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Published: Wednesday, Mar. 11, 2009 / Updated: Wednesday, Mar. 11, 2009 11:09 AM

Kathy's Korner - March 11, 2009

OK, so now what to do?

Where do I put my money now?

The stock market makes me nauseous. Bank CDs are paying a pittance. Where should I put some money towards retirement?

Here's what I know. Real estate is not rocket science. It is a function of economics and psychology. People need roofs over their heads, so there will always be a demand for housing. So who holds the supply? And, more important, how can you get a slice of the supply in the most cost effective way?

My husband and I have purchased several rentals over the last eight years. They are a solid piece of our retirement puzzle. We have wonderful tenants. We respond quickly and take good care of the homes. And the tenants are paying down the mortgage for us.

The value of a rental property lies in the appreciation over time, but possibly more important, in the build up of equity over the years.

There are caveats in purchasing a rental:

• Location: Distance from I-77 or Hwy. 521 limits the tenant niche (think commuting).

• Price: The lower the rent, the larger the tenant niche. Be competitive with apartments. Where would you rent for a year?

• Cash flow: Do the math! In North Carolina, property taxes are the same whether the house is rented or occupied as a principal residence. In South Carolina, property taxes can be double or even triple if the house is rented rather than owner occupied.

• Expenses: Carpet may need to be replaced; walls painted. Keep a home warranty on the house? Establish a relationship with a contractor or handyman.

Here's a disclaimer - I am not a tax adviser! But, I do know that costs incurred on a rental property can be expensed and one can also depreciate the property. Talk to your accountant.

• Vacancy: One month sitting empty is money down the toilet. Be smart. Make sure the rental shows well. Price the rent competitively.

• Advertise: Check your local newspaper/online package. Consider a property manager, but I bet you can do this yourself!