ABC's of Buying Florida Real Estate

 
 

 

 

The Benefits of Owning Your Own Home

The Best Investment You Can Make

  You are going to love the feeling of a home thatís all yours.  But thereís a much better reason to own a home of your own. It's also just about the best investment you can make. As a fairly general rule, homes appreciate in value at about five percent a year or more. Some years the increase will be more and some years less. The appreciation rate will also vary from neighborhood to neighborhood, and region to region. But as a general rule, you can pretty much count on a 5% per year increase in value over the long run.

  At first glance, 5% per year may not seem like all that much. After all, stocks (in good times) appreciate more than that. Over the long run, stocks have averaged an annual appreciation of closer to 8% or 9%. And you can earn as much as 6% per year with the safest investment of all, U.S. treasury bonds. So why buy a home ?

  Take a second look. Normally, when you buy a $200,000 house, you don't pay cash for it.  You get a mortgage. Let's assume that you use a down payment of as much as 20% which is about the maximum you'd ever be asked for. That would be an investment of $40,000 of your own money. All the rest of your home's purchase price is "the bank's money."  That's right. You bought a $200,000 asset by committing only $40,000 of your own money.

  At an annual appreciation rate of 5%, your $200,000 home will increase in value by $10,000 on average every year, year after year.  That means you earn $10,000 on an investment of $40,000. Your annual "return on investment" is a whopping 25%. (The $10,000 increase in value divided by your investment of $40,000.) Try finding a better investment than that.  And your family gets to live in that $200,000 home as well.

  There is a wealth of additional information on how to go about buying a home at Fannie Mae's www.homebuyingguide.org/ website.

  Of course, you are making mortgage payments, property taxes, and other maintenance costs. But remember that Uncle Sam allows you to deduct all of the interest expense and property taxes on your home against your income taxes. So the U.S. government is essentially subsidizing your home purchase. Why ? Because the government wants you to own your own piece of the pie so it gives you an incentive to do so. Remember also that living in an apartment or a rented home isn't cheap either and all you're collecting there are rent receipts.

  What's this all mean ? -- "Simply this. ,Over time, the rate of return (or return on investment) on buying a a home is higher than almost any other investment you could make."  But even better, you get to participate in the "American Dream" of owning a home of your own!


 

 
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