Real Estate As a Tool - Article 5.

When NOT to Invest in Real Estate

OK, our last several discussions have focused on why and when to buy real estate. Just to show you that I am not a one-trick pony, I will today explore some circumstances - be they in you or in your environment - when it is probably inappropriate for you to purchase real estate:

	If you really do not want to have to handle the responsibility of taking care of a house, you should not buy one. Some of us are, pure and simple, appropriate for the renter's life. To be sure, this is a condition rarely found in nature, but I'll accept it as a possibility in your case. As a renter, you can just call the landlord to fix the plumbing or to make sure the neighbor's trash is removed from the hallway, but then you may have to wait for the uncaring landlord to get around to responding. Should you buy your home, it could become a royal pain to have to clear the snow, repair the appliances, replace the roof and cut the grass - if this describes you, then maybe you're right to stay out of the homeowining racket. There is an alternative, however = if the only thing keeping you from buying a house is your overarching concern about all of the responsibilities attached thereto, then look at buying a reasonably-priced condominium.
	If you really think that you cannot afford to buy a home, then you may just be correct. Not everybody can come up with the down payment or has the job security to qualify for a mortgage. If you feel this describes you, then I sincerely hope that you have actually checked out all of the programs available for first-time home buyers, both State and Federal. Please do not use "lack of funds" as an excuse unless and until you have really tried to save for the down stroke AND are told by an appropriate lender that your poverty assumption has been correct. In truth, I think many among us have simply decided that they cannot afford it and use a possibly ill-informed decision as an excuse to remain a renter, a lifelong tenant. Of course, a renter often pays in rent about what a house payment would be, without sharing in the benefit of deductibility of mortgage interest.
	If you are thinking about buying a time share, then please do not kid yourself that you are "buying" real estate. And PLEASE do not try to convince me that you are making a real estate investment. Yes, you may be obtaining some lower-end tax benefits and you may actually use the thing every year and get to exercise great swaps to enjoy different marvelous locations, but all you are purchasing - no matter what the highly-skilled salesperson told you - is a series of vacations. You are prepaying for the next 10 vacations and you are limiting where you can go on each and every one. This is NOT intelligent investing. Anecdotally, I have had several clients come to me already owning time-shares that they have tired of - and we have yet to sell one for anything near what that most glib salesperson told them they'd be able to get. I admit it: I am down on time shares.

Hoping to help just one person or couple to make a better decision, I'll tell one quick story: The client was a 28 year old single female with an income of approximately $24,000. Using favorable financing established for folks just like her, she was able to buy a home, pay less in mortgage payments than she'd been paying in rent, enjoy tax deductions such that her taxes were nearly cut in half - and then when her career took her out-of-state a couple years later, she sold her home for enough to fully-finance her new start. This could happen to you.