The Box Simplifies economic laws.

Now let me provide you with an example of how The Box can simplify the
economic laws. The Box can be used to understand rental versus
ownership in the market; I call this the “Housing Box”.
The Housing Box represents the fact that people always want to have a
roof over their heads. In the Housing Box, people can only get a roof over
their heads in one of two ways:
1. Ownership
2. Renting
Obviously there is the homeless population; but generally speaking,
people either own their houses or rent them.
As we focus on ownership and renting, realize that no matter what happens
to you in your life, you have a choice: you can either own your home,
condo, etc., or simply rent – that’s it! After that there’s nowhere else to go.
That, in essence, is what the Housing Box consists of. The wonderful thing
about the Housing Box is that no one can go outside of it.
Why is the Housing Box important to understand? In boom time, when
salaries are going up and people are buying a lot of houses, ownership
takes over.
You’ll see property ownership take a bigger space of The Box and renting
will take a smaller space of The Box. What this means is that you’ll have
a soft rental market, yet a strong sales market. In other words, it will be a
seller’s market. But, since nobody is going outside The Box, renters will be
moving over to the ownership pile – it’s a good time for people to start
owning property.
Now what does this scenario tell you about the strategy you should follow
as an investor? It is a great time to sell; it’s a great time to flip houses. Buy
multiple properties, fix them up, and sell them. Another way to look at it
is to assume that there are many houses in foreclosure (like in the 2008
market when this manual was produced). If people are being kicked out of
their houses, they’ve got to go somewhere for housing, so they can either
own or they can rent... period! There is nowhere else to go. Consequently,
the rental market will start to take over.
You will see the shifts; supply and demand is basically all we’re talking
about. The Box is never going to change. No one goes outside The Box. So
when you see foreclosures out there, you now know where the market is
going. You should know that in the Housing Box when there are a lot of
foreclosures, renting will take over ownership. Therefore, there’s going to
be more demand for renters. Where there’s a higher demand for renting,
the price of rental properties goes up.
In this case, renting takes a bigger space of The Box and ownerships takes
a smaller space. So it tells you where to put your money (rental properties).
It tells you what strategy to get into, and that is key. Again, The Box helps
us understand simple economic laws; economic principles that will help us
decide what strategy we should move into.