it tends to do well during times of inflation. Real estate prices generally will rise at least at the rate of inflation if not faster. So, while cash depreciates during inflationary times, real estate can provide a hedge. However, high risk real estate investments such as flipping houses or slumlord type properties should not be considered stores of wealth.

One of the most important factors that makes Incline Village real estate a good long-term store of wealth is the extremely finite supply coupled with the tremendous population growth in California over the past 30 years. With nearly 12 million people living within a four-hour drive of Lake Tahoe, the demand far outstrips supply.

There is US Forest Service land on three sides and the lake on the fourth. And let’s not forget the fact that there is very little undeveloped property in our community. Most importantly, keeping the Lake Tahoe environment pristine, preventing the spread of invasive species in water and on land along with everything else we can do to maintain lake clarity will go a long way towards making property at Tahoe a good store of wealth.

Don Kanare is the founder and Sabrina Belleci is the owner / broker of RE/MAX North Lake.


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