With the NBA playoffs quickly approaching, we can’t help but be curious if it makes good business sense to invest in the “Association.” As you ponder the various asset possibilities into which you could plow your pile of investment cash, has your brain flitted briefly to the idea of buying an National Basketball Association team? After all, the average value is a mere $369 million. Maybe you could get your local bank to swing a loan of that size, though you might have to talk Mom and Dad into co-signing.
The bad news for owners is that their NBA teams lost an average 2.6 percent in value during the recent recession, making basketball a below average investment. In the past year, the value has shrunk by 1 percent. Okay, so maybe we’ve finally found an investment opportunity that actually makes the stock market look good and real estate investing positively lucrative. But back to basketball. The truth is that these billionaire owners often get into the business for reasons other than profit. While some teams are incredibly profitable over the long haul, an underlying passion for the sport is probably more of a contributing factor.
And how those fortunes can change in an instant. Let’s look at the Miami Heat, whose off-season acquisition of LeBron James and Chris Bosh (to go with superstar Dwayne Wade) sent that franchise to the largest value increase in the league’s 64 year history, with a 17 percent surge, while the team James left, the Cleveland Cavaliers, saw their value drop by 26 percent.
The lesson to be learned here is that, if you want to earn real estate type returns for your professional basketball investment, hire LeBron James then stand back and watch season tickets sell out. In case you’re interested, here are the values of the top five NBA teams.
1. New York Knicks – $655 million
2. Los Angeles Lakers – $643 million
3. Chicago Bulls – $511
4. Boston Celtics – $452 million
5. Houston Rockets – $443 million
But don’t feel sorry for these owners and the recent paltry rate of return. Most of them are just doing this for fun. They make their REAL money in completely unrelated industries. And these basketball numbers seem positively anemic when compared to that other American sport, football, where 19 of the 30 teams are valued at over $1 billion, with the Dallas Cowboys leading the way at $1.6 billion.
The Young Wealth Team
Flickr / RMTip21