Tuesday, March 3, 2009

My home... my investment

Well, after all it was us that started it! Us real estate people!

We told Americans to buy instead of rent... "It's a sound investment!" And at the time... 50 years ago... it turns out it WAS a good investment.

But today I propose that we change our view. Don't buy your home because you perceive it to be a "good investment". Buy it because you need a place to live. Buy it so that you have a place to raise a family. Buy it because you want a place to call your own.

You know what? Real estate, historically speaking, has appreciated in value, at a rate of 4-6% per year. So think about recent years.... we've seen, in different parts of the country, and specifically in the Albany, New York area appreciation years of 7... 12... even 24% . Pretty good, eh? But more recently we've seen the rate of appreciation flatten out. Like NO appreciation on some homes. But still, guess what? We had a place to live. We owned our own pad. Otherwise, we might have been paying close the same number of dollars to a landlord and STILL not owned anything. And had no right to sell it. And certainly not had any tax deductions in the real estate department. (Didja ever wonder why our government decreed that there should be deductions and tax benefits to owning as opposed to renting?... more on that later)

While I strongly urge you to enlist the services of a Realtor when purchasing a home, I would also strongly urge you not to OVER analyze the process with speculation of what kind of return you can get and when. First, NO one can predict the future. Secondly you know as well as I do that if you are going to pay to live somewhere, it would be better if you could actually call it your own and even actually own it free and clear someday! I would be amused to find out how many of you ever heard of a "mortgage burning party"? You probably need to be older than me. The Mortgage Burning Party would be on the occasion of you making the last payment on your house and you becoming the free and clear owner! People would invite their friends to come to their house... have a party and actually light to mortgage documents on fire... they might even raise a glass in honor of the event. These days financial smarty pants will probably tell you that having no mortgage is a "dumb idea", because now you have no tax deduction! Oh for the simple days!

Anyway... please.... if you are buying your personal residence... make sure you are not paying too much. Have your Realtor research the recent sales activity to help you understand the real value of the property. Buy it for less if you can. Hope that the market works in your favor. But if it doesn't grow at 25... 17... 25% a year... that's OK... you have had a real nice place to live.

In all likelihood it will appreciate. But don't bank on it!

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