The Great Recession came to a peak more than half a decade ago, but we are still feeling the ramifications today. Housing prices in many major markets haven’t recouped to their pre-crash levels and likely never will, firms that were consolidated or deconstructed following the crash haven’t come back or brought any jobs back with them, and the economic climate in general remains tense and anxious. With 2007’s crash responsible for all of these symptoms, it’s easy to forget that the Great Recession wasn’t a real, full-fledged collapse, but only a very serious economic road bump.
So what would true economic crash look like in America, and what would the effects be? The Great Depression is the most recent historical example that we have in this country for true collapse, but the situation in Greece since 2012 is somewhat parallel. When a REAL economic crash comes, we will have a lot more than unemployment rates and volatile markets to contest with. The very fabric of our society will look like it’s fraying at the seams, and social ills from widespread hunger to rampant disease and crime could be the norm.
Investment The Right Way to Prepare for Economic Collapse
Thinking about this kind of doomsday scenario, most people’s idea of preparedness means stockpiling basements with supplies and making plans for evacuation. And while this kind of preparation might be prudent, smart investors have another form of preparedness to think about when discussions of collapse come to the forefront. In the face of total economic collapse, where’s the best place to put your investment dollars?
The answer to that question might surprise some people, but it relies on some of the oldest and most sound economic logic around. To prepare economic collapse, one of the best places you can put your money is into raw land purchases. Here are ten reasons why.
- The Worth of Raw Land Isn’t Heavily Tied to Industry
Most improved properties, from rental units to commercial projects, derive a lot of their worth from other industries in the economy. For example, even your crown jewel commercial holdings won’t be worth much if the retail market crashes and your tenants can’t afford to pay rent. But raw land, almost by definition, doesn’t rely on other industries to produce wealth or maintain value. When other industries crash, real estate investors can get caught in the shrapnel. But investing in raw land can help you ride out volatility in other industries.
- Raw Land Won’t Cost You to Maintain
Undeveloped land can lead to cash flow problems if you end up owning parcels for extended periods of time without regaining any of your original investment. But even so, raw land can be a lot cheaper to own during a collapse than other types of real estate holdings, and can help you prepare for economic collapse by minimizing your monthly costs.
That’s because, while it may not produce much income of its own, raw land doesn’t cost you nearly as much as some other types of holdings to maintain. You won’t need to pay upkeep costs on raw land, or worry about maintaining or repairing units that you own there.
- Investing in Raw Land Isn’t as Competitive
If you’ve spent any time at all dealing with urban, suburban, or other developed real estate markets, you know how cutthroat competition can be. Real estate professionals scramble for profitable investments, since there are way more people with money in these markets than there are truly profitable projects.
However, raw land investing isn’t nearly as competitive. This is especially important when markets are on the verge of crashing and you think about how to prepare for economic collapse, as competition gets stiffer and stiffer in developed markets as housing values heat up, and the “bubble” gets closer to bursting.
- The Value of Raw Land Increases Fast During Recoveries
For urban housing prices to rebound, the very fabric of a city must at times go through a rebirth. Housing prices in cities are so intrinsically tied to infrastructure developments, the health of job markets, and other larger macroeconomic factors that it takes a long time for property costs in cities to truly rebound or grow during periods of economic recovery. However, raw land prices aren’t as tied to these kinds of regional economic trends as other types of income producing properties and don’t rely on outside factors to see values increase.
- Raw Land is a Hard Asset
Many forms of investment aren’t based on hard, real assets, and therefore don’t have a value tied to anything concrete. For example, government bonds are considered a very solid investment, but they only represent debt ownership, and in the wake of a total economic crash the real value of bonds isn’t clear.
On the other hand, raw land ownership represents the possession of a real, hard asset whose value isn’t entirely determined by speculation or outside economic factors. If you feel like you can’t trust the elaborate financial system that assigns value to things like stocks, investing in land should give you some piece of mind, as land ownership translates to possession of a real, hard, physical asset.
- Raw Land Can be a Good Hedge Against Inflation
Depending on the government response to economic collapse, one of the most debilitating effects of a total crash is widespread inflation, which devalues previous investments and makes it hard to purchase assets that will maintain their value in a post-inflation environment. Raw land can help investors solve the problem of inflation, since land values are derived from the inherent utility of property more so than just market fluctuations.
Any time that periods of high inflation disrupt the economy, holding investments in hard assets that possess an inherent value is a good idea. And if you can purchase raw land without the need for financing before a period of inflation begins, it’s one of the best things you can do to prepare for economic collapse and protect yourself from losses and volatility due to inflated markets.
- Raw Land is a Scarce Asset
It can be overwhelming and disturbing to think about, but most of the assets that people invest in aren’t actually all that scarce. More government bonds can always be printed, and shares in the stock market can get diluted. But no one is producing more raw land for hungry investors to gobble up. When economic panic sets in, people will be looking for stable places to put their investment dollars, but even the most creative brokers and entrepreneurial investment managers won’t be able to create more raw land to sell to investors.
That’s one of the prime reasons why investing in raw land before a crash occurs can be so powerful: no one will be able to dilute your investment, and as hard assets get more desirable, there won’t be any more raw land to go around.
- Raw Land Represents Unlimited Potential
If history can be trusted, societies and markets will recover from even the most extreme economic crash. But that doesn’t mean that the economic climate will be recognizable in a post-crash world, or that the kinds of projects that were profitable before a crash will be worth an investor’s time following recovery.
Investing in raw land lets you get ahead of market trends, because purchasing undeveloped land is like purchasing an asset with unlimited potential. You don’t have to know what kinds of projects will be the most profitable after a recovery, or plan on investing in housing, commercial projects, low-impact land development, or any other kind or real estate endeavor. By purchasing raw land, you give yourself the room to seize the moment once a recovery has occurred, and pursue whatever kinds of projects will do the most for your bottom line.
- Historically, Raw Land Appreciates
Because of all of the reasons mentioned above, and a whole host of others, raw land has historically appreciated on the whole. If you look at real estate investing through a long enough timeline, the value of raw land just keeps going up and up. Whatever our society will look like following a major, catastrophic financial crash, raw land will still be important.
People will still need a place to build homes, grow businesses, and even produce food, and raw land will always play an important role in all of these areas and more. Real estate investing is often called a stable, long-term investment, but very few types of projects are more stable or more reliably profitable than raw land if you look at investing over a long enough timeline. Which is precisely why purchasing raw land can be such a helpful tool to help you prepare for economic collapse.
- Owning Raw Land Should Give You Peace of Mind
In all likelihood, a major economic crash won’t lead to the kind of apocalyptic “end of civilization” scenario that you see on T.V. or in the movies. But if everything does fall apart completely, owning raw land can act as something of a safety net. Almost all other types of investment depend on markets to maintain their value, but raw land has an inherent value of it’s own based on its potential and scarcity. If civilization collapses, owning your own land will help you prosper in whatever society comes next. If you find yourself often worrying about the instability of economic markets and the volatility of most types of assets, purchasing raw land should give you some peace of mind.