Should You Invest Where You Sleep?
Fortune (08/12/02) p.94; O'Keefe, Brian

The recession, the recent accounting scandals, and the subsequent stock plunge has prompted many investors to pour their money into real estate. One of the benefits of real estate investments is low volatility. In fact, there has never been a year in which the average U.S. home lost value since the 1960s. Moreover, continued low interest rates, aging Baby Boomers moving into their prime homebuying years, and echo boomers entering the work force and buying their first homes should be enough to drive the market even if interest rates climb and sales slow. While investors benefit from mortgage interest tax deductions and capital gains exemptions when they sell, they should be aware that they cannot take the capital gains exemption or depreciation deductions--unless it is a full-time rental--on a second home.


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