Very often, language itself have the correct words. In English, we have “Real, …as in Real Estate”, it is something that is really there, it is “Real” and will always be there, particularly land. Ask William Gates if you have some doubts. A person I used to work for in Real Estate had a saying that goes like that: ‘’Land has the advantage that it cannot be printed or manufactured, unlike banknotes’’. Land is already there, you can touch it, walk on it and build something on it. It is not a paper (credit) that promises future payments (CDs or Bonds) which are not bad, but they do not have that ‘’Real’’ touch. Not even try to compare it with paper money which value depends one hundred percent on good monetary and fiscal policies.
Even if the above-mentioned financial instruments or currencies were very well “guaranteed”, or rated as AAA, they will always be a simple promise of future payment from someone or an entity in which we place our trust. Meanwhile, Real Estate, if you already have it, it´s 100% yours. It´s physical and cannot be printed. Naturally, risks to take into account are related to fires, floods, illegal occupants and others, so it is essential to get good advice from an honest and totally trustworthy professional at the time of investing. In terms of yield, this depends on the management, both to obtain a periodic income or directly by its own re-valuation over time. It is also naturally key to get it at a good or fair price, in areas selected with expectations of future development.
Real Estate will always be there, particularly Land, although we know that its future value may depends on the factors mentioned before. But they will be there. The direct natural way real estate investing is as simple as going and purchase one, in cash or installments. We also Real Estate Investment Funds, in which the fund makes the large physical purchase of real estate and then divides them into shares of the fund, which can be acquired by smaller investors. Again, at the time of choosing these kinds of Investment Funds, you have to know to choose well, seek advice from professionals who are not biased by commissions, and of course read in detail the composition of these funds and the reputations of their managers as well.
The current worldwide situation, of public knowledge, is definitely leading us to urgently change our mind in the way we invest. Must include Real Estate in your portfolio if you still do not have any. (Also precious and scarce metals like Gold or Silver, …but this is for another article). The current growing inflation is almost impossible to stop, as it is a consequence of the stoppage of the economy due to the known health issues around the globe. These economies stopping plus massive levels of Government Debt will end up leading countries to print more currency to cover these deficits and to honor their debts commitments.
Years before the pandemic, countries with risk of high inflation were only always the countries of the south of the world with weak currencies. However, today, with the official pandemic situation declared since 2020, it has already been 2 years of global recession, with much higher unemployment, and the need for governments to print money for cover social plans and bailouts, issuing even more debt to cover all these. This is taking the whole world to an inflationary spiral with a finale, very difficult to predict.
Real Estate is currently one of the asset classes that give this peace of mind for partial coverage against the global inflationary phenomenon. The year 2022 is a year to keep investing in Real Estate. Make sure to follow all the legal procedures to avoid purchasing a land that has some mortgages or other difficulties embedded. Get a good lawyer and notary. When it comes to geopolitical areas of interests, we believe that Paraguay continues to be one of the last places in Latin America with economic stability and security, particularly after the political events registered in Venezuela, Argentina, Peru, recently Chile and now with some movements towards Brazil. I believe that today, there is nothing better than Real Estate in Paraguay, always supported by double checked companies and public registrars.
To finish, let us remember again that currencies are only “paper” or “electronic records” whose future values depend upon the good management of Central Banks. They have the “legal” obligation to preserve its value, but they are not and will not be able to achieve their low inflationary goals because they will necessarily end-up printing money (either physical or digital) so that governments continue to function avoiding being overturned. They will continue rescuing sectors in difficulty and avoiding bankruptcies of large companies and banks, which always imply a high political cost. Again, Real Estate is physical, real and truly existing, and if it is land, “you definitely cannot print more of it”.