Real Estate Buyer Tips
Buying
a home can be one of your most significant investments in life.
Not only are you choosing your dwelling place, and the place in
which you will bring up your family, you are most likely investing
a large portion of your assets into this venture. The more
prepared you are at the outset, the less overwhelming and chaotic
the buying process will be. The goal of this page is to provide
you with detailed information to assist you in making an
intelligent and informed decision. Remember, if you have any
questions about the process, we are only a phone call or email
away!
The
Best Investment
As
a fairly general rule, homes appreciate about five percent a year.
Some years will be more, some less. The figure will vary from
neighborhood to neighborhood, and region to region.
Five
percent may not seem like that much at first. Stocks (at times)
appreciate much more, and you could earn over six percent with the
safest investment of all, treasury bonds.
Presumably,
if you bought a $200,000 house, you did not pay cash for the home.
You got a mortgage, too. Suppose you put as much as twenty percent
down that would be an investment of $40,000.
At
an appreciation rate of 5% annually, a $200,000 home would
increase in value $10,000 during the first year. That means you
earned $10,000 with an investment of $40,000. Your annual
"return on investment" would be a whopping twenty-five
percent.
Of
course, you are making mortgage payments and paying property
taxes, along with a couple of other costs. However, since the
interest on your mortgage and your property taxes are both tax
deductible, the government is essentially subsidizing your home
purchase.
Your
rate of return when buying a home is higher than most any other
investment you could make.
If
you are moving to a home for the first time, you are going to be
very pleased with all the new space you have available. You may
have to even buy more "stuff."
Income
Tax Deductions
Because
of income tax deductions, the government is basically subsidizing
your purchase of a home. All of the interest and property taxes
you pay in a given year can be deducted from your gross income to
reduce your taxable income.
For
example, assume your initial loan balance is $150,000 with an
interest rate of eight percent. During the first year you would
pay $9969.27 in interest. If your first payment is January 1st,
your taxable income would be almost $10,000 less due to the
IRS interest rate deduction.
Property
taxes are deductible, too. Whatever property taxes you pay in a
given year may also be deducted from your gross income, lowering
your tax obligation.
Stable
Monthly Housing Costs
When
you rent a place to live, you can certainly expect your rent to
increase each year or even more often. If you get a fixed rate
mortgage when you buy a home, you have the same monthly payment
amount for thirty years. Even if you get an adjustable rate
mortgage, your payment will stay within a certain range for the
entire life of the mortgage and interest rates arent as
volatile now as they were in the late seventies and early
eighties.
Imagine
how much rent might be ten, fifteen, or even thirty years from
now? Which makes more sense?
Forced
Savings
Some
people are just lousy at saving money, and a house is an automatic
savings account. You accumulate savings in two ways. Every month,
a portion of your payment goes toward the principal. Admittedly,
in the early years of the mortgage, this is not much. Over time,
however, it accelerates.
Second,
your home appreciates. Average appreciation on a home is
approximately five percent, though it will vary from year to year,
and in some years may even depreciate.. Over time, history has
shown that owning a home is one of the very best financial
investments.
Freedom
& Individualism
When
you rent, you are normally limited on what you can do to improve
your home. You have to get permission to make certain types of
improvements. Nor does it make sense to spend thousand of dollars
painting, putting in carpet, tile or window coverings when the
main person who benefits is the landlord and not you.
Since
your landlord wants to keep his expenses to a minimum, he or she
will probably not be spending much to improve the place, either.
When
you own a home, however, you can do pretty much whatever you want.
You get the benefits of any improvements you make, plus you get to
live in an environment you have created, not some faceless
landlord.
More
Space
Both
indoors and outdoors, you will probably have more space if you own
your own home. Even moving to a condominium from an apartment, you
are likely to find you have much more room available your own
laundry and storage area, and bigger rooms. Apartment complexes
are more interested in creating the maximum number of
income-producing units than they are in creating space for each of
the tenants.
If you are moving to a home for
the first time, you are going to be very pleased with all the new
space you have available. You may have to even buy more
"stuff."
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