Buy Your Second Home First – Real Estate Investment

Owning real estate will still be a good idea in the twenty-first century. However, it will be for different reasons than in the past. In the foreseeable future real estate will not increase in value as it did during the 1970s and 1980s.

The real estate boom was an anomaly directly traceable to the uniquely huge baby boom generation driving up the demand for a limited number of houses. However, ownership of real estate will remain an excellent tax shelter—one of the only ones available anymore—as long as mortgage interest and taxes are tax deductible. Real estate will also, in all likelihood, increase in value at, or slightly better than, the rate of inflation. That means it will remain an excellent form of forced savings, one which, as I’ll explain in future chapters, you’ll be able to use to generate an income. Most important, home ownership will continue to offer emotional and psychological security in an age when that will be a very rare commodity.

Since real estate is no longer an investment, you can’t count on practicing what I call serial home ownership: buying a starter home, selling it for a profit and buying another for your growing family, selling that for another profit and using the proceeds to buy a retirement home. In this new economic age you should wait longer to buy and then buy your second home first—in effect the second home you would have bought in the past. And you should buy a home you can live in for the rest of your life. That means it’s either large, or expandable enough for you to accommodate more children, your aging parents, or a home business. And it should be located in an area where you’ll feel comfortable as both a young parent and an empty-nester.

Obviously that makes the purchase of a home much more dramatic. But that’s as it should be. You’re not buying a pair of sneakers or even a car. This is the single largest transaction you’ll ever make. It’s not just a house, it’s a “home.”