More relevantly if you want to use it as a passive source of income, in the long term you need to worry about war or terrorism destroying your property, even if your property is in a powerful nation. For example, my dad was born just before the British joined WW2 and was temporarily relocated to Wales, my mother was born during it and her earliest memory was using the kitchen table as an air raid shelter — and the British Empire was still a genuine world power back then. (And yes, both were British).
Likewise, governments and businesses may follow economic policies that reduce the economic productivity of the area in of the property: in the UK, there is the Welsh town of Merthyr Tydfil, which went from a wealthy steel producing area at its peak to one of the poorest areas with the cheapest homes in the UK in the late 2000s. Even if you’d lived in Merthyr Tydfil from its best days to its worst and therefore influenced by the local (as opposed to national) inflation rate, you’d have been made worse off by its decline.
Such booms and busts from economic shifts can be found worldwide and throughout history, just as outright destruction from war.
True, although in that case you continue to own the land.
On the other hand, countries also default. So the question is which one is more common. E.g. Argentina used to be a serious economic force with 5% of world GDP. Owning property there (even with all the violence) may have been safer going through the series of government defaults. Greece, Cyprus, Russia, too.
Rent doesn't have to be all from buildings. You can combine with farm and forest to be even more resilient. Low leverage also adds to your ability to recover.
> Even if you’d lived in Merthyr Tydfil from it’s best days to its worst and therefore influenced by the local (as opposed to national) inflation rate, you’d have been made worse off by its decline.
I promise you that back then, people spent between 10% and 50% of their income on rent, as they have done forever, and continue to do today.
You happen to track a declining area. If the area had seen 10x more development, rents would have developed by that order of magnitude.
We agree on this.
I’m just saying that that the economy immediately surrounding the property isn’t necessarily the one driving the landlord’s costs or lifestyle. It certainly isn’t in my case.
Nothing truly "tracks inflation" because inflation itself is a highly debated figure which depends on who calculates it and how it is calculated. It isnt some scientific constant to which we can track.