Any real property with a one to four single or multi-family units is considered residential. These can be owner occupied second homes, rental homes or vacation homes to qualify for loans. Raw land that can be developed with a single family home is included.
Real estate is a safe, wealth building venture. The national average for real estate appreciation consistently increases from year to year, with a remarkable 38% increase over the past five years according to the Federal Housing Enterprise Oversight (FHEO). Even though analysts predict the housing prices will drop overall (or the housing bubble will burst), finding areas of growth is possible if you're willing to buy in another area or state. Arizona, Florida, Nevada, Hawaii and other warm weather climates, along with mountainous areas, are still growing rapidly. In fact, retirement areas like Nevada and Florida are predicted to double in the next 20 to 35 years as baby boomers retire. Buying now could pay massive returns in the near future.
Using real estate as a passive investment can gradually build wealth. Most investors purchase a second house, rent it, build equity, and then buy additional rentals. As long as the home is owned for more than a year and it was bought as a passive investment, there are no self-employment taxes or Unrelated Business Income Taxes when using a self-directed IRA. Protecting one's assets from loss is very important to investors, as a result many create a Limited Liability Company, or other corporate entities, to separate their business from personal activities.
Active real estate investments are either land development projects or properties bought and sold within a year, like a quick flip, and are all the rage for books, seminars and infomercials. These self-proclaimed experts impart get-rich-quick with no money down strategies that many consumers have tried and failed, losing huge amounts of money. However, some have tried and succeeded realizing a nice profit. Like passive real estate investing, it is important to protect personal assets in case of loss or litigation. See Businesses for descriptions of C and S corporations.
There are several types of mortgages to consider and programs for buyers meeting certain qualifications. Review Mortgages to learn more.
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