We have a rule at our house. You can climb only as high as you can get yourself down. This has caused many a tear, debate and calls for help. But it works. My kids feel confident climbing the backyard tree. We don’t want to stifle their natural curiosity and quest for adventure but at the same time we want them to know their limits and listen to their inner voice that says “that limb is too far for me right now.”

It occurred to me while I was watching my kids climb that similar advice could be applied to real estate investment. The investment market is very hot in Sonoma County, with property values dipping so low in areas that cash flow can be had with as little as 20% down, something virtually unheard of in the recent past. As more and more investors buy into this market it is easy to get caught up in the frenzy and to worry that you will miss the opportunity to build your real estate portfolio. There are some great deals on the market and more and more arrive daily. Owning real estate is a great way to build wealth and I would not be one to discourage that desire. But as recent history shows us, it is easy to get over your head in real estate loans. A safe investment is one that involves money you can afford to loose. If the property decreases value (you fall out of the tree) you want to loose only the money (pride) not your life.

Posted by:Jen Phillips