Real Estate As a Tool - Article 4.

When to Invest in Real Estate

I have to believe that regular readers of this writing are by now fully aware of my belief in the value of real estate in bolstering the financial health of any middle class individual or family. To me, it is a simple proposition:

Prudent real estate investing often provides, quite simply, the difference between a "sufficient" retirement and a comfortable retirement.

If necessary I will yell it from Mount Baldy. And I shall surely mention it here ad nauseum.

Here is what I mean: If you buy a house as early as you can - a house costing maybe 200-300% of your annual income; and then you upgrade when your income grows to, say, 150% of the appreciated value, and then you repeat the process as often as indicated, then your retirement nest egg will be much grander than that of your contemporaries who rented or stayed or never capitalized on real estate in their retirement planning.

To be sure, some can get to financial independence more quickly or in different ways. Being born into a rich family or left a nice inheritance by Aunt Joyce sure helps. So does becoming a successful entrepreneur or corporate executive. Even in these instances, though, real estate can make a big difference.

The reasons are numerous: Using the bank's money to buy your home on a nice long-term mortgage acts as a nice hedge against inflation, plus the interest and property taxes are deductible, meaning that the government is subsidizing your home purchase. Also, real estate values generally appreciate nicely and your Uncle Sam won't tax you on a huge portion of any such gain when the time comes to sell. Also, one of the best ways possible to finance young Richard's college education is by using the equity in your house. Also, you can use some of that same equity to invest in the stock market or in other real estate. Need I go on? I can….

Beside that best of all investments - your home - there are several other incredibly accessible ways for we of the middle class to invest in real estate:

	If you think you live in a neighborhood where property values will appreciate nicely, check around to see if any of the vacant land is available. Neighbors are more likely to sell to neighbors than to strangers - and you may even be able to aggregate this new purchase with your existing property so as to be able to sell for an even greater price;
	When your child becomes an adult, consider helping her buy her first home - there are many ways to accomplish this, including a shared-equity arrangement (you put in the down payment, she pays for all repairs and carrying costs and the "profit" is shared when she refinances or sells) or a "rent-to-own" arrangement or a straight purchase and resale - any of which can serve as both an investment for you and nice kick-start to your child's financial planning;
	If you own a small business - or even a large one - you really should consider purchasing the business real estate - there are so many tax and planning benefits to this that I cannot even mention them in this limited space;
	If you feel unable to swing real estate investing on your own, look at going in on something with a friend or relative - many a real estate fortune grew from such a humble beginning - it is OK to start small and become comfortable with the process before taking bigger risks;

Then, of course, there are some "do not do's" - such as: Do NOT fall for those get-rich-quick schemes shown on late night television. Do NOT buy something just because your friend in real estate tells you that it is such a great deal - do your own homework, including asking why he isn't buying it? Do NOT invest any money you cannot afford to lose entirely. And do NOT invest in real estate hoping for quick results - instead, invest for the long haul, just like in the stock market.