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Why Buying
a Home is a Good Idea
The Best Investment
As a fairly general rule, homes appreciate about four or five
percent a year. Some years will be more, some less. The
figure will vary from neighborhood to neighborhood, and
region to region.
Five percent may not seem like that much at first. Stocks (at
times) appreciate much more, and you could easily earn over
the same return with a very safe investment in treasury bills
or bonds.
But take a second look…
Presumably, if you bought a $200,000 house, you did not pay
cash for the home. You got a mortgage, too. Suppose you put
as much as twenty percent down – that would be an investment
of $40,000.
At an appreciation rate of 5% annually, a $200,000 home would
increase in value $10,000 during the first year. That means
you earned $10,000 with an investment of $40,000. Your annual
"return on investment" would be a whopping twenty-five
percent.
Of course, you are making mortgage payments and paying
property taxes, along with a couple of other costs. However,
since the interest on your mortgage and your property taxes
are both tax deductible, the government is essentially
subsidizing your home purchase.
Your rate of return when buying a home is higher than most
any other investment you could make.
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