Real estate has long been the most effective vehicle for building wealth. Andrew Carnegie is credited with saying, "90% of the millionaires in the United States made their money investing in real estate." Read the best-sellers Rich Dad, Poor Dad and The Millionaire Next Door, and you'll quickly see that experts and regular folks alike agree: real estate is an awesome way to earn income, build wealth, and minimize taxes.

But people who have never invested in real estate don't always have a clear picture of what it's really like. They compare real estate investment to other, more familiar investments, like securities. They figure that you buy a property, do some repairs, put a tenant in it, and wait for the checks to start rolling in-sort of like dividends. Or they imagine that buying bargain properties and reselling them is similar to day trading-all you have to do is call a broker and put the property on the market, and, presto! A buyer comes along the next day.

Real estate investing is not like the stock market. This is both its strength and its weakness. Unlike the stock market, real estate doesn't lose 30% of its value overnight, except in certain areas at certain times-and these mini-bubbles are almost always predictable. Unlike the stock market, real estate is always in demand-people always need a place to live, even when they don't need new cars, or restaurant meals, or gadgets. Unlike stocks, real estate is both highly leverageable-you can OWN a property by paying less than 10% of its value up front-and highly tax advantaged-you can even sell at a profit an not pay capital gains taxes if you handle the transaction right.

On the other hand, real estate is, unlike the stock market, a hands-on investment. Properties have to be managed, and repaired, and maintained, and kept occupied. There is liability associated with owning property that is simply not a factor when you're a stockholder. No stockholder was ever sued personally for discrimination, personal injury, lead paint or mold issues, or any of the variety of other problems that could affect a property owner. And finally, real estate, unlike securities, is relatively illiquid. A burnt-out shareholder (if there is such a thing) can rid himself of his investments in moments; a burnt-out landlord, depending on the number and type of buildings his owns, can expect to wait months or years to divest himself of his properties.

A successful real estate investor is one who has determined in advance what it is he hopes to get from his real estate; who has chosen his properties, areas, and strategies wisely, and who has educated himself thoroughly on the possible pitfalls, and taken steps to overcome them. A real estate investor cannot truly be a success unless he reaches his financial goals and does so in a way that allows him to enjoy the fruits of his labors.



Source: www.regoddess.com

 

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