• you have to move - to a cheaper area - or increase your monthly obligations with an equity line in order to live on your home equity;
  
  
• a million dollars (or even two million!) is really not much in today's economy - probably not enough for you to live on through retirement; and
  
  
• because women live longer than men, want to live fabulous and active lives throughout their retirement (which takes cash), and often took years off from work to raise kids, we need to be even more aggressive than men and than in years past in order to generate income that continues even after we stop working.
  
  

Reason #1: Real Estate is an Ideal Investment Because Real Estate is Stable
You'll be happy to hear that the fabled real estate "bubble" doesn't exist. For years now, news reports have said that American real estate is highly overvalued (hence, the "bubble"), and that the value of homes will plummet (burst) any minute. Many a would-be homebuyer or investor has been stopped short on her path to property ownership by the fear of buying at the top of the bubble and getting caught in the burst.

The truth is that real estate values, like all markets, are cyclical, subject to periods of relative highs and lows. However, American real estate has NEVER had a nationwide "bubble," never a time in which there was a national loss in value across the country. Over the last few years, some (mostly urban, mostly coastal) markets have been appreciating at an unsustainably high rate. For instance, in the Bay Area, we have had a number of years where it was completely commonplace for a home to increase in value 25 to 35 percent - meaning that homes were doubling in value every three years! To the extent that this reflects a bubble, it is a bubble that is set to flatten out somewhat, but not burst. The basic economics of these areas - limited supply, a constant influx of people moving into the area, and a strong job market - prevent homes from actually losing value.

As I write this we are at what most learned commentators describe as the flat part of the bubble, or the bottom of the real estate cycle in many of these markets. At the bottom of the market in the "bubble" areas, appreciation has slowed to 2-5 percent per year. In many noncoastal and non-urban markets, 2-5 percent a year is normal or even good, and some of these areas have seen an upswing to 10 percent plus at the same time as the bubble has flattened in larger areas.

Appreciation and home values are local issues. There certainly have been periods in which individual cities or areas have decreased in value due to local economic troubles or natural disasters. For example, after the 1989 earthquake, homes in San Francisco lost as much as 30 percent of their value - and values stayed depressed for three years. However, in the long term scheme of things, real estate everywhere keeps trucking ever upward in values; those folks who owned homes before the earthquake and still own them now have experienced a 300 percent plus increase in the value of their homes! Long story short, other than short term, local, and occasional glitches, the value of homes rises consistently and stably, and is not subject to the universal ups and downs you see with other investments.

Reason #2: Real Estate is a Good Investment Because It has Tax Advantages
All the interest you pay on your mortgage loan - even for your investment properties -- is tax deductible. And for the first several years you own a property, most or all of your monthly payment is comprised of interest. This can mean from $8,000 to $40,000 plus per year of additional tax deductions, which basically is like taking money that you were paying for taxes and putting it directly into the appreciating asset of a home.

Additionally, the ongoing investments you make in your properties in the way of improvements, management and maintenance costs are also tax deductible - so Uncle Sam allows you to enhance the value of your own property and gives you a tax break for doing so.

Finally, when you buy stock shares at a low price and sell them at a high price, you pay a capital gains tax on the profit you make. When you do the same thing with your real estate, the tax code gives you two huge opportunities to defer or eliminate your capital gains tax liability:

1. You can indefinitely defer your capital gains taxes through a 1031 Exchange, if you take all your profits from the property you sell and roll them into the property you are purchasing, and meet other guidelines; and
   
   
2. You can actually convert an investment property into a personal residence by living there for at least 2 years, then take a personal residence exemption from capital gains taxation, allowing you to pocket $250,000 (if you're single) or $500,000 (if you're married) tax-free in profits on the sale of your former investment property.

Reasons #3 & 4: Real Estate is a Good Investment Because Property is Scarce & People Will Always Need a Place to Live
Everyone from Will Rogers to Tony Soprano has made the observation that real estate is a good investment because "they ain't making any more of it." The fact that there is only so much land available, especially within livable distances from jobs and schools. This, in conjunction with the constant growth of the population, has created a permanent demand/supply imbalance. This imbalance is what keeps American real estate appreciating over time.

Reason #5: Real Estate is a Good Investment Because Real Estate is Secure
The value of a property is mostly in the land, and land is extremely durable - it's almost never destroyed. For this reason, homeowner's insurance is readily available - and very affordable. (Unless you buy your home with all cash, your mortgage lender will actually require you to obtain and maintain a homeowner's insurance policy.) So if your house burns down - you can easily replace it. In areas prone to flood, landslide or earthquake, it can be prohibitively expensive to insure against those risks; when natural disasters of these sorts destroy homes or the land they sit on, governmental entities virtually always offer some rebuilding assistance. Even with all the natural hazards, real estate is still a much more secure investment than almost any other asset you could buy. Just try asking your bank to insure your securities investments against the possibility of an Enron happening again, and when they stop laughing, you'll understand why real estate is relatively secure compared to other investments.

Reason #6: Real Estate is a Good Investment Because It Can be Bought Using Leverage
Leverage is just a fancy way of saying that you can put down a tiny bit (or none!) of your own money and buy a house, because someone else (the bank) will let you use their money to make the purchase. (Real estate insiders talk about the upsides of using Other People's Money so frequently that they've actually assigned it an acronym - OPM). Precisely because real estate is such a stable, scarce and secure asset, banks know it is a safe bet to give you a loan secured by your property.

Leverage is probably the most critical feature that makes real estate investing such an extraordinary opportunity for developing financial prosperity, because it literally makes each dollar that you invest into the property grow exponentially. Look at it in this (very oversimplified) way:

Leverage is simply the flip side of the debt you incur to purchase your property. Yes, it is debt, but a really nice type of debt that is actually desirable because it magnifies the asset building impact of your dollars.