Dear David,

We’ve been retired for a few years. A friend of ours is a real estate developer who purchases land, subdivides it, and sells the lots to builders. We’ve invested some money with his company instead of putting it into the stock market. We don’t need these funds to support ourselves, the intent is that the investment will benefit our children and grandchildren in the future. Given today’s economic uncertainty, negative headlines, and rising unemployment, should we be concerned? – CAUTIOUS INVESTOR

DEAR CAUTIOUS: When it comes to building and preserving wealth over the long term, real estate has a track record that’s hard to beat. When measured over decades, well-chosen real estate investments have historically outperformed many other asset classes, including the stock market. Unlike paper investments, land is a tangible asset. It’s finite in that it can’t be “made” or duplicated, and demand always recovers after short-term downturns.

Development land in particular has a unique advantage: as communities grow, properly located land becomes increasingly more valuable. While the real estate market can slow during periods of economic uncertainty or higher unemployment, the growth patterns tend to be cyclical. Property values rise over time, making patience one of the most important qualities of any potential investor.

There is no quick route to making money in land development, and it could take a decade to realize any significant return on your investment. Since you don’t need this capital for living expenses and are investing with a generational time frame in mind, you are in a position to ride out any short-term volatility triggered by today’s news headlines. The long-term fundamentals of real estate remain strong, even when short term challenges arise.

There will always be ups and downs in the real estate market, but statistically speaking, there are few investment vehicles that can match real estate for its long-term stability, growth, and ability to pass on value to future generations.

PRO TIP: As an investor, adopting a long-term mindset can be challenging. It’s easy to feel good about something that pays off right away, but those who play the long game tend to win in the end. 

No matter what kind of real estate purchase you’re contemplating, consider this: the year I bought my current home, the average sale price in Waterloo Region was $177 thousand. Today the average sale price is in the high $700 thousands. To realize this substantial increase in value, all a homeowner had to do was live in their house. And in the case of your principal residence, the gain is tax free. #Advice #AskDavid #TheNegotiator