Recent volatility in the stock and bond markets has people turning to gold as a “store-of-value”. Makes sense. Historically, gold maintains value, is a hedge against inflation and is transferable (weight aside). When markets get rocky people look to invest in hard assets like gold and real estate.
Is multifamily a gold alternative?
The short answer is no. Of the various asset types within real estate multifamily is a favored investment. Can multifamily investment property be a “store of value”? Real estate, in terms of investment allocation theory, is not a replacement for gold but it generates certain benefits, namely income.
Gold is a defensive investment. Multifamily can be an offensive and defensive investment; defensive against inflationary occurrences and offensive as a current income generator.
As financial markets have increased in sophistication (with the use of margin accounts, derivatives, spiders, etc.) gold is in many instances just one more piece of paper in an investment portfolio. The vast majority of individuals that own gold have never held a single ounce in their hand.
Direct real estate ownership is different from gold ownership. Owning un-leveraged income producing real estate can provide a stable source of current income. Presuming the asset is in a quality market and insurance is maintained, short of a catastr0phic event, you own it forever (forever in this instance being multi-generational).
Multifamily real estate is not a replacement for gold as a store of value. As an investment vehicle, multifamily does, however, offer some of the same positives as gold; as a hedge against inflation and as a store of value via being a hard asset. There are thousands of passive multifamily real estate investors that will attest to this.
Thus, while multifamily is not a replacement for gold, it is an alternative investment with some similarities to gold when purchased without debt.
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