I bought my home at the top of the housing bubble and I don’t regret it. In fact, I think it may have been the best possible financial made I could have made in my life. I could easily relate to a recent Yahoo breakout piece about Americans’ steadfast love for real estate, even after the housing crash. The article cited a Gallup poll that revealed 30 percent of Americans consider real estate to be the best investment over the long haul. Twenty-four percent favored stocks and gold. When I compare my retirement accounts to the equity I have in my home, it’s basically a tie. In terms of my 401(k), I put in just about as much as my account is worth. Of course, there is the potential for my stocks to go from just breaking even to making profit. But there is also the potential for loss.
Getting a solid return
With my home, I have about $100,000 worth of equity. On the downside, I paid every bit of the equity as opposed to the value increasing from the time I purchased it. I paid $183,000 for my home just before the market crashed. I invested about $10,000 with upgrades and improvements. My home could probably sell for about $190,000, which is $100,000 more than I owe. Even if the value plummeted again, I’d still have a place to live. I also have the potential to pay off my mortgage. It’s hard not to love real estate because it’s practical.
Renting out my home
I can essentially “rent out” my stocks by selling covered call options. However, it’s still a financial risk. I suppose there is some financial risk to renting out a home since tenants can trash a place. By having a good property management company, it’s possible to reduce the risk. I like the fact that homeowners have the flexibility to live in their homes, rent them out or sell. At this time, my home is worth more as a rental property. A renter might pay as much as $1,500 in my neighborhood. With a mortgage of $900, I could net $500 a month after paying a property management company fee.
I was talking to a neighbor of mine who has more of a love/hate relationship with real estate. On the one hand, she wants to buy a step-up home to accommodate a growing family. On the other hand, she can’t sell her current home for enough money to cover the down payment on the new home. With real estate, it seems most problems get resolved with time. Few people remain underwater on their mortgages forever. Buyers’ markets eventually shift into sellers’ markets. I don’t know if real estate is the best financial investment, but owning a home instead of renting was my best lifestyle choice. Over the long run, I’ll own something tangible I can leave for my children.
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