Many, often, articulate, some of the essentials, of financial planning, but, do so, without fully, paying attention, to what this should include, and mean! There are many necessities, including the need, to include, all possible components, which might enhance one’s ability, to be, as successful, from a financial perspective, as possible. However, many, only look at this, in terms of stocks, bonds, and other investments, without, fully considering, where real estate, should fit in, to the overall equation. It takes intelligent, financial planning, both, from an overall perspective, as well as, a specific one, to determine, how to create, the proper balance, and direction, for each of us. There is no such thing, as, a, one – size- fits – all, approach, but, rather, this article will attempt to consider, examine, review, and discuss, why, in most instances, real estate, should be, a vital part, of one’s personal, financial plan.
1. Beginning the process: One should begin, this process, by giving himself, a check – up, from the neck – up, and determining what his personal, financial goals, are, and why. Real estate, should be broken into two categories: personal housing; and investing. For most people, the value of their home, represents, their single – biggest, investment, as well, as housing, and owning, a piece, of the American Dream! In many instances, from an historical perspective, investing in real estate, has been a quality decision, because, not only, does the property, itself, help to keep up, with inflation, but, there are tax benefits (including depreciation, etc), and, when, done, properly, a positive, cash flow. Before, this can be done, effectively, and efficiently, it’s important to be prepared, for the financial necessities. These include: funds for down – payment, and closing costs; financial reserves for repairs, renovations, maintenance, and upgrades; and; a reserve for contingencies. When investing, consider cash flow, rates of return, and, both, the possibilities, and ramifications.
2. Do you wish to be a landlord?: Are you, ready, willing, and able, to be, a landlord, and the associated responsibilities, stresses, strains, hassles, and potential tensions?
3. Balanced portfolios: Wise investors seek to diversify, and, doing, so, means, properly, balancing, investments in stocks, bonds, savings, real estate, etc. Real estate, traditionally, increases, in value, at, or slightly, more, than the inflation rate, while, bonds, often do not, and stocks, are often selective, and challenging, to balance, and choose, properly and effectively.
4. Personal home: How important is it, to you, to achieve, some part of, the American Dream, by owning a home, of your own? It makes sense, to weigh, whether you should buy, or rent, where to do so, advantages and disadvantages, and the ways, to be, financially prepared, for contingencies, and enjoy it!
5. Investing in real estate: Some people use Real Estate Investment Trusts, or REIT’s, to participate, in real estate investing. They hope, to take advantage of professionally managed, portfolios, but, should, recognize, some are, more conservative, and income – oriented, while others, may be, less secure, and more speculative! Others begin their involvement by buying a two – family house, and it is wise, to weigh, the costs, versus, the potential, and risks.
Wise investors balance their portfolios, and, thus, their risk/ exposure. Are you willing to commit, to proceeding, wisely, and with your, eyes – wide – open?