Here are four major reasons why mature investors choose to invest in real estate:

1. Cash flow: Yes, it's true: even after all expenses have been covered (such as mortgage, repairs, utilities, taxes, and insurance), there still can be some money left on the table.

2. Appreciation: Based upon our current population growth, we can assume a growing need for housing - and a corresponding appreciation in value. The average single-family home sold for $23,400 in 1970 and has seen an appreciation rate of 8% annually. Of course, appreciation will vary with the location and condition of the property as well as the condition of the local economy, but historic performance is encouraging.

3. Equity build-up: As you pay down what you owe, you increase your equity with every mortgage payment made. The closer you get to the end of the mortgage, the faster the equity builds.

4. Tax savings: You can depreciate your investment properties on schedule E when filing annual tax returns. This is actually a paper loss that offsets your federal tax obligation. Of course government needs to pay its bills and they get their share when you sell one of your investments. You will pay capital gains tax on the increase in value of the property and the recapture of the depreciation. This cost could be deferred if you complete a 1031 tax deferred exchange.

Real estate investments can work for anybody, but it’s important not to buy the first investment property that comes along. Know enough about yourself and your competencies to choose the type of property that is right for you.

For example, if you’re not handy and not comfortable working with contractors, don’t buy a 200-year-old "fixer-upper". Instead, buy an investment condo or a fully-renovated property.This strategy will give you a comfortable introduction to investment property as well as a positive start to your own long term investment strategy.

I have owned investment property in New Hampshire for more than 17 years and have originated more than 1/2 billion dollars in New Hampshire real estate loans for thousands of homeowners. Experience has given me a perspective on what works and what doesn’t work for most investors. Choosing your property investments wisely and having realistic expectation will likely determine how successful you are in the long run.

If you want to learn more about buying investment property (or just want to talk about what might work for you), call Charley Farley at (603) 471-9300 or e-mail charley.farley@weloannh.com.