Real Estate : the Ideal Investment

Most people believe real estate will go up, even in the face of past bubbles and recessions. They don’t always think the stock market will, even if it is has been the number one performer over the long term. Since no one should put all their eggs in one basket, having investments in both areas is advised. Owning a home is one way to participate as is a retirement plan that includes a self-directed IRA in property, real estate mutual funds, or REITS.

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In actuality, there are seven different types of investments: bank accounts, stocks, bonds, currencies, commodities, real estate, and insurance (annuities). Everything else is packaging such as a mutual fund. Diversification means choosing more than one instrument, not just having ten homebuilding stocks. With shifts in the economy, they can offset each other or work in tandem. Among these investment categories, real estate is a commodity that reflects economic conditions and demand. It also relates to location and regional growth patterns. If you are willing to ride out downturns and wait for rallies, it is an ideal investment along with participation in the stock or bond markets.

When the tide rises, it carries all the ships with it. When personal income increases as a result of wages, tax reduction, and investment returns, there is general optimism about real estate. When you see your home increasing in value, you are tempted to upgrade and/or buy more. If you are wary of trends and fads and don’t fall in line with over speculation, you can do well with property and related vehicles. You have to keep your wits about you. Prudence is always the first consideration when saving for retirement. Even for the shorter term, you can build wealth without sacrificing safety.

Whether in or out of an IRA, rental properties offer many benefits. You can’t live in a home that is contained within an IRA, nor can you rent the home to relatives and fiduciaries (attorneys, accountants, and financial advisors), but you can participate in other ways. Rentals provide steady income when occupied and long-term growth if desirable in location. While single family homes and multi-family apartment units come to mind, office buildings are an equally viable option. When buying property, prevailing mortgage rates and potential deductions are of major concern. Tax benefits take a front seat every time. The net expenditure will dictate the degree of return, including repairs and upkeep. Finding a “good buy” goes without saying. You can’t make much progress if you over pay! The question is whether or not you want to become a landlord.

You can be a passive investor in a joint venture or a real estate LLC. In addition, mutual funds pool investor money to develop a large portfolio of real estate properties for growth and income. REITS (Real Estate Investment Trusts) are structured to be privately or publicly held and focus on commercial properties such as hospitals, warehouses, industrial parks, shopping malls, hotels and apartment buildings.Less common but possible investments are real estate deeds and notes, mortgages, and tax lien certificates.