What Does Buying A House Do To My Investment Plan?
Ideally, nothing! It really should be a part of your entire plan, unless home ownership is not a priority to you.
Should it be a priority?
For many people it is, but like nearly anything on the planet it really comes down to solid understanding of the individual choices you could make, and why you’d make them. This is probably slightly different advice than you’ve heard other places, so I’ll tell you why I say what I say.
More important than anything else is, why are you buying a house?
If your answer is because it will be worth a lot more in future years, know the historical appreciation rate for your market, and the likelihood that people will want to move there in the near future. The appreciation rate must be higher than inflation for your investment to grow and actually BE worth more in the future.
If your answer is that you and your spouse and three kids need some place to live, then you’re not thinking of it as an investment, which is probably a good thing. I don’t ever factor in your primary residence in your portfolio, because I don’t expect you’re going to sell to invest. You need a place to live. Rental real estate is a completely different discussion. I’m a landlord myself, so I’m not saying that real estate investing is a bad thing – far from it.
So, given that, what is the definition of a good investment, a.k.a. an ASSET? Simply put, an asset puts money INTO your pocket, while a liability takes money OUT.
If you own a home for 10 – 30 years, it’s highly likely you’ll replace the roof, the water heater, the furnace, the carpet, the flooring, and many other things over that period. That’s not making you money, so it’s not an asset. In fact, the only way you can get money out is to refinance or sell, so in many cases it’s not a good idea to pay your mortgage down faster than the schedule calls for. Understand, it’s a case-by-case thing, and you need to have that reviewed.
So, getting back to the first question, buying a house should be a part of your investment plan.
Yet another reason why starting to plan and save and invest early make things a lot easier!
You want a house, and there are many ways to get the down payment saved for if you’re patient.
You want to provide an education for your kids, and of course, someday you want to MAKE WORK OPTIONAL.
By the way, you can’t borrow for that last one, so that should be your number one priority.
The good news is, it’s do-able.
Let’s get started figuring it out today.
Contact me for advice assistance, Email me at: John@financialideasblog.com
1.888.379.4352 Extension 1000
Read more at: http://www.whattoinvestinnow.com
Related posts:
- What Does A College Plan Do For Me?
- The Investor - Advisor Relationship
- Real estate is booming again. Huh?
- Why Right Now Is A Good Time To Buy A House For A First Time Buyer
- Should I Buy A House Now?
October 6th, 2010 at 6:13 pm
I am moved beyond tears at the sheer brilliancy of this blog. Thank you.