The Best Investment
Historically, homes have appreciated between one and five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood. Five percent may not seem like that much when compared to stocks and bonds. They oftentimes appreciate much more quickly. You could earn over six percent with the safest investment of all, treasury bonds.
Consider this: If you bought a $200,000 house, you probably 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 twenty-five percent.
In addition, 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.