Real Estate In Personal Portfolios

Right Amount = Measure as a percent of total assets Normal:
25-40% People who use real estate in their business (dentists, farmers, etc.: 30-60%)

Right Leverage = Normal: 2x – 5x
People who use real estate in their business: 1.4x – 2.5x

Right Liquidity = 24 months of mortgage payments. This is usually 20% of outstanding mortgage balance. A1 + A2 should equal minimum of 20% of outstanding mortgage balance.

Safety/Tax Advantages The best real estate investment is a personal residence. Most states have “homestead exemption” laws that protect a personal residence or a portion of the equity from creditors. Mortgage interest is tax deductible. If you’ve owned and occupied your home for 2 of the 5 years prior to sale, the first $250,000 of gain is tax free ($500,000 for married couples).

Nine ways to invest in real estate (in order of preference):

Home

1. Personal Residence

Income Property

2. Business Real Estate
3. Shared Equity Arrangement
4. Rental Property (Get Real Estate Professional license to deduct losses, 750 hours)
5. REITS

Vacation home, land

6. Vacation homes (At least 13 weeks or more use per year?)
7. Vacant Land within 25 miles of home area (Not productive, carrying costs, speculative)
8. Time shares (Overpriced, Price X 52 weeks = Value of Condo?)
9. Limited Partnerships (Inheritance problems, 20% of return goes to costs)

• Home
• The Financial Plan
• Money Management
• Who Is Plan & Act
  What is Plan & Act Chief Advice Officer
• How It Works
  Money Management The Financial Plan Five Fundamentals
• Blog
• Info Center
  Your Life Circumstances Glossary Videos The Cambridge System Frequently Asked Questions Understanding The Ten (10) Financial Stages of Life Good Debt vs. Bad Debt Functional Asset Allocation The Hidden Costs of Paying Off Your Mortgage Real Estate In Personal Portfolios The Customized Longevity Planning Report The Cambridge Safety Net: Laddered Treasury Strips