Be a Modern Railroad Baron – Invest in the Path of Progress

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Investing in the path of progress is not a particularly novel concept. The railroad barons made an art of it back in the 1800s – locking up vast tracts of lands before the first tracks were laid, all but guarantying a huge fortune once the infrastructure was completed.

Not many small investors can afford to wait out demographic shifts by investing in raw land – nor should they, given the lack of return and illiquidity of land. But with a little research, patience, and proper planning, there’s nothing from preventing you from duplicating the success of the railroad barons, albeit on a smaller scale.

Real Life Possibilities
Here’s an example: in Los Angeles, where I live, the city has been notoriously ill served by public transportation following the demise of the trolley lines early in the last century. After many years, the city finally managed to build something of a subway system, although one that by the standards of any large modern city, is currently something of a joke – with a couple of lines, and, shockingly, no direct connection to the airport(!)

Fast forward a few years, however, and the plans are already in place to improve this system to the point that it will be of value to almost every Angeleno. The plan is to bring the subway right down Wilshire Boulevard (there is still debate about much of the route) all the way to the ocean, most likely terminating in Santa Monica. Combined with the recent stimulus spending on a high speed rail, and in a decade or two, you will be able to jump on the subway in Santa Monica, transfer at Union Station, and be in San Francisco only a few hours later, all without the indignities of airport security or having to find a place to park.

In my native country (France), once high speed train lines were built connecting the south to Paris, wealthy Parisians began snapping up coastal real estate as an ideal – and suddenly convenient – weekend getaway. Needless to say, the price of real estate skyrocketed in areas that were newly served by the high speed rail. My prediction is that we will start to see a similar effect in places that become more accessible in the U.S. For instance, anyone considering buying property (either as a home or investment) in Los Angeles, would do well to consult the prospective subway map, as once it is built, addresses within close proximity to the subway are certain to be better investments than those that would require a bus transfer.

You must, of course, have a long-term time horizon in order for this strategy to pay off – it requires patience. But real estate investing always rewards patience and foresight – start your research now, and thank me later.

Photo: Professor Bop

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  1. Great article. There are many companies now promoting LandBanking as a long term investment strategy. As long as the cost to get in is low I think it makes sense. If you as the investor do not benefit your children probably will.

  2. I can see if high speed rail ever becomes a reality that it will totally change the dynamics of where people live as opposed to where they work. Throw in the growing acceptance of telecommuniting in the workplace and all of sudden the reality of living in one city or outer suburb and working in another city an hour a away (i.e. living in Philadelphia and working in New York, which is already done by some) becomes a reality. Employment opportunities will less about location and more about accessibility to communication and transportation.

  3. Hi Florence,

    I liked your article. I also really like the concept of ‘getting in front of transportation improvement.’

    I am Canadian and I live in Toronto. Our subway system here is currently being expanded. The Government is constructing new lines of the subway which lead into adjacent cities. The project is scheduled to be completed over the next 5 years. However, the impact the changes is going to be significant. Housing values are going to remain strong if the homes are in close proximity to the subway stations. It is an exciting time here for real estate investors.

    You are correct, when you say that it take a little bit of research. I think that if people are willing to invest the time to do the research into these expansions, the rewards can be exponential.

    Best Regards,
    .-= Neil Uttamsingh´s last blog ..The Eight Most Common Questions Joint Venture Partners Ask – Part One =-.

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