What do I know about real estate? The types of properties I’ve owned include multi-family residences, single-family, commercial, vacation rental, condo, land, tax lien, and even a gold mining claim (which is not technically real estate). Do I think real estate has bottomed? Yes, but the recovery may take a few years. Do I think everyone should buy a home? Yes, if you want to live in a house for a long time, have the down payment, and you can afford the mortgage, then definitely.
No Increases in Rent
One of the big advantages of owning your own place is not being at the mercy of the property owner’s rent decision. I would recommend avoiding an adjustable mortgage, so your payments will be fixed for the life of the loan. If you have a no prepayment penalty loan for thirty years, you can always overpay your mortgage each month turning it into a 15-year mortgage. If you are hit with money problem, stop making the excess payments on the mortgage.
Deductible Interest
Unlike rent, the mortgage interest deduction can reduce the monthly cost of owning your home, and it is not very likely that this tax benefit will go away.
Your Own Destiny
If your landlord decides to sell the property, and you are in a month-to-month status, you’re stuck, unless the new owner wants to keep renting to you. When you own your own house, as long as you keep making the mortgage payments, you decide when you want to move.
Personalization of the Property
Want to upgrade and renovate the house you live in? Then you had better be the owner of the property.
Equity Can Be Used for Emergencies
Although accessing the home equity should only be done as a last resort in my opinion, it is available to the homeowner if emergencies arise. Many retirees have sold their houses, bought smaller homes, and are living off the surplus funds.
Non-Recourse Loans
Almost all mortgages are non-recourse loan, which means is that the mortgage company can’t go after your personal assets if you walk away from a loan on a home with negative equity.
Other Ways to Invest in Real Estate
Now suppose you like real estate, you think it is going up, you have some money but not enough for a down payment, or you are just not ready to buy yet. You do have another option, real estate investment trusts, also known as REITs. These investments are similar to stocks, but have the advantage of not having to pay corporate income tax, as almost all the income is paid out to the investor.
REITs are available with various specialties. Some are diversified in terms of the properties they own, others concentrate on apartment buildings or shopping centers or hotels. According to the free list of residential REITs at WallStreetNewsNetwork.com, there are half a dozen REITs with yields ranging from 4% to 8%. The REITs also provide the advantage of liquidity; in other words, if you need to sell, you can get the proceeds within a couple days.
If you want the American Dream and you can afford it, then go for it.
By Fred Fuld, publisher of Stockerblog.com