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Tuesday, October 13, 2009

Real Estate Investing For Long Term Gain.

By Doc Schmyz

The real estate market has dropped out. Prices are falling around your ears. So does this mean that you should get out of property investing? No this is actually a great opportunity to increase your portfolio. When you are buy real estate it does not really matter where the market is, unless you are considering selling in the short term. If you are holding long term then you have to accept the market fluctuations if you can buy during a low period of a cycle that is the "golden hour" in real estate...but sometimes it is hard to find that hour on your watch.

If the market is experiencing a major downturn it is a great time to be buying due to a vast number of bargains. You can buy at rock bottom prices. However, do not get too negatively geared because this is how most investors get themselves into trouble in the first place. Go for positive gearing. In other words make sure your rental income equals or exceeds your outgoing expenses, to include mortgage payments. If you have other income you may be able to stand an extra $100 or more per month to top up the mortgage but try to avoid it. Negative gearing is ok if you have a really good income and a tax problem.

When real estate prices where climbing we all knew that our property values also climbed. Now in a declining market and slower home sales, investors need to be able to hold those property investments for a longer period of time.

Meanwhile, concentrate on positive gearing and steadily increasing returns. This is a long term game and always has been. Look at property investing from a business perspective and do the sums before you buy. You need a decent return on investment and you need the rental return to cover or nearly cover the mortgage expenditure.

Having said all that, we cannot avoid the fact that with good research and due diligence the depressed market presents investors with the GREAT opportunities to build a portfolio of properties for long term gains. - 23212

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