There are two good reasons to buy a home. The first, and most obvious, is because you want to live there. The second reason is because real estate is a tried-and-true investment vehicle that has been an effective way to build wealth for a long, long time. If you have the money to buy a home, but you’re not looking to move, here are a few reasons why buying anyway might be a good idea.
- There are lots of ways to invest. Buying and selling stocks and commodities, for example, all have one thing in common: they’re intangible assets that you have very little control over. If you purchase stock in a tech company, for example, and that company’s CEO makes some bad movies, you’re out of luck. With a home, though, you have much more say in the matter.
- The rate of return via renting a home that you own can be considerable. When you rent a home that you own, the money is paid to you and you use that money to pay the mortgage. Currently, rental increases are outpacing the growth of home prices; which means that you’re likely going to be able to rent the home out for more than the cost of the mortgage. So, when your renters pay you the monthly rent, a portion of that money is pure profit.
- The renters put equity in the home for you. Even if the monthly rent of your home does not exceed the cost of the mortgage, every payment your tenants pay you, that you in turn pay the bank, becomes equity. If you decide to sell the home ten-years on, provided you get at least what you borrowed back, all of the money you accrued in rent over that time period becomes yours.
Interest rates are low right now, and the market is trending upward, which means right now is a great time to buy. Remember, though, that if you choose to become a landlord you will take on some responsibility for the home even though you don’t live there. Make sure you have someone draft a very comprehensive rental agreement so that you and your tenants know exactly who is responsible for what. If you play your cards right, can easily put yourself on the road to financial freedom through owning several homes.