Your Real Estate Investment Portfolio

June 2, 2010 - PRLog -- Real estate prices are down. Are they at their bottom, who knows? Was the market at its bottom in 1991? No. What about in 1993? Maybe in some markets, but not overall. When was the bottom during the last cycle? It was impossible to know the bottom, until after it had passed and prices started going up. What do we learn from cycles? Buy when the market is down. Investors who bought in 1991, 1992 and 1993 generally made a lot of money down the road. Did they make as much as the investor who bought a little lower? Maybe not. Did it matter? No. The investor who waited too long for the bottom, bought on the way up, often at higher prices than they could have if they weren’t so greedy. Any investment advisor will tell you that you can’t time the market. Is there anyone who, with hindsight, wouldn’t have bought property in 1991-1993? Even in today’s “down market” you would likely have made a lot of money.

It is a buyer’s market. Prices are still coming down in some areas and sellers who need to sell, have to do what it takes to make a deal. It is always better to acquire, when you have more control.

What investment option will do better over the next five to ten years than real estate? Stocks? Bonds? Mutual Funds? Money market accounts? Energy? Real estate has consistently proven itself to be a prudent growth vehicle. Historically it has provided amongst the best returns of any investment. Factoring in the use of your tax-deferred equity, that will be taxed if it is not exchanged, as well as depreciation and other benefits, real estate is an essential component of a diversified long term wealth building strategy.

Warren Buffett and many others like him say it is the time to buy. If you are going to bet on someone, Warren Buffett isn’t a bad choice. Why is it that those who always seem to make money, in good times and bad, are buying now? Because, they know that when a market is down and others are selling, that they can take advantage of the sheep. They are not followers.

Keep your equity. Most investors are better served by retaining their equity, as opposed to giving it to Uncle Sam. Paying capital gains, recapture on depreciation, and other taxes removes you from the only true tax-deferral option and one of the best (if not the preeminent) wealth building tools available.

Think long term. Bill Gates said “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction”. The next two years may be difficult, but in ten years, we will look back and say that we should have invested more now.

Owning tangible hard assets is a powerful hedge against inflation and a fundamental diversification tool for your portfolio.

Be a wolf, not a sheep. Followers are the ones who sell at the bottom and buy at the top. Let us not forget, that the basic theory of investing is, buy low, sell high.

The sky is not falling. The market may be down and it may go down further. But, it will go up again and will exceed the values of today. Some areas are already seeing an increase in price and a lack of inventory of homes for sale.

Think about the ideas above and consider these three basic tenets:

Real estate has been, and will continue to be, a long term money maker for most savvy investors. Depreciation, tax advantages, and portfolio diversification are just a few of a myriad of benefits that make real estate an essential component of any long term financial strategy.

The 1031 tax-deferred exchange is the one of the most powerful prosperity building tools available, and can multiply an investors earning potential and income.

The financial and real estate markets of today may be tumultuous, but those who seize the opportunities of this economy will reap the rewards tomorrow.

If you are selling income producing real estate, you have a choice. For some, paying the tax and recapture is the appropriate option. For many others, employing their right to effectuate a 1031 exchange in today’s “down” market is the best way to capitalize on opportunity, develop a strong diversified portfolio, and to have the highest likelihood of maximizing net worth.

Is the sky falling? Not for those who understand that timing is everything.

Visit our website at www.investindallas.com.

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Whether you are buying or selling a home in Dallas, or you are relocating to the Dallas area, the The Harrison Group is here to help.