As January Goes, So Goes the Year?
I Certainly Hope NOT!!
There is a saying in the financial services industry (in which I used to be involved many years ago) that says that the stock market’s performance in January sets the pace for the entire year. With the worst January performance by the US stock markets EVER (down over 8.5% for the month of January for both the S&P 500 and Dow Industrials indexes) it is a pretty good bet that the market will in fact be down for the year. Historically more than 70% of the time the ultimate direction of the market for the entire year is the same that it pursues during January. Since the small portion of our own retirement account that is not invested in Gatlinburg area real estate got hit pretty hard during January (again) I’m not feeling real optimistic about the balance of the year right now for that portion of our savings.
In contrast, our real estate investments have done pretty well overall during the past year. Since the value of Smoky Mountain real estate is not quoted in the newspaper daily it is a little harder to get a value on over a short period of time than that of the stock indexes. I do feel quite certain that with the enormous amount of borrowing the federal government is doing to try and create an economic stimulus (not a fan!) the ultimate outcome will be a return of inflation and that is good news for real asset type investments. Since gold and other precious metals are way above the level they were a couple of years ago it looks to me like investing in Sevier County real estate makes a lot of sense right now.
It is still possible to purchase rental real estate in the Gatlinburg/Pigeon Forge/Sevierville area that will produce a 10% return on investment if you are patient. A 10% gross return can cover our area’s moderate insurance and exceedingly low taxes and still be a very attractive investment. With the likelihood that we will see serious inflation eventually, investing in real estate while it is historically cheap sounds like an attractive alternative. If you would like to learn about homes that can be purchased for less than 10 times their lease income please contact us!