|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
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
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
Your rate of return when buying a home is higher than most any
other investment you could make.