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Your Home Investment Makes You Wealthy |
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Along with all of other benefits of owning a home are the benefits of wealth that accrue to the homeowners. The net worth of the people who own a home is on average much higher than those who rent property. (Net worth is your "bottom line" after subtracting debts from assets.)
The figures come from Harvard's Joint Center For Housing Studies and show that the average homeowner had a net worth of $250,000. Renters had a median net worth of $8,700. The wide difference is startling.
The reason that may come to mind first is that people who buy homes were wealthier in the first place. True, but even among people with similar incomes the difference is considerable. For example, renters with annual incomes of $60,000 or more had a net worth of $50,700. Comparable homeowners had a net worth of more than $300,000.
After the home is purchased, payments on the loan each month reduce the mortgage. Usually, houses increase in value. The combination will do wonders for the net worth of the homeowners, even if they have no cash savings.
When wealth builds up in equity over the years, it can usually be tapped and used by owners by the use of refinance or home equity loans.
The study did not include owners who own a second or third home, but certainly the wealth of these owners would be much higher than the average owner.
Houses Are A Top Investment
Homeowners may struggle and save to buy their first home. Many of them then dream about the time when the mortgage is paid off and there are no more payments. Wouldn't it be great if at the time you pay off the mortgage on your home, you also paid off two or three other homes? You could sell them for a good price or keep them for rental income in retirement.
You can do just that. Just save a bit more, buy another home as a rental, and the dream can come true. After the down payment, the monthly rent can pay off the loan every month.
Rather than buy apartment units as a rental property, it could be wiser to invest in a small house, condo or townhouse, or more than one, if possible.
There are reasons for this demand for small houses and condos. Here are some of them:
. There has been a trend for young people to stay single longer and wait to get married.
. There is an increase in the numbers of nontraditional households (single parent, singles-not-married, married two-income, no children) that should create a demand for smaller houses, condos and townhouses.
. The elderly people who have increased dramatically in numbers will have a major impact on the market for real estate for many decades to come. Many of these will try to remain close to family and friends. The convenience and good locations of many houses and condos will make them desirable to this group.
. As the baby boom population ages, the country will need more housing that will be of the type that older Americans will prefer, usually the small house, condo or townhouse.
Owning a rental home or homes automatically adjusts for inflation. Real estate goes up in value while other types of investments may not.
Give me a call when you want to get started in investment homes!
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