The name of the game in Washington is still real estate.Although the single-family housing trend is slowing and recession and inflation are feared, most metropolitan Washingtonians remain highly optimistic about the future potential of real estate investments.
In fact, the interest in investing in real estate has become even stronger recently, since most forecasters consider real estate the only real hedge against inflation.
Kenneth R. Harney, a columnist for The Washington Post real estate section and the executive editor of Housing and Development Reporter, has capitalized on this tremendous interest in real estate in his new book, "Beating Inflation With Real Estate."
The subtitle of Harney's book tells it all: "How You Can Keep Ahead and Save Taxes by Investing in Rental Houses, Land, Second Mortgages, Vacation and Other Properties."
In the forward, Harney gives a warning that must be heeded carefully by anyone interested in the real estate game: "Real estate can be harmful to your financial and mental health. It's no sure thing. But if you pursue it sanely, it can be extraordinarily profitable and fun in the bargain."
The book, although well written, is not intended as an easy reader. Real estate is a highly complex field, involving such matters as tax and investment considerations, leverage issues and major decisions relating to one's own future.
Should you buy land for long-term holding, or are you better off with in-town rental property? Is a condominium unit a better investment than a cooperative share? Should you invest with your neighbors in that limited partnership down the street? Will your bank give you the necessary financing for all of these projects?
There are a lot of real estate books presently on the market, ranging from the how-to-get-rich-quick type to the textbook form material. Harney's book is perhaps the only one that takes the average unsophisticated reader through most -- if not all -- of the kinds of investment possibilities currently on the market. Indeed, the final chapter is entitled "Creative Real Estate Strategies," in which Harney attempts to put together some imaginative ways of keeping ahead of inflation.
But the book is not designed only for the unsophisticated reader. Anyone in real estate, whether the lawyer, the lender, or the broker, can use the Harney book as a desk reference when dealing with individual problems.
For example, Harney makes one important observation that he carries throughout his book: "Think taxes before you acquire property."
Harney goes beyond mere advice to outline the various tax considerations for each of the transactions described in the book. A comprehensive analysis of tax considerations can be found in the chapter on single-family house investment. Indeed, Harney's explanation of depreciation finally made the concept understandable to this reviewer.
One question keeps coming to mind, however, as one reads this book. "Can I really do it? Can I make the kinds of investments Harney suggests are available?" Unfortunately, books alone cannot tell the whole story. One certainly needs to have an understanding of location. Is the neighborhood declining, or is it still a good investment potential?
One certainly also needs to know the availability of financing. Harney perhaps passes too lightly over the availability of money -- especially in these tight money times -- when he states that "you can easily" refinance an older mortgage. Money is tight, and lenders are cutting down on their investment loans in favor of owner-occupied financing.
But as long as real estate investment continues to be the talk of the town, Harney's "Beating Inflation With Real Estate" will certainly be a valuable tool and compendium for everyone.