Although the purpose of The Homebuyer’s Kit is to explain the ins and outs of buying a home for you to occupy, this chapter will discuss the purchase of investment property. While any purchase of real estate can be looked on as a kind of investment, buying investment property usually means holding it for the production of income (kind of like buying stock), and not necessarily buying and selling for immediate profit. There is an entire science to the purchase of property for this purpose, but space permits only a brief review. Real estate has been called not only the best way to build an estate but also the only way. Real estate investment, though, takes constant effort on your part. You can buy shares of stock and then limit your effort to checking every day on the Internet. Not so with a duplex three blocks from your home. You must be ready for a phone call at 6 A.M. explaining that the water heater has burst, be ready to buy a replacement promptly, and arrange for someone to meet the plumber that very day.
Despite the plumbing problems, real estate investment is not liquid. You can take your money out of the stock market with a simple phone call to your stockbroker. When your capital is in real estate, you shouldn’t count on taking it out under, say, six months’ notice. When things (such as low employment levels) get bad in your community, it’s possible that you can’t get your money until the economic cycle changes. Certain economic factors locally can contribute to an unpredictable vacancy period, forcing you to carry your investment property when you may not be in a financial position to do so. |
