Is Buying A Home Still A Smart Plan?

Back to Table of Contents

With the burst of the housing bubble, credit crisis, and millions of foreclosures across the country, you may wonder if buying a home is such a good idea after all. However, it’s important to consider all of the facts. The important message to take away from these events is not that buying a home is a bad idea, but that you must be smart about buying your home.

The housing market, like every type of market, unavoidably has its ups and downs. That doesn’t mean buying a home is a bad investment. As a long-term investment, homeownership is still one of the best investments for individual households. Historically, real estate has consistently increased in value, despite shorter periods of depreciation due to local markets and/or national economic conditions. The data shows that homes generally appreciate about 5% per year.

Savings & Investment

Five percent may not seem like a great return on investment, but you have to think about it in the context of the situation. For example, let’s say you put 10% down on a $200,000 house. That’s a $20,000 down payment, or initial investment. At a 5% annual appreciation rate, your $200,000 home would gain $10,000 in value during the first year. Earning $10,000 on an investment of $20,000 is a whopping 50% return.

For further perspective, let’s say instead of spending that $20,000 on a down payment, you invested it in the stock market. With a 5% return, you would gain only $1,000 in profit.

Tax Benefits

So now you’re saying that a home may have a higher return, but that’s before you consider all of the costs of home ownership, such as taxes, etc. Well, think of it this way: your property taxes as well as the interest on your mortgage are both tax deductible. You can deduct those costs from your income, thus reducing your overall taxable income. In other words, the government is subsidizing your home.

Other Benefits

It’s easy to get carried away with all of the economic reasons for home ownership, but it’s important to remember that not every reason is financial. Have you ever wanted to paint the walls of your apartment? Well when you’re renting, you can’t. Has anything in your apartment ever needed updating, but the landlord refused to do it? When you own a home, you can make the space yours in almost any way you want. And you benefit when you do home improvements, both financially and psychologically. Homes generally have more space, for storage, living, etc. than other living arrangements. Not to mention that you have space outdoors for barbecuing, pets, and kids. Owning your home carries with it a sense of pride, accomplishment, and even an elevated social status.

So when you’re considering buying a home, consider the broad range of benefits that owning a home can have. And always make sure you have an experienced real estate agent and loan officer to help make sure you’re getting a home that is right for you, both financially and psychologically.

Back to Table of Contents

Do you want to preview the interior of a home? Or do you want disclosures or inspections on a property, give me a call at 510-684-1455. I am here to assist you when you need me.

 
 

Testimonials about Leah

Hiring Leah to be our realtor was the best decision we made when we sold our home in Oakland. We moved to Illinois for my work, and our relocation company required us to interview multiple realtors, all from the Oakland/Berkeley area. Leah was the first agent we interviewed, and while we completed our interviews with the other realtors, we knew right away that Leah was going to be our favorite. When Leah arrived at our house, she was full of enthusiasm and friendliness. She started off by making very positive comments about our location, the view, and her overall first impressions. Her opinions on how our location compared to different neighborhoods in the area meshed with our thinking exactly. Then she had us walk through the house, where she paid attention to every inch of every floor and walls and fixtures, asking lots of questions and taking notes and photos. After giving her the tour we sat down and Leah told us she thought our house could sell for just over 700K, and showed us the comps and discussed the trends that supported her position. She explained why certain lower comps were not applicable based on her research of those sales, and why buyers who had been in the hunt for a while (it's a seller's market in Oakland) would understand why our home had more value. She explained that she didn't think we needed to do any major repairs or upgrades, as they wouldn't increase the price of our home nearly as much as the investment we would have to put in. We left very impressed and excited (we had purchased the house a few years before for a much lower price and had expected it needed a lot of repairs). The other realtors we interviewed over the following week didn't show as much interest in our house, paid minimal attention to the details, and suggested that a lot of work was needed if we were going to get over 600k for the house. They used the comps that Leah had discounted, and scoffed at the idea that houses in the next neighborhood over would be comparable to ours. We agonized over the decision for a while. We liked Leah, we knew she would give 100% to sell our house, but what if it really wasn't worth as much as she thought? We reviewed the sales plans of each realtor, and in the end we came to the conclusion that we trusted Leah over the others, and even if she was wrong on the starting price, she would present out house in the best possible light because she understood it's value. But our fears were unfounded, Leah turned out to be completely right and worked harder than we had hoped to prove our trust was well-placed. Leah held 5 open houses and a realtor tour in 3 weeks before opening up for offers. She had a handyman make minor touches (fence repair, painting our mailbox) and paid for those repairs herself. She coordinated the cleaning, the carpet washing, the staging (she met with multiple stagers before choosing the one she felt fit our house right). While we focused on our new life in Chicago, she was back in Oakland meeting with 4 appraisers, 2 home inspectors, a termite inspector, a mold inspector, and coming to the house dozens of times to interview contractors for bids for termite work and mold remediation, and to inspect their work for thoroughness afterwards. She advised on us which contractors seemed the most professional, who was overcharging us, and made herself available whenever we scheduled a new one out for a competitive quote. When our buyer tried to get a discount after the first appraisal, she proved herself a shrewd negotiator and was able to work with the buyer's agent to avoid a significant price reduction. When our company-appointed relocation agent was slowing down the process, Leah set her straight so we could keep the deal moving. We sold our house for $705k. The other agents we had interviewed told us we'd need to do a lot of upgrades to even sell between 600 and 650, but Leah insisted our house was worth at least 700. We believed she was right. And she was right. I know the other agents would not have gotten us such a high price, and would not have showcased our best features like Leah did. Overall, I would definitely recommend Leah for anyone looking to sell their home. She puts your needs first, and will work tirelessly and enthusiastically to make sure you are happy. We used a relocation company who referred Leah (and the other realtors) to us but Leah made it clear that she worked for us, not for them. When the relocation company dragged out the process, Leah was positive, helpful, and remained enthusiastic, and we knew she had us covered. I really cannot express enough the gratitude my wife and I feel towards Leah, who took care of us so well and gave so much of her time and her own resources so that we would have the best experience and get highest sales price possible. Hire Leah. Justin R.
Thank you for lowering your fees to get our offer accepted. Thank you for paying for the home inspection and termite inspection to get it done quickly. Thank you for understanding that my deposit should not be put at risk if I don't feel comfortable. Every time I called with lender complaints you where there for me and got on the phone and straightened it out for me. You explained documents when lenders could not help me understand. You were the best buffer I have experienced. I trust you like family. I will use you again when it's time to buy or sell. Thank you so much. A.Wouldo, Buyer
Lady, you are amazing. Sold my house and pushed for more than what those agents wanted to give. Helped me clean and organize. Dropped stuff off for me and pushed those vendors to do what they said they would. It was fun and I love my new house you helped me by way out of your service area so I did not have to look for another agent. You knew what I wanted and we got it done. Your family now and forever. W. Terry Seller/Buyer
View All