Ideal Real Estate Investments for 401(K) Plans

A lot of folks would like to find the best real estate investment, but even the best real estate investment strategy requires time, effort and hassles doesn’t it? Not so for 2014, 2015 and well beyond… with this strategy.

Sit back for a moment and try to envision what your idea of the best real estate investment strategy would involve. Picture the upside potential to make money; but also the financial hazards and downside risk. If you’ve ever watched the popular TV shows on the subject you’ve seen people make money flipping houses. You’ve also seen blood, sweat and tears.

Here we look at the advantages and disadvantages of traditional strategy, and then move on to the best real estate investment strategy for people who just want to put their money to work to make money vs. working for their money. Traditionally you buy, finance, improve, maintain, and manage a property. Your primary objective might be price appreciation (buy low, sell high) or it could be income (rental income). In other words, your strategy may be to flip it; or it could be to hold it. Either way, some day either you or your heir(s) will likely sell it.

Traditionally, the huge advantage of investment properties has been the financial leverage achieved in financing it with OPM (other people’s money, like a bank). This magnifies profits because you can own a $100,000 property with $20,000 or less down, out of pocket. In other words, with $100,000 you could own five properties or more… each of them going up in value and producing rental income… instead of paying cash and owning just one. Implicit here is the assumption that the value of real properties generally go up in value.

The financial crisis of 2008 drove home the crowdfunding real estate platforms Singapore of financial leverage (OPM) and the risk that’s involved. High leverage with little or nothing down was the best real estate investment strategy for making money quick – until the bubble burst. But there are other disadvantages in owning properties. To name a few: poor liquidity, costs and expenses, questionable market values, and property taxes. You can’t buy or sell quickly and easily, and the market value of a property is always subjective. Whether you are buying, selling or holding there are significant costs and expenses involved.

If you can buy right (cheap), put a property to its best use, and make improvements with sweat equity (do it yourself) your best real estate investment strategy for 2014, 2015 and beyond could be to go for it – with or without financial leverage. Just hope that the market remains favorable, the creek don’t rise, and interest rates don’t rise too much either while you own it. Interest rates have been historically low for years now and are forecast to rise in 2014, 2015 and/or beyond. Higher rates are a negative for both market prices and marketability.

So, what’s the best real state investment strategy for busy people who don’t want the hassles and disadvantages of property management? Let the professionals do it for you, without personally owning real properties. Simply buy shares in REAL ESTATE mutual funds that manage a portfolio of stocks (equities) in the real estate sector – like home builders and REITs (equity real estate investment trusts) that own/manage office buildings, housing complexes and other commercial properties.