Real Estate Investments

Even with the recent downturn in real estate values (1990-1996), investing in California real estate has provided handsome returns ever since the Treaty of Guadalupe Hildalgo ended the war with Mexico in 1848. Since World War 2 real estate appreciation in the Golden State has averaged 10% per year.

Advantages

The advantages of real estate investments are many: real estate can be acquired with other peoples money, it can provide an excellent return on your cash investment, it's a tangible asset, you can go and look at it and the fact that there are unique tax benefits to income property ownership that cannot compare to other investment vehicles.

Most other investments have to be purchased with cash. Real estate can be purchased with other peoples money. Residential income property purchases usually require 20% down in cash. Down payments for commercial real estate are usually higher and vacant land usually requires down payments of 50% or more.

Real estate is a tangible asset. When you own common stock, you own a fraction of the company you've invested in. Which faction do you own? With real estate there shouldn't be much doubt about what you own.

The main advantage to real estate investments is that it is possible to sell your real estate and reinvest the proceeds into real estate without paying the tax man (1031 Exchanges).

Other tax advantages, too numerous to discuss here, are also made available to owners of certain real estate as government at all levels struggles with the "housing crisis".

Lastly, real estate has fallen from favor recently. Why invest in dirt when mutual funds are returning 30% a year? Long term investors, as you should be, understand that income real estate provides terrific inflation hedge. Should inflation return, you would be able to raise your rental rates to maintain your purchasing power and able to repay your loan with cheaper dollars (this assumes fixed rate financing).