Why Buying a Home is
a Good Idea
As a fairly general rule, homes
appreciate about four or five percent a year. Some years will be more,
some less. The figure will vary from neighborhood to neighborhood, and
region to region.
Five percent may not seem like that
much at first. Stocks (at times) appreciate much more, and you could
easily earn over the same return with a very safe investment in
treasury
bills
or bonds.
But take a second look
Presumably, if you bought a $200,000
house, you did not pay cash for the home. You got a
mortgage,
too. Suppose you put as much as twenty percent down that would be an
investment of $40,000.
At an appreciation rate of 5% annually,
a $200,000 home would increase in value $10,000 during the first year.
That means you earned $10,000 with an investment of $40,000. Your
annual "return on investment" would be a whopping twenty-five percent.
Of course, you are making mortgage
payments
and paying property taxes, along with a couple of other costs.
However, since the interest on your mortgage and your property taxes
are both tax deductible, the government is essentially subsidizing
your home purchase.
Your rate of return when buying a home
is higher than most any other investment you could make.
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