Is Buying a Home a Good Investment?

Share on facebook
Share on google
Share on twitter
Share on linkedin
Homes for Sales - Smoky Mountain

Purchasing a home is a significant decision for anyone who is looking into real estate. If you are considering buying real estate for investment purposes, it can be a bit more complicated. There are a variety of factors that can affect your investment, for example, the intent of use, how long you intend to retain the property, liquidation value, and more.

What makes a good investment?

In general, a good investment is something that you buy which will, in the end, pay you more than what you paid for it. You can consider something an assess if it puts money into your pocket, whereas a liability is anything that takes money out of your pocket.

Is buying a home a good investment?

With the knowledge of what makes a good investment, you first have to look at the reason why you are buying the home in the first place.

If you are buying a home to live in, then you have to take account of not only your mortgage and interest but the overall upkeep of your property. You also have to pay for property insurance and taxes monthly.

Plus, there are other factors to keeping up with your home’s regular maintenance. Your personal residence takes money out of your pocket. A general rule of thumb is that, on average, your home is going to require 1% of the original purchase price just for repairs and maintenance. For example, a home purchased for $100,000 will need $1,000 of maintenance annually.

An Investment Property

However, if you invest in real estate to create rentals, then you could be putting money into your pocket, which makes your purchase an asset.

There are still expenses to be paid just like your personal residence, but now someone else is making your mortgage payments for you. The idea behind renting is that your tenant gives you more each month than it actually costs to own the home. Over time you can see how a rental property will pay for itself and build equity while also providing you with passive income.

Rental properties have become increasingly popular over the last few years with the invention of companies such as Airbnb and Vrbo. 

To Buy or Not to Buy a Home

Owning a home does have many tangible benefits, so do not think I am against homeownership. I just caution that you understand the difference between what is genuinely an investment property and what isn’t.

Part of the American Dream is to own your residence and gives you the freedom to decorate and modify it the way you want. It also provides a sense of pride and allows you to put roots down for your family.

However, if you are as many millennials are trending currently and only live in an area for a few years, then it is not practical to buy a home. The home-buying process is lengthy, and the market is not always open for a quick sale when you are ready to move, so keep that in mind.

There is no right answer for everyone who is looking at real estate, but it is essential to think about your future goals for the property. Not everyone’s path is the same, but there are more options than either just buying or renting; you can do both.

For example, you can buy your first home, live in it for a few years, buy a second home than rent the first. Or you buy a home or duplex and live in one unit or room while renting the others. By exploring options like these, you can diversify your venture into home buying.

Overall you are the only one who can determine WHY you are buying a property, but if you need help in looking for real estate, we are here to help. Rob Roland Realty is located in Western North Carolina, and we can provide you with valuable information for our market to ensure a smooth transition. Contact us today for more details!