Over the almost-six years I’ve been writing these monthly emails, I’ve said more than once that looking at a house purchase strictly as an investment is missing a big part of the picture.
A house is more than an investment. A house is also a home.
Life – romance, marriage, intrigue, kids, gardening, entertaining, joy, sadness, good food, good friends, hangovers, holidays, the whole ball of wax – happens at home.
And yet … Investing in a house can also work in your favor – big time! Right now, in these crazy covid-challenged times, it’s a good idea to look at that side of the equation, too.
First, let’s get this one out of the way: ALL investments involve risk. No risk, no reward. Generally, the higher the risk, the higher the potential reward. But of course, with high risk comes the possibility of no reward at all.
So, how do we look at the risk/reward picture with residential real estate?
Let’s compare to the stock market. Gains in the S&P 500 look impressive this year, rising almost 5% from January through mid-August. Unfortunately, that’s entirely due to the gravity-defying performance of six tech stocks: Facebook, Apple, Amazon, Netflix, Microsoft, and Google. Without these six, the index would have dropped by 4.2%. And how long can these six fly so high? Remember Icarus?
Bond yields are lousy and values are sinking. Hoarding cash won’t work. The value of the dollar is down 3% so far this year.
Pretty gloomy, right? There’s always gold, of course. Gold is up 35% this year. But gold can be volatile and – here’s a fundamental question – what can you actually do with gold?
Which gets us back to real estate. Not only do values generally increase over time – sometimes dramatically – you can live in a house while it’s appreciating. See paragraph three above. It’s the only investment you can throw a party in, cook dinner in, make love in … whatever. Try any of that with stock certificates or gold bullion.
True, property values sometimes drop, but they always rise again. And in the mean time you have a place to live, which can take the sting out of a – usually temporary – loss.
Add to this mix ultra-cheap mortgage rates – currently 3.5% (or less) for a 30-year fixed – and the answer is obvious: Buy a house!
One more thing – always work with a good realtor. Preferably one who will mix you a nice cocktail …