Why Buying a Home is a Good Idea
The Best
Investment
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.
