One question Realtors are often asked is, “Is it a good time to buy?”, or, “Is it a good time to invest?” The answer to both is “yes.”
“Well,” you say. “Of course, you would say that. You’re a Realtor. Your career depends on me buying a house.”
That has some truth to it, there are several reasons for this answer. Let’s start with buying.
So, why would you want to own a home? Because it dramatically impacts your long-term financial net worth.
It impacts you in two ways: equity and cash flow. First, there is equity through appreciation. In September 1996, the average price for a three- or four-bedroom home with between one to two-and-a-half bathrooms sold for just under $113,000. Twenty years later, the average sold price for that same home was just under $208,000. In only two decades, the homeowner’s net worth nearly doubled as the house appreciated by $95,000 simply because they owned the home in which they lived. A renter living in that very same property would receive none of that appreciation.
As for cash flow, in September 1996, the cost to rent one of those homes averaged $788 per month. Twenty years later, it was $1,412 to rent that same home.
To make a comparison, average that out over the 20 years and it costs $1,100 per month to rent. In contrast, with interest rates at 8.41 percent, the mortgage payment for that home would be only $862 per month, plus taxes and insurance. And the homeowner’s mortgage payment wouldn’t increase. The only increase is in taxes and insurance. So let’s throw in a generous amount to cover that and at $1,000 per month the homeowner is still paying $100 less monthly than the renter. Spread that over the 20 years and the homeowner has saved about $24,000!
So when is it a good time to buy? Now! Mortgage interest rates are around 4.29 percent. The banks are practically begging for you to borrow their money. And if you do it wisely through the guidance of a knowledgeable Realtor, it can greatly benefit you. At that interest rate, the monthly principle and interest payment for that average $208,000 home, with a modest 5 percent down payment of $10,000 would only be $979 per month on a 30-year mortgage.
You can use our mortgage calculator to check on other scenarios. Take advantage of the low interest rates and free yourself from your high and ever-increasing rent payments, and instead begin to build your net worth through homeownership.
But what about investing? For a variety of reasons there are people who either need or prefer to live in a place that they can rent. You can be the one to provide them with safe, affordable housing and, at the same time, it can be a financial benefit to you. Not only do you get the net worth increase through appreciation, you can also receive positive cash flow when you buy correctly. Three bedroom homes can bring between $1800-$2300 in the right areas.
With the combination of low interest rates, well-priced properties and high-dollar rent, why not buy a property?
Also see: 7 Tax Benefits of Owning a Home
Published on 2017-04-10 17:05:38
