Can I Still Make Money If I Buy Real Estate Right Now?

A very common question and a very good one too, as the face of the real estate market has changed dramatically since your parents first bought their place and quite a bit in the last 5 years even. For a while it was an instant gold mine and if you weren’t able to buy real estate you were missing out on huge profits. Housing and land has appreciated in value at incredible rates which trump even the 10% per year average of the stock markets. The basic number that sticks in people’s head is the 7% per year and let me tell you for a while it was 3 to 4 times that!

Thinking has also changed with the changes in laws and this has made the payment structure and the leverage that you have in your house as an asset. It used to be that you had arrived financially when you had your house and your car paid off and all of the money that you had been putting into these things was going instead into your retirement fund. That is no longer the case. Now it makes more sense to use the tax deductions that you get when you buy real estate on loan.

You see liquidity of your assets is so much more important in today’s fast paced and fickle market. You never know when the current housing bubble is going to pop or slow and when your job is going to be revoked. You are not smart therefore if you have $150,000 “invested” or more correctly locked into your house. What if the house will only sell for $100,000 and you have a huge health care bill for which you desperately need every penny that you have saved into the house? Well the sad fact is that you have lost that money and there is no getting it back, because you didn’t buy real estate in the right way.

On the other hand pretend that you had mortgaged the house and refinanced whenever you could as the house appreciated. You then took the profits from these refinancing ventures and put it into a fund that could earn more money than you were paying in interest on the loan. Well you now would have a fund of liquid cash that you could use for whatever emergency that came up and you actually had more than if you would have simply paid your house of not even thinking about its’ market value. This is made very possible by the fact that number one any interest you pay on a house loan is interest that is tax benefited, and number two there are funds that you can put this money into that are liquid, earn a better rate of return, are tax free! This is the real reason why it is a good idea to buy real estate.

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