Thanks so much for your wonderful blog. I've seen a lot written about the pros / cons of debt going into an economic collapse. You're recent blog post about contracting brought up this topic.
We're in the opposite position however, I'd like your thoughts on the dangers of being debt free during/after a collapse because I see risks with this decision as well. We own two houses with no debt or mortgage. One is a large nice home near downtown Houston in a walled gated community, not in the suburbs; we use this house part-time. The other is a small place with 15 acres just outside the city which is our full time home.
We think the US is headed for a dollar collapse. We are considering selling the house in the city because much of our savings is in this home. If we sold now, we could invest this money in precious metals. However, we'd take a significant loss on the home. So do we hold or sell?
Reasons to sell:
If we hold the home, we're concerned about being able to pay property tax and insurance during a collapse
We're concerned about rioting and crime in the city during/after a collapse, further driving down the value of this property
Finding buyers may become very difficult after the collapse
Reasons to keep the property
We could use it as a rental property for income. (However, I'm concerned about the downward pressure on rents during a collapse b/c people will be so focused on having enough money to pay for food.)
If people migrate from the suburbs to the city b/c transportation costs skyrocket, it might be a good investment
We really like this house and enjoy the property
Your thoughts on this would be much appreciated. If you post on your blog, please keep me anonymous.
Hi K, I think that right now isn’t the best time to sell given the overall low prices. I also believe you can profit nicely when renting it because of the reasons I’ll explain.
Regarding your two properties, they represent opposing views in terms of what works or not in a post-collapse society. Fiction survival literature would have you believe that a house in a rural setting is the best option. Stay as far from rioting cities as you can, avoid criminals by living far away. This is repeated over and over until people take it for a fact, but ironically the truth is that living in such conditions is possible only in very safe, functioning societies. The further away and more isolated you are, the more vulnerable you are. With higher gas prices commuting back and forth or driving into town puts a dent into your finances. As the system and infrastructure starts failing, roads, reliable power and proper medical care becomes unreliable the further away you are.
After a decade of studying different crisis and disaster scenarios in different countries all over the world I believe that the idea of retreating to rural areas as a way of rationally preparing for hard times has no foundation on empirical facts but is instead rooted on American survival fantasy concepts. In what seems to be a vicious circle, people keep regurgitating what others have said and take it for a fact rather than checking how things actually turn out when serious social crisis have occurred. You only have to study South Africa’s recent history, most third world countries or the post communism western union nations to understand that what is taken as a fact in the American survival culture isn’t quite so. Keeping it short, if you live well today in an isolated homestead without 24hs security, its precisely because society has not collapsed. You wont be able to do so afterwards.
Because of this, a house in a walled gated community is highly desirable and it will be even more so after a serious crisis or collapse. In most Latin American countries, gated communities such as those are the only way in which you can live with a degree of peace of mind while you sleep. Your two properties are basically giving you those two options.
As crime gets worse in USA, demand for such properties will go up. With a gated community you have options such as all neighbors paying more so as to have added security.
I wouldn’t sell it. If you like the other place more then I´d just rent it so as to make some money, always good to have another source of income, and at the same time you keep it as a plan B in case things go South Africa or Latinamerica way and you have to move into the gated community yourself.