Recreational Property as an Investment
- Reasons for buying recreational properties are many – a secluded place to play and build a family legacy, an exceptional hunting or fishing spot that's safe and undisturbed, a wild and beautiful escape to seek silence and solitude. For many, it's a combination of these.
- Because recreational property is purchased primarily for recreation and held for a long time, its value in a diversified investment portfolio is often overlooked. But, in an unstable financial world of skyrocketing government debt and over regulation, rising taxes, and high unemployment/under employment, many investors include tangible assets in their portfolios along with traditional paper investments like stocks and bonds.
Recreational property is one such tangible asset. It does not go bankrupt, wear out, or depreciate. It cannot be stolen. Further, as the old Twainian adage about buying land because 'they ain't making any more of it' goes, the supply of recreational property never increases. The supply is in fact steadily decreasing under the pressures of suburban sprawl, industrialization, and agricultural conversion. Couple the decreasing supply with rising demand fueled by a growing US population and the swelling ranks of baby boomers looking for retirement getaways, and the long term trend toward rising recreational land prices seems likely to continue.
Recreational property is also attractive as an investment because, unlike stocks, bonds, or precious metals, the owner can enjoy using the investment with family and friends while it appreciates. For recreational properties that can be classified as income producing properties, like a rental cottage on a lake, or a property harvested for timber, there can be other tax advantages, including writing off losses, or using a 1031 exchange to defer taxes on gains when the property is sold to buy a similar property. Finally, for some, there is the added "insurance factor" of owning a recreational escape. These buyers appreciate the peace of mind in owning a property they could live on self-sufficiently, should the need ever arise. So, in addition to all the other gratifying reasons to own that dream property, don't neglect its value as a hard asset in a diversified investment portfolio.