Zacreth

I'm curious because I have read lots of books recently on personal finance and such. But one point everyone seems to repeat in all the books is real estate investing.

Passive income is what they talk about and I'm curious to know... it is worth the hassle with the way the economy is right now? I can see how you could buy a house a little cheaper than the current market and you can either sell it higher or rent it out.

What are your guys thoughts on it?

trainwreck

real estate is not only a good investment, but an awesome tax shield.

cthree

Real estate is not quite as passive as they say. You still need to be a landlord, collect money, keep up maintenance and perform repairs. You also have to kick out deadbeats which isn't that easy and for those who say real estate can't go down in value I say you haven't been paying attention.

If you want passive income then what you want is fixed income, ie bonds both government and commercial. They will pay you compounding interest with very low risk, require no maintenance and can be 100% tax free (municipal bonds).

Your best option is to look at all the investment choices available. There are opportunities in just about every vehicle but you have to be realistic about how much you are prepared to both work and risk. Being a landlord is not my idea of fun.

trainwreck

^but with real-estate investing you can leverage to gain equity. buying a bond presumes you have lots of equity to begin with. no point in leveraging to buy a bond.

owning property not only helps build equity, but increases cash flow through tax deductions.

if you have 2 people both making 100k, 1 owns a mortgage/property, and the other doesn't, the take home pay differs significantly by around 12%.

persons without mortgage would probably only take home 70k

person with mortgage would take home 80-85k, depending on the size of the mortgage.

and i am sure all the books op has read mentions that paying rent is like paying off someone else' mortgage blah blah blah...

have at least one piece of property...whether you want investment properties is a different story, like cthree mentioned, look at the numbers and risks.

Zacreth

Thanks for the info guys. I'll have to look at what the possibilities are. Just trying to figure out the best method to have a steady monthly passive income so that I can get some financial freedom.

sahtt

When there are such great deals in equities yield wise and debt yield wise I don't see the temptation in a falling housing market with increasing unemployment (higher chance of dead bit renters).

cthree

That actually isn't true and is in fact a very popular and common investment. It's called a carry trade but that really depends on your capital base. You need a lot of money, lots, to pull that off.

I don't this the OP is talking about owning the house you live in. That's not really an investment. I think he's talking about income properties. Perhaps he can clarify. You aren't going to get any "extra" tax benefits from investment property. If you're talking about income then the problem you have with real estate is that it is withdrawn and not reinvested and it's taxable at the time it's paid.

If you compare that to a municipal bond fund which pays 4-5% tax free. Ginnie Mae's are paying 6+% and once people stop hiding in treasuries and get back into the stock market even guaranteed 10 year treasuries will pay well over 5%.

You don't get the capital appreciation in bonds that you would get in real estate or even dividend paying stocks but you don't have any measurable risk of capital loss either.

If you want a nice safe income portfolio then you want 60% in guaranteed (federal, state, municipal) bonds, 20% in high-yield commercial bonds and 20% in high-yield dividend paying stocks. The bonds you would buy in no-load mutual funds.

That's going to give you a nice blend of high and low yield and a pretty safe place to store your nest egg. It's kind of portfolio that financial planners and advisors would be recommending to clients who are stashing money away for retirement if they were halfway competent.

Zacreth

Yes I was talking about income properties and the ability to draw a monthly passive income from those properties. I have read up on tax liens and it seems okay but not really something I would like to invest at in this economy of ours right now...

Just trying to leverage the best option to increase the money I have so that I don't have to keep working for someone in a 8-5 job that I have...

cthree

How old are you and how much capital are you talking about if you don't mind me asking? It makes a difference in the answers you receive.

Zacreth

about only 12k cash in hand, and 27. Time is starting to fly by and I need to start looking past next week.