Real Estate Investing in an Affordable Area

By Alan Rosenthal

According to demographers, Baby Boomers (people born between 1946 and 1964) and 18-30 year-olds are the largest groups that will be moving homes in the next two decades. The reasoning behind this shift is due to domestic migration and immigration, especially with 18-30 year-olds. This shift, said to be the biggest in our country’s history, will create a major boom in real estate.

But where will they move? One of the deciding factors for locations for these two groups, as well as many others, will be affordability. Let’s look at a few examples.

Bill and Mary are two married Baby Boomers who live in Southern California. Even though the weather is beautiful, they want to retire to a more affordable area. Mary and Bill each have an IRA as well as a small pension plan. They have a little money saved and, fortunately for them, they’ve paid off their house in Woodland Hills. It’s now worth $800,000.

They sell their house and, after commissions and fees, walk away with $750,000. Because the basis price of the house including improvements was $250,000, they make a $500,000 tax-free profit. Since Bill and Mary used the house as their primary residence for two out of the last five years, they are entitled to a tax exemption from the capital gains. Mary and Bill now have $750,000 and do not have to give the government a penny in taxes.

If Mary and Bill decide to move to Arizona or Nevada, they can buy a newer home for roughly the same square footage or bigger, let’s say for $200-$250,000. Now they have $500,000 dollars or more to help fund their retirement and pay for a lot of nice cruises, trips, theatre, dinners out, money for charitable contributions, etc.

Now let’s see what could happen with the 18-30 year-old age bracket. The people in this group have a higher propensity to move because many of them are getting into a career or starting families. This group is huge in regards to domestic migration and immigration.

Let’s take Jim for an example. Jim was living on his own in a townhouse he purchased a couple of years ago in Agoura Hills, California. Because the cost of living in this area is high, he needed to get a roommate to help cover expenses. But even with the roommate and his job at Countrywide Mortgage, he got by paycheck to paycheck never having much extra money at the end of every month.

Last year Countrywide transferred Jim to Plano, Texas when it moved 500 jobs, and has since shifted its home base from California to Fort Worth, Texas.

Jim purchased a beautiful 2,200 square foot home to live in, with no roommate. Because he moved to an area of high affordability, he also bought two rental properties in which he has positive cash flow. Now he can go out to a nice restaurant and take vacations.

The last example is of a married couple in their early twenties who are just starting their careers.

Tami is a pre-school teacher and Matt is an engineer. What could they afford in the San Fernando Valley of Southern California? A two bedroom apartment conversion can cost $400,000 and would require both of there incomes to pay for it. These prices do not leave many options for Matt and Tami.

If they moved to an area of greater affordability, such as Texas, Nevada or Arizona, they could afford a home in a very nice subdivision with good schools on Matt’s income alone. If or when they wanted to start a family, Tami would not have to work to help pay expenses and they live comfortably owning their own home on one income.

So even if you or I decide not to move, there will be millions of americans, as well as immigrants, moving to areas with greater affordability in the next couple of decades. This will help us real estate investors, who purchase properties with appreciation in such areas where demographics show high growth rates.

To learn more about how Real Estate Investments can help secure your family's financial future, go to Dr. Alan Rosenthal's website at FinancialHealthRealEstate.com where you can find more great investment information. And while you're there, please sign up for your FREE Financial Health Real Estate Starter Package full of tips, newsletters and much more. Plus, you are cordially invited to attend one of his real estate investment workshops by visiting FinancialHealthRealEstate.com/UpcomingEvents.html. For additional information listen to one of Dr. Alan Rosenthal’s investment talks at FinancialHealthRealEstate.com/InvestmentTalks.html.


Home About Dr. Rosenthal Rave Reviews Upcoming Events Credit Repair Solutions Articles and Resources Products Ask Dr. Rosenthal Schedule an Appointment FAQs Blog Contact Us	Real Estate Investing in an Affordable Area By Alan Rosenthal According to demographers, Baby Boomers (people born between 1946 and 1964) and 18-30 year-olds are the largest groups that will be moving homes in the next two decades. The reasoning behind this shift is due to domestic migration and immigration, especially with 18-30 year-olds. This shift, said to be the biggest in our country’s history, will create a major boom in real estate. But where will they move? One of the deciding factors for locations for these two groups, as well as many others, will be affordability. Let’s look at a few examples. Bill and Mary are two married Baby Boomers who live in Southern California. Even though the weather is beautiful, they want to retire to a more affordable area. Mary and Bill each have an IRA as well as a small pension plan. They have a little money saved and, fortunately for them, they’ve paid off their house in Woodland Hills. It’s now worth $800,000. They sell their house and, after commissions and fees, walk away with $750,000. Because the basis price of the house including improvements was $250,000, they make a $500,000 tax-free profit. Since Bill and Mary used the house as their primary residence for two out of the last five years, they are entitled to a tax exemption from the capital gains. Mary and Bill now have $750,000 and do not have to give the government a penny in taxes. If Mary and Bill decide to move to Arizona or Nevada, they can buy a newer home for roughly the same square footage or bigger, let’s say for $200-$250,000. Now they have $500,000 dollars or more to help fund their retirement and pay for a lot of nice cruises, trips, theatre, dinners out, money for charitable contributions, etc. Now let’s see what could happen with the 18-30 year-old age bracket. The people in this group have a higher propensity to move because many of them are getting into a career or starting families. This group is huge in regards to domestic migration and immigration. Let’s take Jim for an example. Jim was living on his own in a townhouse he purchased a couple of years ago in Agoura Hills, California. Because the cost of living in this area is high, he needed to get a roommate to help cover expenses. But even with the roommate and his job at Countrywide Mortgage, he got by paycheck to paycheck never having much extra money at the end of every month. Last year Countrywide transferred Jim to Plano, Texas when it moved 500 jobs, and has since shifted its home base from California to Fort Worth, Texas. Jim purchased a beautiful 2,200 square foot home to live in, with no roommate. Because he moved to an area of high affordability, he also bought two rental properties in which he has positive cash flow. Now he can go out to a nice restaurant and take vacations. The last example is of a married couple in their early twenties who are just starting their careers. Tami is a pre-school teacher and Matt is an engineer. What could they afford in the San Fernando Valley of Southern California? A two bedroom apartment conversion can cost $400,000 and would require both of there incomes to pay for it. These prices do not leave many options for Matt and Tami. If they moved to an area of greater affordability, such as Texas, Nevada or Arizona, they could afford a home in a very nice subdivision with good schools on Matt’s income alone. If or when they wanted to start a family, Tami would not have to work to help pay expenses and they live comfortably owning their own home on one income. So even if you or I decide not to move, there will be millions of americans, as well as immigrants, moving to areas with greater affordability in the next couple of decades. This will help us real estate investors, who purchase properties with appreciation in such areas where demographics show high growth rates. To learn more about how Real Estate Investments can help secure your family's financial future, go to Dr. Alan Rosenthal's website at FinancialHealthRealEstate.com where you can find more great investment information. And while you're there, please sign up for your FREE Financial Health Real Estate Starter Package full of tips, newsletters and much more. Plus, you are cordially invited to attend one of his real estate investment workshops by visiting FinancialHealthRealEstate.com/UpcomingEvents.html. For additional information listen to one of Dr. Alan Rosenthal’s investment talks at FinancialHealthRealEstate.com/InvestmentTalks.html. ©2008 Financial Health Real Estate, Inc.