Q: If interest rates go up, does that mean there will no longer be good deals available for real estate investing?

A: If interest rates go up, smart long-term investors begin to seek alternative forms of financing, such as owner-financing and wrap-around mortgages. Each of these techniques can be beneficial to the seller as well as to the buyer, and each can help a sale occur in a high interest rate environment.

Because interest rates go up and down in cycles, many investors structure their deals to refinance when rates are low and they can lock in long term fixed rates.

Q: What happens to rentals when interest rates go up?

A: As it becomes more expensive for prospective purchasers to buy a home, more people are forced to rent while they save for their down payment or try to earn enough to qualify for the loan they want. Higher interest rates cause an increase in the number of renters as ownership becomes more expensive.

In addition, as rental vacancy rates drop, rental rates begin to move up. We have already begun to see this happen in the Atlanta area as signs offering multiple months of "free rent" have disappeared.

Q: You have stated that the number of foreclosures in the metro Atlanta area has risen dramatically in the last few years. How will that change as rates rise?

A: No one can know for sure, but I am concerned that as rates rise, those borrowers who signed on to adjustable rate loans will see their interest costs climb to unaffordable levels. If that happens, it is only logical to think that the rate of homes going into the foreclosure process will increase.

Q: If you can buy a house at a good price and sell it quickly for a profit, does that make the most sense?

A: That depends on your needs and your long term investment strategy.

If you need to profit today and you are willing to give up the long term benefits of holding the asset, then selling quickly may be right for you.

However, if you sell quickly for a profit, you will likely be taxed at a much higher tax rate, and you have separated yourself from the asset forever.

In contrast, if you believe that the house will continue to go up in value and you can place a good renter in the home, you may be able to cover your ownership expenses today and take advantage of long term appreciation. While it is impossible to know if a home’s value will go up, it is not unrealistic to expect a slow steady climb in value.

Historically, home prices have exceeded the rate of inflation by 1% to 2% annually. According to surveys, the average home in the Atlanta area climbed about 7% in value between October 2004 and October of this year.

Q: How many houses would I need to own in order to retire from my job?

A: That all depends on your financial needs and the debt structure of your houses.

But as an example, if you set a long term goal of owning ten little rental houses free and clear of any debt by the time you reached retirement age, you would probably have enough income from those homes to allow you to live a comfortable middle-class lifestyle.

Q: If I want to invest part-time, how many houses can I buy and put into a rental program every year?

A: Many part time investors set a goal of one or two little houses per year. That pace is reasonably achievable in your spare time, and allows you to keep working at your current job until you decide to do something else with your time.

One of the principal dangers I see in becoming a real estate investor is trying to buy too much too fast.

By taking a slow measured pace, you diversify over time. In addition, as your experience level grows, you may feel more confident taking on additional responsibilities.

Q: Is it necessary to spend large sums of money on seminars in order to be successful at real estate investing?

A: While education is an important part of any successful endeavor, I do not recommend that you spend money on "get rich quick" programs you may have seen on late night television.

For less than twenty bucks, you can purchase a copy of a book that I highly recommend. The title is "Building Wealth One House At A Time" by John W. Schaub, and it details a "get rich slow" approach to real estate investing.

The author is an honest and hard-working investor who shares his 30 years of experience as a landlord and a real estate professional. I know that his program is a realistic one for the Atlanta metro area, because it parallels my own experience.

Another good book on financial topics is "The Millionaire Next Door" by Thomas Stanley and William Danko. While not specifically about real estate, the book shows the importance of including real estate in your overall investment portfolio.