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The Best
Investment
As a fairly general rule, homes
appreciate about three 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…
Say you bought a $250,000 house - you
did not pay cash for the home, you got a mortgage.
Suppose you put as little as five percent down –
that would be an investment of $12,500.
At an appreciation rate of 4%
annually, a $250,000 home would increase in value
$10,000 during the first year. That means you earned
$10,000 with an investment of $12,500. Your annual
"return on investment" would be a whopping eighty
percent.
Additionally, you are making mortgage
payments and paying property taxes, along with a
couple of other costs. 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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