4 Rules For Building Wealth With Home Ownership
This blog is not about quick and easy profits! True wealth building rarely is. It's about steadily increasing your net worth over time. It is not about speculative investments to get rich quick. It's about how to build meaningful wealth while enjoying your home.
There are many variables and moving parts to the home ownership puzzle. But, it's not brain surgery either. Home ownership is possibly the most accessible means of building wealth that is available to the general public, non-investors, and average middle-class Americans. Here's how to make it work
Rule # 1: Consider the "5-year Rule" before you decide to buy.
Don't consider buying a home unless you plan to own it for at least 5 years. That is because the wealth building cycle starts very slowly during the first 5 years.
After 5 years, the wealth building cycle begins to accelerate. Selling before then may cause you to lose money because you won't necessarily get back all the up-front costs of buying.
Rule # 2: Make sure you don't pay too much when you buy!
Any retailer will tell you they make their profit when they buy. That's because consumers in the marketplace will dictate the final sale price. The retailer can't control that. The retailer can only control what he pays for an item. The difference between what he pays and what he can sell it for is his profit.
It's the same with housing. Get proof of the current value of the property you're buying by researching the comparative values ("comps") of similar properties actually sold recently. These are available for free from your Realtor.
Rule # 3: Shop to get the lowest interest rate you can.
But, don't accept fancy terms of a loan like adjustable rate mortgages (ARM) or deferred (balloon) payments. A fixed rate over the length of the loan is more preferable so you know what to expect over time. Remember, this is about wealth building, not speculative investing!
Rule # 4: Pay for a professional home inspection after you are under contract.
Then be insistent that everything is in top condition before you buy. Remember, there are a lot of moving parts. You must minimize how many of them are likely to breakdown soon after you buy.
Information provided by Huntsville Real Estate Expert Mike Manosky.