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Making a Real Estate Investment?

Ask yourself these 9 questions before you buy.

BY PATRICIA P. HOULIHAN
REALTOR^®Magazine published its financial planning guide in February, including an article on taking control of your finances, which covers investment strategies such as real estate investing.

Real estate investments should fit into your overall financial plan. Ask yourself these questions before you buy investment property:
1. What other investments do you have?

2. What retirement savings do you have?

3. Is your unpredictable cash flow able to accommodate ongoing ownership?

4. Is liquidity a concern for you?

5. Do you need the tax advantage real estate investment provides?

6. Do you see this house generating immediate income or as a long-term investment?

7. Do you want this house to provide income when you retire?

8. Do you want to pay down the loans on your properties before you retire and live off the income they generate, or do you want to sell the properties and use the profits to finance your retirement?

9. If you have a number of residential properties, can you commit to living in each one for two years prior to selling it to take advantage of the current tax provision that allows a $500,000 capital gain exemption (for married couples)?

Answers to questions like these will help you develop your investment plan and guide you toward a secure retirement.