Every financial magazine is publishing an issue this month devoted to “how to invest in 2017”. Of course, their hands are tied as their major advertisers are stock and bond dealers. But we have no such loyalties and can tell you like it is. And the truth is that 2017 is the year of the income property. All of the U.S. megatrends point to this.
Stocks and bonds are in a weak position in 2017 with higher interest rates
With interest rates rising in the U.S., stocks and bonds are screwed. Corporate debt is giant and higher rates mean more spent on interest payments. And, of course, bonds devalue as interest rates rise so they are probably about the worst investment you can possibly make. So the traditional investment vehicles are probably about the last place you would want to put your money in 2017.
Asset-backed investing vs. stocks and bonds
Stocks and bonds are securitized with basically nothing. If a company or bond issuer goes broke there’s nothing there to get. But income properties have hard assets behind them. They hold value because you don’t own a piece of paper, you own real estate.
Income and capital appreciation: the best of both worlds
Income properties offer the best of what investing can provide: regular income and capital appreciation. Let’s say, for example, you buy an income property that has a net income of $50,000 per year for $500,000. And let’s assume it pay out a 20% cash-on-cash return. So you’re making $20,000 per year in dividends. But as the income grows, the value of that property is growing, too. So you then sell the property five years later for $750,000, and you pocket a $250,000 profit in addition to the money you received along the way. In most investments you get either dividends or capital appreciation. With income properties, you get both.
A great hedge to inflation
There has been much talk recently of inflation ramping up in the U.S. Real estate has long been the best hedge to inflation. In fact, real estate’s best performance have come in decades of higher inflation, as rents are able to more than match the pace, and as asset values rise they dwarf the underlying mortgage, which remains static.
Financial instability means you need security beyond your day job
The U.S. has entered an era of extreme instability in the workplace. Every American should establish an alternative stream of income to their day job. And an income property allows you to do so, garnering income without taking away time or effort from what you already have on your plate. Most income property sectors can be easily managed with a few hours a week at night or weekends. This adaptability allows you to build two different methods to pay the bills, and allows you to massively hedge your risk.
2017 is the year of the income property. If you are not already investigating different niches of income property investing, you should immediately do so. Mobile home parks, RV parks, self-storage facilities and billboards offer you high rates of return and capital appreciation and are perfectly positioned for the New Year.
Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 21,000 lots in 25 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. To learn more about Frank’s views on the manufactured home community industry visit www.MobileHomeUniversity.com.