Many investors complain about having to put 20-25% down on income property loans. What they often fail to consider is that's only a quarter of what they would have to put down on any other investment. If an investor purchases a mutual fund, he's expected to put 100% down. If he instead chooses gold, 100% down. Though gold has been profitable in the past, it's not a hard asset in universal demand, like the kind Jason Hartman recommends.
There are investors out there who are fanatical about gold. Jason Hartman believes gold bugs have the right premise, but not the right conclusion. The premise is correct because around six billion people agree gold is a profitable asset. They have the wrong conclusion because many of these people also agree gold doesn't equate to money anymore. Gold has lost the utility it used to have. A smarter investment would be something with
real utility, like an income property.
Why the Gold Bugs Are Wrong
- The first reason why the gold bugs are wrong has to do with the lack of financing. Gold has no financing, and financing can do wonders to create success in real estate.
dly, there are no tax benefits with gold. Taxes are an extremely large expense, probably the largest expense everyone shares. Many people give up half their income to taxes.
- The third problem with gold investment is the lack of renters. There are no renters and no income. The investment is speculative.
- The fourth problem is the investment is subject to confiscation, meaning the government could actually take your gold. It happened in 1933. Jason Hartman believes it could happen again; the government is overreaching, and money hungry.
- Finally, precious metals like gold are subject to manipulation. GATA, or the Gold Antitrust Action Committee, has accused and sued central banks around the world over that very issue.
The accusation is that the central banks have suppressed the price of gold artificially. Why? Because they have huge incentive to hold down the amount of precious metals. Their entire existence is dependent upon precious metals having value. Though precious metals can't be manipulated forever, they can do it longer than we can remain solvent.
Gold isn't as reliable as many investors may think. By investing in differentiated income properties, it's possible to at least stay ahead of the curb. It's like Jason Hartman says, “At the very least, real estate sucks less than everything else.”
The Young Wealth Team