Arbitraging Fed Policies With Rental Housing Cash Flows
By forcing interest rates to record low levels, the Federal Reserve has effectively vaporized most interest income along with most of the ability to benefit from compound interest, with devastating results for many retirees, retirement investors and pension funds.
However, in the process of creating artificially low interest rates for an entire economy, the Fed has also opened up unusually profitable opportunities for individual investors with certain types of investments. Record-low interest rate levels are the most powerful of six different factors that are currently working together to increase owner cash flows from the purchase (or refinancing) of investment real estate in the United States.
In combination, these six factors have created the best fundamentals for cash flow-driven real estate investments in the modern era, delivering not only historically high cash flow in an otherwise yield-starved world - but also substantially higher safety margins than normal.
Gold / Housing Ratio Falls To Historic Low
In gold terms, an average single family home in the United States can now be purchased for only 18% of its pre-bubble price in 2001. The term "pre-bubble" merits emphasis: the average house can be purchased at an 82% discount (in ounces of gold) not from the peak real estate values of 2006, but the much lower home prices of 2001, before the real estate bubble began.
These numbers are based upon the Gold / Housing ratio, which is a measure of relative value between gold and real estate.
