Hypothetically, let’s say you had a family member who has arguably too much exposure to USD in their portfolio. Okay, forget it. Let’s drop the role-play.
My mother has a significant amount of money that she has inherited from the passing of my step-father. As her forward-thinking only child, it goes without saying that I have her best interest at heart. From my humble perspective it looks as though we are in for an inevitable unprecedented wave of hyper-inflation in the coming months and years. That said I would like for her to be able to protect her assets and purchasing power as the world comes to deal with the devaluation of the dollar.
Many months ago I suggested additional real estate to her as a potential hedge against inflation. Houses and land are hard assets in my opinion and are quite clearly more of a store of value than a piece of paper that is being printed into oblivion. I introduced her to the Bitcoin train a while back, so at least she has some exposure to that if the house of cards comes crashing down. Having said that, she is not willing to invest further on that end as she understandably has some doubts about the future of finite digital assets (I don’t).
Anyhow, the months have passed, and real estate has exorbitantly appreciated. We are now days away from closing on a $450,000 lake-front cabin in Georgia. It is in good shape, has some renovations/upgrades, and currently rents from $300-$400 a night. It would not be my mother’s intention to start renting it immediately for passive income, but I can’t help but like the idea as a safety-net if she ever wanted to do so. The cabin sits on a small lake (between 100 and 200 acres) in a private gated community. The lake is not fully-recreational, as it does not allow gas-powered boats; electric motors are okay. The quality of the water is seemingly pristine; it’s not a swamp, etc..
It’s a small place. Less than 2,000 sqft, built in the 80s, excellent water views, kayaking at the edge of the yard, etc..
The plan would be to hold this new purchase for at least 4-5 years; so that she could enjoy staying there when she felt like it, and potentially sit on an appreciating asset vs. let a depreciating asset (usd) sit in the bank at her expense.
Is this a horrendous idea?
Buying this cabin would effectively create a scenario whereby it would represent roughly 20% of her wealth. She owns another home outright, so her total exposure to real estate would be around 45%.
I know this isn’t necessarily a sub about finance, but I would be greatly appreciative of any insights as it relates to this potential purchase.
I’m hoping the niche category of ‘lake-front’ gives this particular piece of property a bit of an edge from an investment point of view. The justification is that I would like to think there will always be a market for vacation-rental properties, despite the everlasting uncertainties of the future.