Envision the property(ies) you would like to own 5, 10, or 15 years from now

At age 21, I bought my first “home.” It was a large old house that had been converted into four apartment units and the garage converted into a fifth unit—which is where I lived. It was owner-financed with 10 percent down and a 5 percent interest rate land contract. At the time, my friends had fun kidding me about the “dump” and my “slumlording.” (Actually, the property wasn’t that bad.) However, six years later, while enrolled in my PhD program at the University of Illinois, I owned (among other properties) a four-bedroom, two-bath, brick house that had previously belonged to the professor who chaired my doctoral dissertation. (Incidentally, he even financed it for me at 7 percent interest and 10 percent down.)Where weremy friends living? Most lived in rental apartments. None lived in (much less owned) a home anywhere near as nice as mine. (I am not bragging—just trying to show the power of knowledge, goals, and action.)

What’s the Moral?

As real estate prices throughoutNorthAmerica (and throughout theworld) have skyrocketed during the past five years, many potential first-time buyers and investors feel frustrated. They hesitate to buy and invest. But if you hesitate, you will only lag further behind.

Renters: Make Ownership Your First Priority

Had I continued to rent when I was age 21, I would not have been able to own the upscale house I bought at age 27. Your best chance today to own the home you would like in, say, 5 or 10 years is to first become a property owner as quickly as possible. Weigh carefully the advantages of buying a property that makes you some quick cash (rental income, fixer-upper, bargain-priced foreclosure). Do not complain that prices have gone through the roof (remember, push aside the self-denying, goal-defeating self-talk). Instead, create a financial plan that places you on the fast track to the property(ies) you really want.

Gain a Great Tax Break

Since 1998, tax law has permitted homeowners to sell their homes every two years and pocket their profits tax free (up to $250,000 for singles and $500,000 for married couples). This tax break means that you can buy a bargain-priced fixer-upper, renovate as you live in it, and then sell for a profit (the economy willing) in two years; then repeat as necessary or desired. Want to earn an extra $100,000 to $250,000 (more or less) in tax-free gains during the next four to six years? Weigh buy, renovate, and resell fixer-upper properties.