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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75375  
Subject: Re: Trying to help my folks... Date: 12/31/2003 4:55 PM
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A lot of it depends on their personalities; some retired people enjoy dealing with the real estate management as a “hobby job” that keeps them active. If they aren't the types of people that would enjoy this they can still have real estate investments through REITs. The reduction in the capital gains tax rates is also favorable for real estate investing.

Other than the amount of time and frustration that can come with property management the biggest pitfall that comes with real estate is the potential lack of diversification. They could easily end up owing several similar houses in the same city(or even the same zip code) that will tend all perform the same.

One of the problems now is that the interest rates are so low that rental housing is coming under price pressure because in many areas it is cheaper to buy than to rent when all the tax advantages are factored in. There was a rental house on my street that was recently sold to resident owner in part because the prior landlord had problems finding any credit worthy renters that were willing to pay a high enough rent to cover the investment. Try to encourage them to only consider properties that provide a nice positive cash flow with sufficient reserves for big expenses(these will be hard to find). Some people think that there has been a real estate bubble and to buy a property that does not provide good cash flow is only speculating that there will be a bigger fool sometime in the future.

Greg
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