When reading through a list of topics about what I would like to write a blog entry, this one set off all the bells. I want to write about things I truly believe in and this is certainly that. Here are 3 reasons why I believe real estate IS a good investment.
Appreciation. Though I do appreciate you as a person, this is the other kind: when something gains value over a certain time. You can look all day at markets, interest rates, and trends; and that is good. You can certainly optimize the system by using the right programs and knowing the right timing. But in a basic sense: What did your parents pay for their house? What is it worth now? On a long timeline, real estate is almost always going to gain value. You may have heard the saying “buy land, they aren’t making any more of it” and, in very simple terms, that is completely right!
Equity. This term refers to the value in your real estate between what you owe on it and its current value. Use your money to make more money while you sleep! Equity builds over time, simply by the property existing. It gives you leverage and buying power. You can use it in many ways. It can be collateral for a second property. Or use it for renovations to further increase the value (which further increases that same equity)! If you sell your property, you can put that money toward your next one. Maybe you want a lower (or no) mortgage payment? Your cash-out of that equity can help you get there.
Use. This one isn’t so much about earning money, but improving the quality of your daily life. As I like to say ,“You have to live somewhere, right?” When I was just out of college, I lived in an expensive place. I realized my friends and I had given our landlord $20,000 and we were moving out with nothing to show for it. I immediately chose to buy. I had somewhere to live, I was in charge of it (my place, my rules), and ended up paying less every month than I was previously paying in rent!
There are some folks who prefer the freedom of renting instead of buying. There is definitely something to that. It is a commitment to buy something; you are in charge and will need to handle maintenance and repairs. If rent is inexpensive where you live, it may not be cheaper to buy (though cheapest is not always best). Lastly, if you think something major will be changing in your life within the next year or two, you might want to wait. But, if you have been financially stable for 2 years and see 2 more years of the same, you are in a great place to buy.
As with most things in life that are not absolute, I can’t say all real estate will appreciate or you will always earn a lot of equity. That is why you should be sure to have a really good agent you trust working on your behalf, helping you navigate the process, and offering their experience and opinion. With the right mindset, tools in the box, and people in your corner you can change your life by buying property.