Investing in Real Estate - A Great Way to Diversify Your Portfolio

Investing in Real Estate is always a good idea if you can afford it, and is also a great way to diversify your portfolio. There is such a wide range of things you can do in Real Estate Investing, from just owning your own home, to getting into a partnership on a construction project. Some like to buy empty lots, some would love to buy land overseas.

As with any kind of investing, there are pluses and minuses to Real Estate investing. Some of the negatives include having difficulty getting your investment back once you have taken the plunge. Another may be that the particular real estate is overpriced in some markets, while you see undervaluing in another. Things are subject to zoning laws and environmental issues and those things can change and are out of our control.

The pluses to investing in real estate can include things like having a hedge against inflation, and allowing for more tax deductions in some cases. Of course a huge one that sometimes there are just huge profits in certain markets.

Some people will leverage, or borrow money to pay for their real estate investments. While this may be a temptation, since often you can sell at a profit and benefit, its not always the wisest choice. You can't control or always predict what will happen if prices go down. Your losses can be very great if you decide to leverage. The appeal is usually that there are so many cases where the real estate increased in value and often significantly. Unless you have a lot of money to invest and aren't needing to sell quickly or on a time frame, I would recommend against borrowing for obvious reasons. It makes sense that its hard to sell quickly at times, and especially for the price you are hoping for.

Second homes are appealing for many reasons, including investing, vacationing and personal use. Some people really appreciate the extra income that can be had which can come through renting out such a property. It gives some flexibility in that sense if you should have a time in life where you need the income more than you need the "time away." Pay attention to things like possible cuts in resale value due to overbuilding, and complicated rules limiting their usefulness as tax shelters, etc.