Buying Real Estate | 01.06.05

So at lunch today, our Project Manager was thinking of buying a place in
Brooklyn. She thought of buying a place 3 years ago and now everything
is much more expensive and she doesn't know if she should buy now (being
the market is really inflated).

Ah, this is the dilemma alot of people have been facing in today's real
estate market. Do I buy now? Or do I wait? But if I wait, am I going to
get priced out? Am I buying at the top of the bubble?

Well, my answer is this (DISCLAIMER: I'm not an "real estate" expert;
these are my opinions based on my own real estate deals in the past few
years and reading numerous real estate books) go and buy now. But buy
carefully. Yes the market is very high, but there are good deals out
there. The secret is to look around a lot and don't buy high.

Ok, Why should someone buy, especially in today's market? One word:
limited. Land is limited. We can make more cars, more buildings, more
clothes, but we can't make more land. There is only a certain amount of
land available. Second, the benefits of real estate is vast. There are
hugh benefits that would benefit 99% of the population, here are some:

- tax breaks on property taxes and mortgage interest
- in some cases, no taxes on property sold for profit
- increase net value with mininal money

Here is a example. I see a property for 500,000.00. Now, if I wanted to
buy 500k in stocks, I would need 500k in cash. Well, if I want this
property for 500k, I just need a mortgage and 10% down (50k). Now for
10% of the value of the property, I now own 100% of that property.
Pretty cool, huh. It just gets better.

Now, say I held onto this property for 2 years. The property value
soared during this time, so my property can be sold on the market for
say 550k (a 10% increase in value over 2 years, very conversative
figure). So for 50k in cash, I made another 50k (value of the house is
500k to 550k). I made an 100% return on my cash investment. Now thats
hot. Wait, it gets even better.

By paying taxes and mortgage interest, I get a certain percentage back
in taxes for those two years, because I own the property. You're like,
thats awesome, right? Now get a load of this.

If I sell the property 2 years after I brought it, I won't have to pay
taxes on my profit (this is under certain conditions, like if you use
the money to buy another home or you had to move for work). So I made
100% profit on my intial investment and I didn't pay Uncle Sam a dime of
it! Say if I made the same amount of money in the stock market, I would
still have to pay taxes on my profit, after I sold the stocks.

Are you a believer now?

So, how do you get started? I have some very simple steps:

- read a book on real estate. there are tons of good books. just so you
know what you have to do, and what you need to prepare for.
- check out your credit report (equlifax, TRW). you will need good
credit to get a mortgage.
- get a mortgage loan. find out what you qualify for. they will show you
how much you can afford based on your salary and cash on hand.
- last but not least....start looking around. and look. and look. the
rule of thumb is that by the time you buy your place, you should have
seen 99 other properties before that time. the more you look, the better
you will know your market. also, don't except to get any property you
just bid on. sometimes you will lose out on a bid to another bidder.
thats why you got to keep on looking until you find the right one and
win the bid on it.

ok. hope that got you all hot and heavy. now get to it.