Many people assume buying a home gets them ahead financially. But in some cases, renting makes more sense. As investors, it helps to understand the people we are doing business with and figure out whether it’s more advantageous for them to buy or rent. So put yourself in your prospect’s shoes and consider the following:

 Renting makes sense for people who plan to live in the area for two years or less. If the person is not planning on staying for the long term, there’s a stronger chance of losing the money put toward the fees associated with purchasing property.

 People with little or no savings, bad credit, and unstable employment are better off renting property until they have savings or change their financial situation. In this volatile real estate market, it is becoming more difficult to get a decent interest rate if the client is considered to be a risk.

 Unlike home ownership, renting has no tax benefits, but if your client is in a lower tax bracket, they don’t have as much of a need for tax deductions.

How does the issue of renting versus home ownership impact us as investors? When we are buying property, we have two options: to hold for the long term or to sell. If you know your intentions with the property before you buy, you can capitalize on both markets. You can rent for the long term, especially if the property cash flows, or sell it straight out or on an option.

Knowing your exit strategy before you buy helps you make the most of your investment. Understanding the needs of the people who are occupying your property makes the tenant/new owner comfortable with you as a successful business person and a credible investor. Wise women who invest in real estate know their plan for each property, how to capitalize in their local marketplace and, most importantly, how to screen and qualify their tenants and potential buyers.

The U.S. housing market could be facing a two- to three-year downturn, with the supply of unsold homes creeping up to 4.2 million, a record. The national median home price is poised for its first decline since the Great Depression, and confidence among U.S. home builders dipped this month to its lowest level since February 1991, reports SIFMA’s SmartBrief.

If you inherit assets from an IRA or other retirement account, you can choose to take a lump-sum distribution or transfer the assets into an inherited IRA. Taking a lump-sum distribution provides immediate liquidity, but also incurs an immediate taxable event. If you don’t need the money right away, consider transferring the assets to an inherited IRA because you can defer taxes until you are required to take minimum distributions.

Since there are several factors to consider with inherited IRAs, talk with you tax or financial professional to get the best advice for your situation.

Hunting for that new investor property? Virtual real estate is alive and well and should be considered a part of your marketing research. With maps, home-value calculators and more, these tools can help you find the right deal on your terms. The top three sites are:

 Zillow.com—The feature “make me move” lets you name a selling price without committing to a sale.

 Trulia.com—A new social-networking feature lets prospective buyers talk to locals.

 Realtor.com—In many parts of the country, Realtor.com offers more listings than any other site. Each property has a broker, so if you like working with realtors, that information could be helpful.

More and more Americans are diversifying their assets into international investments, including private REITs and real estate. A survey conducted by Spectrem Perspective found that 40% of affluent households say that they are likely to invest or continue to invest overseas.

Though most investors are focusing on the foreign equity markets, real estate is also on the rise. Several European countries have established real estate investor associations or communities that have a large American base as membership.

The primary reasons for purchasing real estate outside the U.S. include:

 Second home
 Diversification
 Have a percentage of a portfolio outside the U.S.
 Future residence upon retirement

Mexico, Central America, and parts of Europe are the most popular places Americans are looking to invest in real estate.

According to NAR, we are experiencing the largest decline in housing sales since 1989. How do you continue to grow your business in a down market?

Many realtors are working harder and longer hours for less money. Are you one of them?

One way to sail through this downturn is to continue working the investor market. This might be a slow time for realtors, but for investors with cash, sales are actually up. Pre-foreclosures, short sales, buying from distressed sellers, and buying investments for the long term at below fair market value are thriving.

So how do you capitalize?

• Start attending Real Estate Investor Association meetings. Network and develop alliances.

• Consider doing seminars for investors, showing them why you are the expert in this arena. Co-sponsor with others that have been affected in the market, such as mortgage brokers, appraisers, and home inspectors.

• Deliver the whole package to make doing business with you easy and flawless.

• Consider buying an investment property of your own if you never have owned one so that you can “walk the talk.” Let investors know that you’re able to understand their needs and be their source for continued deals.

Will you make as much money this year as you have in the past? Hard to tell but, if you utilize these few tips, you may not have as bumpy a ride through this downturn.

Are you looking to purchase investment property in this market? Consider the following before you make your offer:

• Be prepared to come up with the down payment. Forget the no-money-down deals in this market. As foreclosures increase, lenders have tightened their belts on investor loans. Consider at least 10% down. Putting 20% is even better, because it will probably get you a lower interest rate.

• Look at your total financial picture, and make sure you are comfortable and can afford the debt. At time, lenders are more flexible than you should be.

• What is the exit strategy for the property? Is this a long term investment, and if so, for how long? Have a clear idea of what you want to accomplish before you make an offer. Don’t be stuck.

• Make sure you have an emergency fund. Never be one paycheck away from a missed mortgage payment.

• Add up all the costs. The total amount of all of your debt payments, including the mortgage, other loans, credits, etc., should not exceed more then 36% of your income. Some lenders will go up to 40%. I prefer the more conservative number.

• Understand what it is you’re signing. Is this a fixed rate loan or adjustable? What are the terms? If it is an adjustable rate loan, what is the cap (sealing) on the loan. In other words, how much could your monthly payments rise over time?

• Always have a reserve. Create a financial cushion to protect yourself on a rainy day. Have at least six months of living expenses in a money market or savings account. You just never know.

When I first started investing in real estate, my goal was to pay off all loans associated with my investments. Over the years, interest rates dropped, making it easier to make more of a return than I could have by owning free and clear real estate. Also, many advocates have encouraged investors to get the largest loans possible to get the tax deductions.

How you handle your loans is a matter of comfort level. Having free and clear real estate provides security. However, for those of you who have not saved for retirement, you should fully fund your employer’s 401(k) plan if you have one or contribute the maximum allowable to an IRA. So you may want to reconsider where you put those extra mortgage payments.

Having assets is a good thing. Having the income you need in your retirement years is better.

Start investing in your IRA or 401(k) today.

A big increase in home sales in March sends a mixed signal. The National Association of Realtors reports a 16.2% increase in home sales; however, the median price of new homes fell more then 10%. At this point, it’s not clear whether the worst of the housing slump is over. And despite this increase in home sales, foreclosures are up, which means that more homeowners will be in the rental market. It is definitely a buyer’s market.