Real Estate has been a great investment throughout the ages and as much as I believe in it, I also believe in diversification. Having worked both on Wall Street as an Equity Analyst studying the stock market for investors and now studying the real estate market for myself and my clients, I still believe it is in people's best interest to balance their assets between stocks, bonds and real estate. However, like stocks, it's important to buy the 'right' real estate.
"The right real estate investment
can triple your monthly income"
The 'right' real estate means getting the best return for your investment (ROI). Single family homes and condominiums are some of the worst investment in terms of monthly cash flow, but of course they can be decent equity appreciation vehicles in a booming market. The best cash flow investments are apartment buildings with 12 or more units.
But buying 12+ unit apartment building in the Bay Area will likely cost around $2M, this is beyond the reach of many investors. However, in New Mexico and many other places you could buy such a building for $800,000. If all you can afford is a $300,000 investment, then instead of buying a condo in San Mateo County, consider buying a 4-plex outside the Bay Area or even out of state for the same price. The return on the investment makes far more sense. Then when you can afford more, do a tax free 1031 exchange closer to home or buy something even bigger out of the area.
You can also consider using IRA funds for real estate investments. There are of course all sorts of rules and limitations going about. A god source for more information is PENSCO's Real Estate Investment webiste.
The menu selections on the left investigate different investments options and other considerations by demonstrating with real numbers the logic of the statements on this page. I invite you to browse them and understand why keeping a single family home for rental purposes is not an ideal investment.
When investing try to leave emotion out of the process, let the numbers speak for themselves. Also, get professional advice, I always consult my accountant and sometimes lawyer when I'm thinking about making an investment. A few hundred dollars in consultations could save you tens of thousands of dollars in mistakes at a later date. Finally, select a Realtor that can assist you through the entire investment process. I keep contacts in several states that are prepared to assist my clients with their investment purchases. This allows us to put a complete plan in place for our clients.
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