Expert: Paul Henneman - 3/21/2004

Question
Hello Paul.


Do you recommend buying a book on Investing In Real Estate?

When will I begin to see some results from my investing?


regards,

Julian

Answer
Julian,
  Thank you for your question!
  Yes, real estate is generally an excellent investment. The question of when you will see results is more complex. There are great differences depending upon what area you are interested in investing in, as well as the type of real estate (residential home, apartment, or business oriented building).  For example, in general aparments (condominiums) go up in value more slowly than residential homes. But, they are also easier to rent, so that you have income from the renters to pay the mortgage. If you do your research and plan carefully, this income from renters can actually be greater than the mortgage, giving you a few hundred dollars extra each month. The main thing is that all of the expense of the condo is being paid for. So you can resell for a higher amount in a few years and not have paid anything, or keep until the mortgage is completely paid off and then own this valauble assett outright to sell or continue to rent.
The problems: it is always a danger that you can't find renters for a few months. pick your area carefully.
Also, the real estate market has gone up dramatically over the past few years. Some experts are saying this will continue, some are saying it will reverse and therefore would be a bad time to invest in real estate. I am of the opinion that both could be true, that it all depends upon the area. I believe that Florida offers some of the best real estate opportunities, with land and homes still very inexpensive but a huge aging population that will seek to move to warmer climates in the next 5 to 10 years. (the baby boomer population). Florida is also running out of room to build new homes along the desirable coasts, so values will rise further due to that.
Simply purchasing your own home is a great investment rather than renting. Renting is like 'throwing money out the window', kind of like renting a car. It serves the immediate purpose of giving you a place to live, but you have nothing to show for your monthly payments down the road. Someone else is benefiting. Instead, owning your own home often has about the same monthly payment, but you are paying off your own asset and building equity. The home should rise in value as well. You generally cannot go wrong buying a home, even if it drops in value you are better off than renting as ALL of your money goes to someone else when renting. The only word of caution: Too many people buy a home that they cannot afford. Do not simply buy the very best and most expensive you can get approval for. Really go over your budget and buy something you can affort do avoid problems and stress. You can always add improvements to the home in the future if you have extra money.
Another thing to consider is a mutual fund that specializes in real estate. This will be covered in the book I recommend below.
Regardless, I do recommend that you read up. Don't take anyone's word for it, read as much as you can and make up your own mind based on research. I like 'Investing for Dummies' as an introductory book. It does cover real estate, as well as most other forms of investment. This will really help you decide if real estate is for you, or if you should perhaps consider another form of investing.
I hope this helps! Please do not hesitate to follow up with me if I can be of any further service,

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com