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A House In The Hand Is Worth Two In The Bush?...or The Building Of Value Thru Home 'Own'ership

By
Real Estate Broker/Owner with Maine Custom Realty

I just read another blog today from Rob Magnotta, What Does Caramel Coated Popcorn and Zillow's Chief Economist's Opinion Have in Common? 

It got me to thinking about the true value of homeownership and brought to mind an article I saved from a few years back.

Why Your Home Is Not the Investment You Think It Is

2When I work with buyers, especially young buyers, I try to get them off of the idea that buying a home is a great investment and make it clear to them that it is more of a sovereign place to live than a great way to make a dollar.  Not that it couldn't be, in certain circumstances, but, in it's best light, home ownership i.e. 'the home you live in' is a breakeven to losing proposition (I know, I know...let the flames begin).

Simple math can bring anyone to this conclusion on their own (or just read David Cook's article above).  However, I tell them it's not the first house that will be an investment...it's the 2nd house they own...and maybe a 3rd house they own that is truly an investment.  Now, I realize not everyone is interested in owning multiple properties but they should be.  It's the best way to really make money with residential Real Estate for the Average Joe...let other people buy you a house or two.  This will bring you a real return.    

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I counsel my buyers to try to hang onto their present home and see if they can purchase another.  (I know, I know...it could cost me a sale but, it's about them, not me).  Often, after they add a large percent of rental income to their own incomes, many find they can make it happen.  This is something that seldom occurs to them and their argument against it is the loss of the tax-free income from the sale.  The savings in capital gains tax is often miniscule (to nonexistent) compared to the revenue that will be generated over years of quietly paying down & renting a home (and they still have two years to decide to sell it before they lose the tax break if it doesn't agree with them). 

1Usually, after we go over everything, and I show them how it's done (and after a few days of thought) they will come back to me with an excited interest and take a serious look at it.  I truly love to see young folks amass buildings, it's a great feeling to instill this in someone, at the threshold of their lives.  If they do it right, most of them will be in a better place at 40 than their parents are retiring at 65. 

The bottom line is Real Estate can be an investment...the biggest mistake people make when they buy a house is not buying another one.  It's not as hard as you think.

 

Here are some other articles worth a read:

Renting vs Buying: The Realities Of Home Ownership

The Worst Investment Ever

 

 

 

 

 

 

 

 

Comments (2)

Wanda Thomas
Montana Homestead Brokers, Broker, CRS, GRI, SFR, RN - Billings, MT
Billings Montana Real Estate

With so many people either needs to rent due to loss of home, or needing to rent due to insecure income, having a rental is a good thing to do!

Aug 25, 2010 11:31 AM
Petra Norris
Lakeland Real Estate Group, Inc. - Lakeland, FL
Realtor, Lakeland FL Homes for Sale

John - when I work with first-time homebuyers yes it is an investment, but the biggest picture is letting them know that is about "home", making memories, raising children etc., etc.

Aug 27, 2010 08:57 AM