Real estate is a complicated thing based on a simple premise: everyone needs somewhere to live. Over the course of our lives, we’ll pay a lot of money for a safe shelter and a space to call “home.”
But the ways in which we pay for and purchase real estate can make all the difference in our long-term financial future. Here’s what you need to know.
Buying and renting
Everyone needs a place to live, but not everyone owns their home. Those of us who rent are paying money to a landlord every month. But when you move, you can’t sell our apartment, because it’s not yours.
This is why conventional wisdom considers buying a home to be better than renting. Homes are so expensive that you’ll almost certainly have to take out debt to get one. But both fixed-rate and variable home loans tend to have rates that are attractive enough to make this form of debt healthy.
After a down payment, you may find that you are not paying any more per month than you were when you were renting. And, in exchange, you’re gaining an incredibly valuable asset.
Investing in real estate
Owning your own home is a classic way to protect your finances and build long-term wealth. But if you’re lucky enough to build up a great nest egg and have cash to spare, you may want to consider another step: a second property.
Investment or income properties are powerful ways to gain a passive income. Perhaps you’ll get started by choosing to keep your old home (and rent it out) while you move to a new one. Or, if possible, perhaps you’ll start a real estate business and buy an apartment building or a commercial property.
Improving real estate
Owning real estate means owning land. But you shouldn’t forget about what’s on that land. If you own a home, you need to focus on maintaining (and perhaps improving) it. Unlike the land beneath, structures are pretty much bound to depreciate.
Keeping your investment profitable means counteracting the natural decline of aging properties. This goes for commercial properties too, explain experts in Everlast II™ commercial roofing. In real estate, you often get out what you put in.
All of the above points go to a central one, which is that buying real estate can be a very good idea. But this does not, of course, mean that buying real estate is never a bad move.
It is entirely possible to buy a real estate property and have its value decline. That’s what is happening to many baby boomers and retirees in some parts of the country right now, according to recent reports. So how can you avoid this fate?
For starters, you can accept that this is a possibility — and then buy real estate anyway. This means making sure that you’re not putting all of your eggs in one basket. In some ways, you should not treat your home as an investment.
Buying a home is a way to save on rent, but it’s not a retirement plan. Your home-buying budget should reflect that. Don’t spend every dime you have on your home; keep some money to put in other assets. The same logic applies (even more so) to investment properties.
Next, you need to do your research. Consider short- and long-term trends, and research the properties you are considering, the areas that they are in, and more. When it comes to real estate, you can’t be too careful.
There are no guarantees in life or in real estate. But real estate can make a great investment, especially when it comes to buying your own home. Make a careful decision, and you’ll likely benefit from it.