Are Investment Homes Worth It?
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” This quote from Robert Kayosaki in the book Rich Dad, Poor Dad perfectly illustrates why investing money is so important.
New to this idea and wondering if investment homes are worth it? We’re here to tell you that one of the best ways to watch your money grow is an investment property. We’ll cover exactly why home investment is worth it and how you can set yourself up for financial success.
INVESTMENT HOMES
Investing in another home besides the main one you reside in is one of the smartest money moves you can make. A property such as an investment home is an asset that is most likely to gain value over time. So if you’re in a good place financially, while stockpiling money is great, investing in an asset that will appreciate is even better.
Your investment home will gain equity. This will be a great springboard for later financial opportunities. Bankrate breaks down equity in these simple terms:
“[equity is] the difference between what the home is worth and how much is still owed on your mortgage. For many, equity from homeownership is a key way to build personal wealth over time. As your home’s value increases over the long term and you pay down the principal on the mortgage, your equity grows.”
Building this equity means you most likely will be able to sell the home later for far more than you bought it, or even put that equity towards a newer, bigger house. You could also take out a line of credit from your equity. Basically, you are creating a financial asset that works for you in more and different ways than a basic savings account.
BUYING A HOME TO RENT
You may also consider buying a home to rent as another option when investing in real estate. This is another wise investment situation. Having tenants that are paying your mortgage or even paying beyond it is a fantastic way to capitalize on the home market. While renting has its challenges (making sure you can cover any costs of repairs, possible dry spells without renters), it is more often than not a great use of an investment property.
This passive form of income can be fairly hands-off if you want it to be, which is great if you already have a job. You may even consider hiring a property manager if necessary. You’ll also want to make sure your return on investment is worth it. But if you can make it all work, you’re looking at a stable investment, one in a market that is “generally more stable than the stock market” (Investopedia).
Other pros listed by Investopedia on renting include the fact that the interest paid on property loans is tax-deductible and not subject to social security tax, and that a home is a physical asset, unlike some other investments.
TAKING THE PLUNGE
We know buying a home is a big decision since we work every day with buyers who are making that choice. Buying a second home for yourself, as an investment, or to rent out is just as big of a decision.
Talking with a professional to find out what you qualify for, what you’ll put down, and in general, if this is a good decision for you will be key. We trust our preferred lender, First Colony Mortgage, who works tirelessly to help buyers in these exact scenarios. If you’re thinking about making your money grow, consider reaching out and starting your journey to bigger and better investments for your future.