Manage Your Real Estate Investments Wisely


Do you want to invest in your future?  Leave money for your kids when you are gone?  Pay for college?  I know a good way to do that… invest in real estate.  Now some of you may not agree with that, but I am a firm believer that is the only way to go.

The most important thing one has to remember is that this is a long term investment.  Yes the real estate market just took a big downward turn and a lot of people lost a lot of money.  But, did they over extend themselves to begin with?  Did they pull money out of their home and spend it?  A lot of people did just that, now they are in trouble.

I have had income property for the last 26 years.  I have never bit off more than I could chew and this is what has saved me from destruction.  If you manage your investment carefully, it can be there for you when you need it.  The market will come back and any equity that I lost will come back.  It will continue to go up over the years, sometimes faster than others.  But, in 20 years – I will be ahead of the game with my investment.  You just have to ride the wave sometimes.

So, those of you who are in the position to buy a little rental house… I say go for it.  YOU MUST THINK LONG TERM – that is the key to success.

If you are renting… buy a house that you can afford… don’t waste your money on rent.

Warren Buffett gave some advise in a recent article and this is what he had to say…

Here are 3 basic steps Buffett urges every American who owns a home – or wants to – to include in their approach to home ownership.

1.  Ditch your “dream home” for a practical pad. When it comes to homes and mortgages, bigger is not always better.  What is better is to buy a home that makes sense for your family’s future and its finances. In Buffettt’s own words, “a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender . . . facilitates his fantasy.”  Instead of buying dream homes, Buffett went on, the goal should be to buy a home you can afford.

2.  When you buy, plan to hold. Warren Buffett is worth $50 billion, and he still lives in the home he bought 52 years ago – for $31,500. Many Americans got caught in the housing crash when they took on mortgages they could only sustain for a short period of time, then weren’t able to refinance as expected. Buffett’s stock investing advice has long been to avoid making investments you can’t hold for at least 10 years. Likewise, buying a home should be done with a long-term plan to avoid catastrophe when home values fluctuate in the short term.

3.  Mortgages should have fixed, affordable payments. In his shareholder letter, Buffett points out that a housing company he holds has done vastly better than other real estate and mortgage industry players and attributes their success to the fact that “our approach was simply to get a meaningful down-payment and gear fixed monthly payments to a sensible percentage of income.”  Buffett believes these two mortgage musts are the key to avoiding foreclosure, opining that “[i]f home buyers throughout the country had behaved like our buyers, America would not have had the crisis that it did. . ..  This policy kept [the company] solvent and also kept buyers in their homes.”

Unless you are one of those rare buyers who know their income will increase by a predictable amount at a predictable point in time, like a lawyer prepping for partnership, a good rule of thumb is to stick with a fixed mortgage payment (including taxes and insurance) that’s under 30 percent of your take home income.


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