Sep 26, 2014

Is real estate still a good investment in 2014?

Is home ownership still a good investment these days? Some financial 'experts' think real estate is not where you should put your money. They advise young adults that the concept of buying a home and building a nest egg is antiquated and that they are better off renting. For a small percentage of the population this is true. However from an investment stand point, I disagree.

Regardless of what is happening in the market, what many financial advisers don't consider is that stock, bond and fund investors still have housing expenses. You have to spend money on shelter. You can't just take your money for shelter and buy other assets with it - unless you plan to live rent-free with a relative forever.

Because mortgage interest rates are still low, you can currently get a 4.5% rate and lock it in for 30 years. That locks in most of your housing expense for 30 years. Renting is like having an adjustable rate loan that can change every year. Which way do you think rents will go in the next 30 years?

Unlike rental payments that are gone as soon as you write the check, your mortgage payment is like forced savings. While you have to maintain your property and often put additional funds to keep it updated, you're also able to build equity and you decrease your income tax liability.

And it provides stability that other investments don't. You can't live in a Wall Street stock or raise your children in a bond investment. A home is where you can establish roots and raise a family. While I don't think every American needs to be a homeowner, I believe that home ownership is still the best long-term investment.
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