A HOME AS AN INVESTMENT
AS A REALTOR, ACCOUNTANT AND A HOMEOWNER, SOMETIMES I WONDER WHETHER A HOME IS AN INVESTMENT. CERTAINLY THERE ARE BENEFITS TO HOME OWNERSHIP, BUT IS A HOUSE AN INVESTMENT? WHAT SORT OF RETURN SHOULD I EXPECT, IF ANY? WHAT ARE THE RISKS?
Well, the benefits, risks, costs and ROI of home ownership are unpredictable. After the recent mortgage crisis, many homes throughout the country have seen a significant decline in value after years of high value appreciation. So, even though the residential real estate market has definite ups and downs, overall I believe a home is a good investment.
EXPENSES OF HOME OWNERSHIP
As a home owner, you should expect to encounter a wide array of home-related expenses. Starting as soon as you make an offer on a house, you'll pay for inspections, closing costs, title insurance, homeowner's insurance, real estate taxes, closing fees, courier fees, copy fees, etc. After the purchase closes, you can expect more expenses right away. From painting and decorating to buying plants, wall hangings, candles, rugs, mats, Christmas trees, rakes, lawn mower, leaf blower, tools, more tools, etc., etc. Don't forget plumbers, electricians, furnaces, air conditioners, appliances, and utility bills. Don't spend so much on a house that you can't afford to fill it up and maintain it comfortably. Very comfortably. Of course, these days you don't have to worry as much about that, because the lenders are doing it for you. Lenders are making darn sure that you can afford your house, and they are also being more careful about appraising the homes they make loans for. So, if you're getting ready to buy, be smart. Don't spend too much on the house. Shop carefully and try to find a quality home in your price range. Make sure your home is one that could gain value over time - look for good neighborhoods, quiet streets, great schools, etc. Use a realtor to make sure that you don't pay too much for your home. Paying too much for your house might make it hard to sell if the home has not appreciated in value. When you sell your house, expect to pay 6% in realtor commissions in order to maximize the selling price and minimize days on the market. Also expect another $1500-$2500 in closing costs.
SHORT TERM FINANCIAL BENEFIT OF HOME OWNERSHIP
A great short-term financial benefit of home ownership is tax deductions.The ability to deduct interest, property taxes, and insurance as an itemized deduction is awesome!! As a new homeowner, you will definitely notice the benefits come tax time. Unlike paying rent, paying for a mortgage has a tax incentives. Especially during the first 5-7 years, a significant part of your mortgage is interest. Since the interest is deductible, the tax benefits are great during this time period. The tax benefits will decrease the closer you get to paying off your mortgage. The smaller your loan balance, the less interest in each payment and thus the less you get to deduct from your taxes.
LONG TERM BENEFITS
The long-term benefits of home ownership can be great. Generally, if a house is in a solid, safe, good neighborhood, and if it is bought at a reasonable price and well-kept, then it will be a good investment in the long term. The short term is not necessarily the same story. In the short-term, prices can increase and decrease signifantly, but over the long-term, history shows home prices to steadily increase. Therefore, buy a home you love at a good price and live there for a long time and you are likely to enjoy the long-term financial benefits of home ownership.
TO BE CONTINUED...
THANKS SO MUCH FOR READING!! PLEASE LEAVE A COMMENT AND COME BACK LATER FOR PART 2. HAVE A FANTASTIC HOLIDAY SEASON!!
CHECK OUT OUR WEBSITE IF YOU ARE AN ACTIVE BUYER OR SELLER
http://www.db.reeceandnichols.com
Daniel Bennison, Laura Byram
Bennison Byram Team Realtors
Neighborhood Experts in Prairie Village and Overland Park
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