Women in Real Estate

Photo credit to Working Woman Report

Exploring the Drawer of Real Estate

As you will remember in the article ‘Library of Investments:  The File Cabinet’ — the three drawers are stocks, bonds, and real estate investment choices.  These are the choices for your Money Machine.

The Real Estate Drawer

The seventies and eighties were the golden age of real estate. Savvy New Yorkers and other city dwellers scooped up for a mere $60,000 three-bedroom apartments that today are worth as much as $1 million. In California, first-time homeowners who lucked out with that cute little cottage for $75,000 sold it within a year or two for two or three times as much. Not a bad turn of the money. The catchphrase was “flip it,” meaning “buy it and sell it fast.”

For a while, it worked: The market climbed to unimaginable heights. Then the nineties came with a very big reality jolt. The same desirable co-ops and condos that were almost “flipped” into infinity became immovable objects of regret. You couldn’t give those properties away; many owners sold at enormous losses if they sold at all.

People were treating their houses, condos, and co-ops as if they were a buy-at-one-price-and-sell-at-a-higher-price part of their Money Machine. But remember, your home is not part of your real estate drawer. It doesn’t generate cash, and therefore it cannot be a source of the money you’ll eventually need to live on after you stop working. At best, your home will eventually be paid off and won’t be part of your monthly expenses.

So just what is in the real estate drawer? The income-producing property, like apartment dwellings, stores, office space, houses for rent, and so forth. Is real estate a worthwhile investment for you? It depends on you. Being a landlord requires more of your time than managing stock investments. And real estate is less liquid than stock and mutual fund investments. Real estate, unlike stocks and bonds, is sold in one-on-one transactions rather than in a vast, regulated open market; you may not immediately be able to sell a house or apartment should the need for cash arise.

Investment Advice and Real EstateReal estate prices are not expected to do as well in the next twenty years as they did in the 1970s and 1980s, although lately, they have been on the upswing. The large number of immigrants who entered the United States in the 1990s is partly responsible for the boost in the real estate market; so are the last of the baby boomers, who decided to buy property late in life. Still, the gargantuan sales of a decade or two ago are unlikely. You just might turn a profit if you sell real estate in some choice states or regions of the country, but you may not be so lucky in other areas.

Nonetheless, real estate has its advantages as an investment. That beach cottage in Ocean City, Maryland, or the country cabin near Asheville, North Carolina, or the ranch in Wyoming, where you plan to summer, or the ski retreat in Deer Valley, Utah, are attractive and desirable properties in their own right. If you consider renting them out for all or part of the year, then you’ll generate income and your Money Machine will appreciate, even as you enjoy a few weeks each year in the house yourself. If you can charge more in rent than you pay out each month for your mortgage and overhead costs, you’ll have a healthy flow of cash that will keep your Money Machine purring.

Rental Sites – VRBO and others

   VRBO…found at vrbo.com is the most popular vacation rental site in the US.  Many of my friends go ‘on holiday’ and put their own house on VRBO to earn some income while they are traveling.  This is a way of turning your house into Money Machine earnings.  It requires that they clean, straighten and organize their living space very well so that other people can come in and live in the space in a ‘hotel’ manner.  This may work for you, or you may say that you want your personal space held privately and the income is not worth the effort.

     A good source of real estate income can be commercial properties, such as apartment dwellings, stores, office space, and so forth. But “location, location, location” is still the key. If an area or neighborhood has a glut of rentals, you could get stuck. Months could go by without renters, and this makes investing in rental properties riskier than investing in a healthy mutual fund.

Investment AdviceYears ago, I could see that I was spending a lot of money renting office space for my business. And I began to think about my lifestyle and travel to work.  I thought about my Money Machine and the investments that I was making in it, and concluded that if I continued to pay rent to someone else, that person would own a piece of real estate in fifteen years through my efforts. I asked myself “Why not me?”

So I looked for a building that would suit my needs. I wanted to occupy 90 percent of the building so that a bad tenant wouldn’t jeopardize my equity in the building, and I wanted something unique, just to make the experience of owning and maintaining the building enjoyable. I wound up buying a wonderful hundred-year-old building listed in the National Register of Historic Places. Residents of our town affectionately call the building “The Castle.” It was built by a brick mason for his sweetheart, who lived in Philadelphia. He hoped to marry her someday. Yes—she came, they married, and they moved into The Castle. My office is in what was once the living room. I imagine that female spirits in their bustled dresses are looking over my shoulder and marveling at how far women have come in taking charge of their financial futures!

I paid for the building over time, by paying rent to myself. Then later, when we no longer needed some of the offices for my business, I rented them out, and these rents paid for the building as well over time.

If you are a small-business owner in a similar situation, financing is available from the Small Business Administration that makes buying this kind of building easier. If you have a business with a proven track record, and if you plan to purchase real estate, check out the SBA.

Another piece of real estate that fits nicely into a Money Machine is the three-bedroom house owned by friends of mine who live near the beach in Santa Cruz, California. They rent it out during the school year to students from the University of Santa Cruz in order to pay the mortgage, and they get to enjoy it themselves during the summer. Once their mortgage is fully paid up, rental income and the value of the house will be part of their Money Machine.

A man I know named Dennis has purchased ten houses in various parts of California over the past fifteen years. He rents them out to families; he even rents out part of the house in which he lives. He’s definitely devised a long-term plan for building wealth by sorting through the opportunities in the real estate drawer. He decided also that it was worth it to pay others to oversee his properties so that he wouldn’t have to travel in the middle of the night to fix the water heater.

Other friends have a successful income-producing property in Philadelphia. They purchased a building, moved into the top floor, and opened an art gallery on the bottom floor.

Some might say, “You need capital to buy a building. How would I get it?” If you have an established business, plan to occupy the building, and can demonstrate that you will generate enough cash to meet monthly debt service on a mortgage, investors will be willing to make mortgage loans. Run an ad in your local newspaper— you might be surprised at the responses you’ll receive. But you’ll have to be prepared to do the legwork, like identifying the property and its costs and presenting your payment plan for the building. Look at it this way: You’ll become your own investment banker, and you will pocket cash that would otherwise be someone else’s fee.

If you do decide to buy real estate for investment purposes, you will also want to pay off the principal on your mortgage as quickly as possible. This will dramatically cut your mortgage payments, which go almost entirely to paying the bank its interest. You might think that it’s okay to stretch out your payments because the interest is tax-deductible, but this makes the building cost you more, and this is money you could be investing instead of paying to the mortgage lender—cash you could be growing in your Money Machine. The investment income you could be generating is worth much more than the tax deduction.

Your Investment Options: The Bottom Line

You now have a clear picture of the investment options for your Money Machine: stocks, bonds, and real estate. The bottom line is that your Money Machine will most likely be centered largely on mutual funds. You might also build your wealth with some individual stocks and perhaps with one or two pieces of the income-generating real estate. You’ll do just fine, though, if you consistently steer your cash toward a variety of investment-wave mutual funds and/or stocks and monitor their performance. It’s a safe, powerful way to grow your wealth and one that is easy to get started in with an investment of as little as $500.

Joan Perry is the publisher of www.WomensWealth.money, the national authority site for women and money. She is a Best Selling Author of ‘A Girl Needs Cash’, Random House; and Living Proof, Celebrating the Gifts that Came Wrapped in Sandpaper (co-authored with Lisa Nichols). Joan is also the creator of The Women’s Wealth Model, A Heroine’s Journey to True Wealth,. As a pioneer in the field of women’s wealth, she founded the first female-owned investment banking firm that underwrote and traded municipal bonds for major governmental entities. Now as a women’s wealth advocate, she serves as a teacher, coach, writer and speaker.

Pin It on Pinterest