People often say that real estate is the safest business there is; real estate only goes up, and so on, but as we can see from recent catastrophes in Hawaii (US) and Yellowknife (Canada), a fire or a flood can take it all away.
In addition, most real estate properties are heavily leveraged, which means that if you owe a mortgage, you still have to pay that mortgage even though your property is no longer there.
Earlier this month (August 2023), a series of wildfires broke out in the U.S. State of Hawaii, predominantly on the island of Maui. Over 100 people have died, and thousands of people have lost their most valuable asset: their homes. Many others have lost their businesses and livelihoods.
In Canada, the residents of Yellowknife are being asked to evacuate the city, as the wildfires are approaching the city, and unless there is some rain, the city will be burned to the ground.
Once again, as in Hawaii, those individuals who have invested their life savings in their properties are running the risk of losing everything they have.
Real Estate is not as safe as people make it out to be. Due to its high value, it’s difficult to diversify. It’s not liquid; many people can’t sell their properties in times of distress.
There are floods as well.
Of course, fires are not the only catastrophes home owners have to worry about. There is also the risk of floods. Here is a photo of the floods that happened in Vermont a few weeks ago.
And if nature doesn’t destroy your property, there are always criminal who would like to take a piece of your good fortune, like in Los Angeles and Saint Francisco, where criminals roam free on the streets, breaking into cars and houses, taking anything they want.
Finally, if nothing goes wrong with your property, then the government steps in and increases your taxes, because you are having it too good and you have to share a piece of your good fortune with the rest of the population.
In my opinion, one should only invest in real estate after they have achieved their goals investing in the Stock Market. For example, if your goal is to invest 1 million dollars in the stock market, then anything over one million could be invested in real estate.
Real estate should be one of your assets; it should not be your only asset or your most important asset.
As for me, I have achieved my stock market goals. The next stage in my life is to deleverage, pay back all the money that I owe, which I used to buy stocks, and the step after that will be to buy a piece of real estate.