When utilized wisely as part of a diverse portfolio, real estate investment can be the best move for most Americans to build wealth and subsidize their incomes in retirement. Between passive cash flow, appreciation as a hedge against inflation, and depreciation to offset taxes, it is incredibly attractive. However, there are a few rules which must be followed:
1. Define Your GoalsBefore acquiring any property, ensure that you have defined your financial and personal goals and that your investment decisions are aligned with them.
2. Is Your Home the Worst Investment You can Make?
For many, purchasing a home can create forced savings and eventually become the best investment they ever make. However, your own residence and home equity should never be something to gamble with. It's where you live; your investments are for paying for that. Don't confuse the two.
3. Don't Invest in Real Estate Until You Are Financially Ready
Real estate is somewhere to put your money to work for you. No money down real estate investing is possible, and it can be a way to make money, but if you bite off more than you can chew and don't have any savings or reserves, you are asking for bankruptcy.
Make sure you are prepared for the worst, have separate personal savings which are sufficient to carry you through for several months, and have an exit strategy before you get in as well as a plan B and C.