How Buying a House Can Really Pay Off
Everyone knows the value of owning a home.
By the time you’ve paid interest, insurance, taxes, and more, over the course of years, you have accrued for yourself some serious equity. You can live in it for as long as you wish; borrow against it; sell it or exchange it for another ideal property; or pass it down to your loved ones. In other words, the advantages of homeownership include:
- Forced savings. If or when you do sell, you will end up with a large chunk of capital which you can use to invest and/or fund your lifestyle, downsize, or make some other decision.
- An asset to call on later. Even if it costs you now, the fact that you have an asset that you can fall back on for various purposes has value itself. A home equity loan or line of credit is a solid back-up.
- Lifestyle perks. Many people enjoy the lifestyle perks of homeownership. You can do what you want with the home, feel good about the improvements you make in it, and provide a safe place for yourself and your family.
- Retirement housing. As long as you have a way to keep up with property taxes and insurance, a paid-off home can really provide you with low-cost housing during your retirement years.
The key is to think about how much return you are satisfied with. The above is great but don’t forget that homeownership comes with responsibilities:
- Property taxes
- Homeowners insurance
- Any upgrades or remodels
- Landscaping and yard care
Long-term appreciation is a type of investment, and a real test of a true real estate investment is whether you can get income out of your property. Location is a big factor on its profitability, too. If you live somewhere that housing prices explode over time, there’s a good chance you really can make a healthy profit when you sell your home.
For some, homeownership is not enough to bring them big returns down the road, and they begin to consider rental investments which can be a real safe haven in a volatile market.
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“Real estate investments provide for more stability, and many markets can outperform the Dow and S&P 500,” said Jason Haber at Warburg Realty Partnership in New York.
According to U.S. News, the three reasons why now is the perfect time to consider a property investment are:
- The 2019 outlook is strong
- Housing is bolstered by low unemployment
- Renter profiles are shifting
“Things like location, property condition, property style, local job growth, etc. are important factors to consider when selecting which single-family rentals to acquire,” said Kevin Sneddon, founder and managing partner of the private client team at Compass in New York.
If thinking about venturing into being a landlord, know that it comes with its own responsibilities.
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Janine Yorio, CEO of Compound in New York, says that not all single-family residential investments are created equal.
“It’s important to pay attention to more than just the initial rental yield or cap rate and pay attention to the near- and medium-term cash flow at the property level, taking into account required repairs and maintenance,” says Yorio.
“There’s a lot of work in being a landlord, but outsourcing leasing or property management to a trusted team can ease the burden.”