Investing in Real Estate: The latest collectible trend

On May 18th, Bayamon's Board of Realtors offered a seminar titled 'Sale Price vs Market Value.' As one of the speakers, I explained the reasons for the demand for 'special' real estate assets that are already considered 'Collectible Assets' - assets with preservation, cultural, and historical values, among others, that bring with them an unprecedented, accelerated appreciation.

As the data presented then evidenced, we must acknowledge:?The World has Changed.?Fluctuations caused by past events such as pandemics, natural disasters, the fall of trillions of dollars in cryptocurrencies, armed conflicts, global warming, accessibility to information, and new laws with macroeconomic impact have created a 'shift' in human behavior that greatly influences the way we assign value to things, assets, and life itself.

It is concerning to me, to see mayors and government officials wondering why this is happening and even creating conspiracy theories without presenting economic elements or logical, empirical, or scientific market data. It speaks volumes about our leaders. It is also disheartening to hear some appraisers saying that the appraisal defines the market value. Industry professionals still trying to fit into a simple arithmetic of a residential appraisal, with three comparables, and applying certain adjustments in this market segment, validate that we need to update ourselves and have a deep analysis of whether our education curricula are up to date with the reality we live in.

To dive into the subject in a more specific way, I would like to share the following analysis where the government contradicts itself. On one hand, they call these properties 'high ecological or conservation value,' but on the other hand, they are surprised when high prices are paid for these assets, and they pretend to buy them at a minimal price. For years, an average value of $2-$3k was given to an acre of land if it was agricultural. If the zoning was highly protected conservation, its value was even less. So, for decades, this was the value we perceived for our resources of high ecological or conservation value. Yet now we are surprised by the value, some are willing to pay for these resources, because we were influenced by the idea that if the land is not developable for residential construction purposes, its agricultural value was minimal.

There is an old saying that goes "the devil knows more for being an old man than for being the devil". I remember when our grandparents used to tell us that land was like gold. They understood the incalculable value of owning a piece of land, where they could cultivate its fruits and sustain their families. They understood the value of self-sufficiency at a hyper-collective level. They did not want to be dependent on a system. They understood the economy much better than us, and within their reality and circumstances, they were content with the little they had, especially those who were blessed to have their own land. They considered themselves rich. I wonder, if our grandparents were alive and had the fortune of Bill Gates or Jeff Bezos, in that immense wisdom that distinguishes them, would they spend their fortune on clothes, shoes, helicopters, cryptocurrencies, or would they invest it in land?... and how much would they have been willing to pay for it?

As we say in Spanish, let us not mistake "la gimnasia con la magnesia”, meaning let’s not think things are the same when in truth they are opposites. ?Before asset values worked according to their economic reality and personal circumstances, even land was exchanged for cattle. However, wealth has been transferred to new generations and there are people who understand and value our environmental and ecological resources and are willing to put them to good use for the benefit of next generations. But there are also exploiters who don't give a damn about their best use.

In my opinion, the solution is not to give away our conservation lands to the government who has demonstrated its lack of capacity to ensure their best use. The solution is to impose restrictive conditions of use in perpetuity on these lands so that regardless of who is the acquirer, they can offer their best performance according to "their best use" for the benefit of our generations. In this way, we avoid speculation by exploiters and filter the new acquirers, to find those who have conscience and respect for the environment and its best use. However, just because it is conservation, agricultural or of high ecological value does not mean it is worth less. On the contrary, just as a piece of art painting has sold for over $300 million dollars, the same thing goes on with these special real estate assets and we will continue to see it and every day it will be more and more evident. There is a transfer of "wealth" from some investment instruments to others.

Always remember that people want to make money in the cloud (stocks, cryptocurrencies, etc.), but in the end, that money wants to land in tangible assets, and real estate has become that investment instrument where, in turn, it provides personal satisfaction to those people or groups with a conscience. Through these assets, the environment is conserved, economic development is promoted, and a social impact is generated which provides an additional sense to the investment in an unquantifiable way. This type of investment is also considered "impact investing". Impact investing is the act of deliberately making investments that help achieve large social and environmental benefits while generating financial returns.

Let us guard the use of these lands and impose conditions of use in perpetuity so that they are protected for generations and stop assigning penny-pinching value to what has always had diamond value.

'' Wisdom is not a product of education but of a lifelong attempt to acquire it.''

-Albert Einstein