Some may argue that purchasing a home is merely taking on debt for little to no tradeoff. However, buying a house is a secure path to financial security. Not only is owning a home a symbolic action of “making it,” or achieving “the American Dream,” but it’s also a great way to invest in your financial future. Because homes are a source of appreciating values, rather than depreciating, they remain a smart investment option.
Financial planner and author David Bach said that homeowners in the United States are worth 38 times more what a renter is. Can you imagine what you could do with that much more personal wealth?
Below are some reasons why owning a home is better than having a landlord. They just may convince you to trade your rental agreement for a secure financial future!
Invest in Your Wealth
When you live under a landlord, you’re never truly living in “your” home. At any given time, they can force you to move out, even with a contract in place. Because someone else is the real owner of the building, you are just a tenant. Also if you’ve remained current on your rent and you’ve not caused any problems, they may very well decide to stop renting the place out entirely.
While renting a home may be less expensive than owning one directly, it fails to give you and your family that complete feeling of ownership and safety. Instead, by buying a home, you are the one calling the shots. Yes, you do still have to worry about the bank’s mortgage on your home. But once that is paid off, your house is indeed yours!
Each month, when you hand over your check for rent, it’s going nowhere except your landlord’s banking account. But when you send a payment towards your mortgage, it increases your wealth instead! Each payment made on your note decreases the amount of debt that you own, as well as provides you with equity from the physical building. A Homes For Heroes Account Specialist can go over these options with you. Sign up to learn more!
Build Your Wealth Faster with Extra Payments
Most mortgage notes are written for 30-year repayment periods. However, most institutions allow you to pay that amount off early. It may sting a little, but if you can make at least one additional payment each year, it will drastically reduce how long you remain in debt.
Like other loans, most of your repayments go to the interest, and not the principal. By making additional payments here and there, you can chip away at more significant chunks of the note.
In fact, this method can help you pay off your home by year 18 instead of 30! Not only will you look like a rockstar on your credit report, but it will free up that much more equity and time. It’s a win-win, and one that serious homeowners strive to accomplish!
Become the Landlord
Once you’ve paid off your home, then what? A frequent mistake by many is to buy an even more massive and expensive house than before. However, immediately upgrading is a mistake and one that you should avoid. Instead, consider purchasing a similar home in the area and renting your current house out.
That’s right, while you’re giving up living under a landlord, become one can build your wealth! When you have one home earning rental income, and you’re paying off your new mortgage, you’re growing your wealth quickly.
That is especially true if you’re able to use the profits to pay off the original note. Again, the sooner you pay off a mortgage, the more money that goes to the principal of the loan.
Best of all, this method of growing wealth is relatively simple to repeat. Just don’t get carried away. There’s likely no one to tell you to stop taking on debt, even if lenders know it’s probably a risky decision.
A More Stable Market
For generations, those who have wealth have frequently gained it through deals. Today, buying, selling, and renting property is still among the safest choices to make.
Other markets are just too volatile to create a safe and efficient path to wealth. Even the best financial advisors are unable to know just what way the stock exchange is likely to swing.
Today, there are more markets to invest in than ever. Cryptocurrency markets, for example, have infamously ballooned to insane amounts of returns, just to crash the next day.
But in real estate, the market remains stable for more extended periods. Even when the market does turn sour, it often recovers in a short amount of time.
Owning stock or mutual funds is a recommended investment strategy. You just may want to reconsider it remaining your only avenue of investments.
An Investment with Real Value
Even if you were to earn well over a million dollars in stock, it wouldn’t provide you with any tangible value here and now. However, when you own a house, multiple aspects benefit you.
You can’t live inside of a mutual fund. A home provides warmth, shelter, and personal storage. Whether you plan to use it for yourself or to rent to others, a house just offers more value to a broader range of people.
People will always need a place to stay, and those who own houses have the clear advantage to capitalize on that need. When you need a dependable investment option, it doesn’t get much safer than homeownership.
Don’t Seek Perfection
Another common mistake is to waste weeks of time searching for the idyllic, perfect home. Or, after it’s purchased, spending a fortune upgrading it until it’s just right.
However, homes aren’t perfect, and even if you built one from the ground up, you’d likely find areas that just aren’t functional. Instead, settle for a cheaper home that doesn’t have all the features you’re looking for and add them on later.
Many home improvement items can be handled as a Do it Yourself project. Some things like painting, new light fixture installations, and installing stepping stones, for example, are quick and affordable.
More homeowners should have a similar attitude towards their house that they do towards their car. Although it’s nice and you love owning it, it’s probably not the last one you’ll buy.
By continuing to look towards your financial future, you may know that the home you’re buying today will earn you rental income later. Don’t look for a private mansion or compound at entry-level pricing.
Instead, by locating a deal and focusing on quick and affordable repair options, you can keep costs low and potentially build up a rental egg later. Now that’s smart investing!