I’m often emailed and asked about what sort of investments are “hot” right now, and what sort of investments are aggressive but relatively safe to house funds. My answer is almost always the same, real estate. If you invest in real estate early on in life you can accomplish a couple different things. First, you build equity and have acquired an asset that you can carry with you throughout life and into retirement. Second, and perhaps more importantly, you now have an investment vehicle that generates passive income for you. This passive income comes in the form of rent payments from your tenants. I remember purchasing my first home, and then a few years later my employer transferred me to another location. Instead of selling my home I simply held on to it and rented it out while I was away. This is essentially what led me into real estate investment.
While I am an advocate of investing in real estate, especially in the current economy, I think any investor needs to be very discerning as to where they invest. Property investments in Canberra (Australian territory), New York, London, etc., all tend to be highly sought after areas that should see appreciation for many years to come. These are areas that weathered the economic downtown and thrived while other areas became more depressed. Having a balanced portfolio is important, and real estate should be a significant portion of that balanced portfolio. Just make sure you are smartly investing in the right countries, cities, and geographical locations.
Now most importantly, don’t over extend yourself financially into order to invest. If you can’t afford a sufficient down payment on an investment property then you need to wait and save money until you do. Having an insufficient down payment can lead to higher interest rates, which in turn will cost you more money and eat into savings and investments. In fact, if possible see if you can start small and pay for your first investment property in full with cash. This gives you full security knowing you own the property outright, and you save money by not having any borrowing costs at all.