aside from having money put away in a 401k, is it reasonable to assume in todays economy, that investing in real estate is a good option?
The biggest drawback of investing in real estate is that your investment is not liquid. You can't just up and sell real estate. You never know when you might need to get your hands on some cash in return for your investments. You don't want to be in a situation where you're doing great on paper, but might have to sell at a loss...
even in todays buyers market investing is always a good thing. the 3 rules of real estate are .. Location, Location and lastly Location.. All this means is there are more houses on the market then there are buyers. The supply is higher then demand.....If your a good do-it-yourselfer like me.. find a fix-me-up house and invest some money into it.. then over time the house will increase in value. You also want to look for the worst house in a nice neighborhood. Last year, my neighbor sold her house to move out of state to a real estate agent who was flipping it. He installed carpet and new appliances, freshly painted and updated everything to make the house look brand new.. He probally put $20-30,000 into renovating and sold the house a few months later for a $50,000 profit
Real estate is always a descent investment depending on the area example california's depreciating but if you check markets such as Texas,North Carolina and south Carolina you will see that you can purchase a property rent it out and the rent can cover the mortgage and then you have the foreclosures popping up everywhere and you can also find great deals there even if the market changes the american dream doesnt everyone wants a home of there own!
Buying real estate is about more than just finding a place to call home. Investing in real estate has become increasingly popular over the last 50 years and has become a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. In this article, we'll go beyond buying a home and introduce you to real estate as an investment.
Caveat emptor - be careful. Real estate investing can be profitable but also has some real drawacks that its avid fans do not mention: 1. Holding costs - in many places after you add up taxes and insurance it can cost 3-5%/yr to simply OWN a piece of property. 2. Liability risk: no matter what your lease says, any person who in injured on your property can sue you for injury and damages. For any reason. You need a LOT of insurance to protect yourself - at least $2 million. 3. Rentor risk - the damage one bad rentor can cause can cost $thousands to repair, more than a year's rent. Sure, keep the deposit - it's hardly enough. Also - if a rentor leaves you have to rclean out and re-rent the place - this can take months during which your holding costs continue and you have no income to cover them. 4. Liquidity and resale risk. If the rental real estate world does not work out, or you have a need for cash, you can't kick out the renter and sell out quickly. In some places this can take months to evict and sell. Even if ther is no renter it can take months to sell - and at what price? Despite anecdotes of hot real estate markets in some places for a short period, the long term rate of increase in a single-family home is about 2-3% more than inflation. This has been true for 70 years and for the last 20 years. 5. Also - do you want to spend your time worrying about renters, getting broken A/Cs garage doors and roofs fixed, repainting? 6. Finally, when you do sell the capital gains tax on real estate gains (and you will have them because you have probably been claiming depreciation over the years to keep current-year taxes down) is 25%. I'd rather see you in the market where you can manage your risk.
