Feb 092015

The following is a guest post by job search company, Trud.

Becoming A Financial Stakeholder in a Recovering Economy

You may not be feeling the sting of last decade’s financial meltdown anymore. At least not in full force. But there are plenty of places on the globe that haven’t recovered one iota. I’m talking mostly about cities. Municipalities are only as strong as their design, industry, and infrastructure. If one of these fails, you’ll see your best chunk of tax base fleeing for security elsewhere. This has been seen nowhere more clearly than in vulnerable American cities wherein, some neighborhoods have the conditions of third world countries. I’m speaking here of Detroit, Baltimore, Buffalo, and St. Louis.

Of course, not every part of each of these cities is dilapidated. But get too far off the main drag and you’ll find block after block of uninhabited houses, decaying. In a recent trip to Baltimore, I saw this first hand. In a truly surreal scene, I drove past probably 15 continuous rows of 3 story Victorian homes, all apparently empty. While homes like this can be had for as little as $5000 – $15,000 in some cases, repair and renovation is an enormous cost for any homeowner and investor. So many of Baltimore’s formerly wealthy districts now look like rotting palaces. But the same can not be said for many former slums.

Being a part of a recovering economy is also about providing jobs. In many locations around the world, it’s not as easy as going on Trud.co.uk to find employment. If the jobs aren’t there, and the people haven’t the experience and skills to get them, distressed communities can easily sink into further economic depression. A healthy economic structure within a city or a smaller community has rungs going up from unskilled working positions all the way up to semi-professional and professional positions. This is built right into the physical structure of many of these older cities. Main streets have 3 and 4 story homes, with 1 and 2 story homes on side streets and alleys beside them. When these were constructed it was with the intention that multiple economic levels of citizens would live on the same block. Restoring this economic character to municipal neighborhoods is inherent to the problem of making these cities new again. Jobs for all, at all levels of employment, is a key part of this process.

Because of their size and affordability, a new generation of homeowner have moved into some of the smallest rowhouses in the city. The same can be said of all the other cities mentioned above. Millennials with careers that never really began suddenly find that they can afford $10,000 for a home in these areas, and are developing bright new communities in disused spaces. This isn’t the same old gentrification. In many areas, like the Remington neighborhood of Baltimore, had roughly ½ occupancy. In a city with a population at 60% of it’s peak fifty years ago, any new and committed residents is a godsend.

Because situations like this are available around North America, it’s an opportunity for the young and the poor to invest in homeownership, something they may never have dreamed for themselves before. Home ownership is one of the most efficient forms of investment available for primary wealth building, but it has been out of reach for a certain subset of the population for a generation. Because interest and home taxes are tax deductible, and home prices grow on average 4-5% per annum (much more in many of these formerly blighted communities), many new homeowners will find themselves with a 25% return or more after just 5 years in their new home.

The added benefit of equity – monthly payments that get stored as wealth in the ownership of your home – makes this arrangement a no-brainer for many. Lots of these individuals have been able to open businesses in their communities, having become very active and committed to the shared life with their neighbors, as homeowners often do. It will be interesting to see how communities like these develop, but in the meantime it’s enough to know that it’s a tremendous investment opportunity for those without a lot of money, looking for a way to start amassing wealth.

 Posted by at 5:00 am

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