Property investment, the sacred turd

Most people you speak to think that being a landlord and owning a property business is the “be all end all” of investing.

Funny part is that it’s the worst.

People just follow the herd.

It’s a bit like the “Eating fat will give you a heart attack” thing that took decades to die. A simple bit of misinformation that ended up written in stone. The sheep pick a direction and then lock onto that path come hell or high water. It takes decades for them to change course. Property is the worst investment you can make. I know this only too well and I’m glad I’ve got rid of my property business.

Why?

Because aside from all the headaches involved with tenants and maintenance, property (housing) hasn’t gone up in fifty years.

The price increase you see on a house is purely a result of the devaluation of the pound. A house hasn’t gone up in value; the pound decreased in value so it takes more pounds to buy the house. Measure the price of the house in a real money like gold and you find that the average family home could be bought for 2kg of gold in 1970.

Today, measured in gold, house prices have gone down.

This shows what a terrible investment houses are when you consider that gold isn’t even the fastest horse in the race by a long shot. Some consider it the baseline from which to measure the increase of an asset. You will often hear things like:

“Wages haven’t risen in real terms.”

This means that if you got a 4 percent pay rise but the thing you got paid in (the pound or dollar) decreased in value by 10 percent, you got a nominal pay rise of 4 percent, but in real terms you’re 6 percent worse off.

House prices go up an average of 4 percent a year in the U.K.

True inflation — currency debasement — has averaged 8 percent a year. So you’re losing 4 percent a year on the house in real terms.

Then there’s the opportunity cost.

Let’s look at a quick scenario.

A person puts their £100,000 house deposit into NVIDIA shares in 2018 instead of buying a house.

Their house deposit funds would now be £3.42 million by 2025.

If they had bought the house, their deposit would have increased to £132,000 and opportunity cost of £3.288 million with the property buying choice.

The 30 percent gain on the deposit if they bought the house is pure inflation.

A McDonald’s quarter pounder went up more than 30 percent in that time frame.

So did eggs.

So did fuel.

Basically, the house investment made nothing but the average layman thinks it’s a win.

This is why they fail.

The people inside nomad investor don’t make those silly mistakes.

They win.