Friday, February 13, 2009

Location Location Location!

With the malaise about the economy being written, spoken, and in general pervading every sensory outlet we have as humans recently, I find myself being a bit more conscious about prices of the things I usually used to look past.

Take lunch for example. There is a Sebastians in the lobby of my office building. The restaurant offers your standard business breakfast and lunch fare: coffees pastries, sandwiches, pre-packaged salads, etc. Generally, it is the "go-to" spot for all of Cambridge Associates. It's good food, it has good variety, and for god sakes its in the same building! Especially in the cold months, you can't find a better bet than Sebs.

The other day, I was craving a chocolate chip cookie, so without thinking I quickly got on the elevator and walked over to Sebastians. After purchasing it, I quickly realized that this cookie was about $5! Pretty steep I thought. Just out of curiosity, I walked across the street (literally) to Viga, an Italian eatery, to see what their cookie prices were. It was cheaper (for the same brand I think too!). I didn't try this, but I'd venture to say that as you walked away from the cluster of office buildings on Summer St, lunches would get cheaper and cheaper. Sebastians, by virtue of being in such a prime location to the tenants of 100 Summer St, could charge all they wanted. They know that people are willing to pay the premium so they don't have to bundle up. The axiom proves itself once again: Location Location Location!

This also got me thinking about the idea of owning land in general. Real Estate is the optimal investment. It provides income and growth, and can thus help you in a bull or bear market. And if its a house or a condo, it can even provide shelter. The only thing it's missing is food. Real Estate also fits the Famous Warren Buffett's maxim of "Investing in things you understand." There's nothing easier to understand than a house.

In the Sebs example, I'm sure the sunk costs are high to get your hands on a good location. But in the long run, its a worthy investment. If all your other investments are tanking (as they are for many people now), you can ideally bank on your tenant's rent to provide some relief. When the economy is good and people are buying, the value of your real estate investment benefits as well.

Robby circulated an article earlier today that talked about pending inflation as a result of the government bail-out package. Holding onto something like Real Estate can really assist in maintaining wealth if cash and other investments are hemorrhaging value.

Now practically speaking, buying land or a first home or condo is years away for people our age. But, seeing as we're always looking for an investment strategy, I thought I'd put my (future) money on some bricks and mortar.

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