Regardless of whether you are a renter thinking about purchasing your first home or are a homeowner considering purchasing a second property to rent or a vacation property to enjoy, there are several great reasons to invest in real estate right now. Here is a quick summary:
Interest rates – We are just counting the days until the Federal Reserve increases interest rates which will likely cause mortgage interest rates to begin to march upwards. As of this writing, the 30 year fixed rate mortgage rate average is at 3.76% – around historic lows which means this is a fantastic opportunity. For a $200,000 mortgage, the principal and interest payment would be $927.37 and the total amount paid would be $333,852. Compare that with the same mortgage at 6%; the payment would be $1,199 and the total cost of the loan would be $431,676. The cost of borrowing someone else’s money to fund the dream of homeownership has rarely been cheaper.
Tax Benefits – Most U.S. homeowners can deduct the cost of their annual mortgage interest and real estate property taxes from their annual taxable income, thus reducing their tax liability. This deduction is also available for certain qualifying second properties. Loans are usually amortized in such a way where the most interest is paid up front when the principle balance is highest, meaning tax benefits are greater up front – another reason to act soon!
Leverage – When a person buys a stock, they have to use their own money in order to gain equity. However, when a person invests in real estate and takes out a loan, they leverage their down payment and instead use the bank’s money in order to gain that appreciation. When interest rates are low the cost of using that leverage is low and with prices on the rise, the gain may be great!
Prices – Prices are not likely to decrease anytime soon due to the steady and growing economy. Therefore, between low interest rates and today’s prices, buying real estate a few months from now will likely not be as affordable as it is right now.
Demand – Unless the world population – or even the U.S. population – begins to decrease, housing is a commodity that will always be in demand. The United States needs approximately 1.2 – 1.5 million new homes each year to accommodate growing population and the demolition of decayed properties. The drastic decline in new construction from 2006 through 2012 had created a dramatic shortage in new construction product and we have not recovered from this yet, which means demand will continue to be high for several more years.
Forced Savings – When you invest in a home, a portion of that monthly payment goes towards your principal, meaning with each payment your net worth increases. Between appreciation and paying down the debt, your equity rises year after year.
Interested? Ready to hear more? Please contact me to learn more about your options and opportunities. Please contact me (206) 790-0081 or firstname.lastname@example.org.