2007 Glencoe/McGraw-Hill Collecting § Q: Are collectible action figures a smart investment for retirement? § A: Although collecting can be an enjoyable and sometimes profitable pursuit, collectibles are not a mainstay of retirement planning. It would be best if you focused your retirement planning efforts on building a diversified portfolio that may include stock and bond investments. You could still use collectibles as a small part of your portfolio, but their returns are very unpredictable. 2
2007 Glencoe/McGraw-Hill Why do you think so many Americans invest in real estate? 3 Main Idea Real estate investment opportunities vary widely. Consider the advantages and disadvantages of each type of investment opportunity. Real Estate Investment
favorite investment for Americans. Unlike stocks and bonds, a piece of property is something you can: § See § Touch § Take pride in If you are new to the real estate market, you may be confused by all the different choices you have. Real Estate Investment
investments can be either direct or indirect. Direct investments include: § Single-family houses § Duplexes § Apartments § Land § Commercial property direct investment an investment in which the owner holds legal title to the property he or she has purchased
ownership is most Americans’ largest financial asset. Owning a home is a good investment because: § Home prices have risen steadily over the years. § Most homeowners have mortgages, which can provide certain tax benefits. Second homes, or vacation homes, also provide tax benefits.
property include: § Duplexes § Hotels § Office buildings § Stores Many investors start by purchasing a small commercial property. Then they buy larger properties as the equity in their original investment increases. commercial property land and buildings that produce rental income
tremendous gains, they also pose enormous risks. For example, you might not be able to sell your property at a profit, or even at the price you paid for it, if: § Construction in general slows. § Business activity declines. Unlike an apartment building, land in urban areas usually does not produce any income.
want to invest in real estate but do not have enough money to purchase property on your own, you might want to consider an indirect investment. Indirect investments include: § Real estate syndicates § Real estate investment trusts § High-risk mortgages § Participation certificates indirect investment an investment in which a trustee is appointed to hold legal title to the property on behalf of an investor or group of investors
A real estate syndicate invests in real estate. A syndicate may be organized as: § A corporation § A trust § A limited partnership A real estate syndicate offers you and the other partners a variety of benefits. syndicate a temporary association of individuals or business firms organized to perform a task that requires a large amount of funds
for a risk-free real estate investment, then participation certificates might be a good choice for you You can buy participation certificates from these federal agencies: § Government National Mortgage Association (Ginnie Mae) § Federal Home Loan Mortgage Corporation (Freddie Mac) § Federal National Mortgage Association (Fannie Mae) § Student Loan Marketing Association (Sallie Mae) participation certificate (PC) an investment in a group of mortgages that have been purchased by a government agency
advantages of certain types of real estate investments include: § Hedge against inflation § Easy entry into commercial property ownership § Limited financial responsibility § Financial leverage financial leverage the use of borrowed funds for direct investment purposes
of the possible disadvantages to real estate investments include: § Illiquidity § Declining property values § Lack of diversification § Lack of a tax shelter § Management problems Property management can be a full-time job, and many investors are not willing to take on that much responsibility.