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Is Real Estate Still A Sound Investment?
Posted under UncategorizedThe answer to that question is: It all depends on where you are thinking of buying a house. Obviously, there are markets out there that are significantly depressed with prices in home values crashing. Other areas, like Raleigh, North Carolina, aren’t as significantly affected because they never experienced the frenzy of overinflated prices to begin with. When you want to buy a home as an investment, it pays to look at how it compares to other investment vehicles like the stock market or bonds. It also helps to understand the cost of borrowing money to finance your purchase. With mortgage rates low, it makes it much cheaper to finance the purchase of a home. You will have to put up some of your money to get those rates, though, typically 10% or more of the value of the home. The rate of return in most markets is either decreasing or a meager 3%. And, there are other things to consider when you are thinking of using a house as an investment vehicle.
Liquidity
When you buy stocks or bonds, they are highly liquidable. You can simply choose to sell and they are gone. With a house, you have to attract a buyer and you do have costs associated with selling the house, which are far higher than the cost of selling your stocks. If you are a person who loves to fix up and repair homes, then those costs can be lower. However, you still have to find a buyer to get a return on your investment. If you live in an area where the housing inventory is not too glutted with foreclosed home, you can still make some good money. However, if you live in an area with homes that are nicer than yours selling at lower prices, odds are you are stuck with the house until the market turns.