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Buying a House: Good Investment or Not?

Buying a House: Good Investment or Not?

Since homes are such permanent fixtures, conventional wisdom suggests that buying a home is always a good investment since generally, the price of housing goes up year to year. The current housing market notwithstanding, homes today are still worth more than they were 20 years ago, which is less than the time of your average home loan. So a person who purchased a home in the mid eighties and stuck with it has seen the value of their home shoot up significantly and, in recent months, come down significantly, as well.

All things being equal, however, their home is still likely worth a good amount more than they originally bargained for. So the home was a good investment for them, right? Well, perhaps. Much depends on the home, the bargaining savvy of the owner when purchasing the home and the fix-it knowledge of the owner as well. There are three things you want to remember when considering a home as an investment:

  • A good investment has a fixed interest rate.
  • A good investment has no hidden costs.
  • A good investment has much research behind it.

Fixed Interest Rate

Buying a home on an adjustable rate mortgage (ARM) is rarely a good idea if you’re looking at a home as a long-term investment. Home mortgages are still at historic lows even today, and that means that there is little else for your rate to do but go up. Many people who buy their first home are unprepared even for the taxes on the home, which can drive up the price of the payments, let alone if the interest rate climbs year to year, raising the price of housing. A good fixed interest rate helps to keep the price of your home steady and predictable, which is key to managing a good investment.

No Hidden Costs

Homes aren’t cheap to maintain. If they just sit there, year in and year out without any work on them, they will decay and fall apart. That means that in order to keep their value, you, the homeowner will have to put time and money into repairs for windows, roofs, A/C units, fences, landscaping, carpeting, toilets, etc. Living in an apartment you may not have been aware just how much the owners put into keeping your place in good repair on a monthly or yearly basis, but it is best to go into home ownership with your eyes open wide to the approach of these costs.


It has been said that the three most important things to consider when buying a home are “location, location, location.” This is mostly true, as the location of a home is key to determining its value. However, there are other things that a wise owner should look into before deciding to purchase a home as an investment. For example, are the building materials high quality or bare-bones parts needed to make the house stand up for awhile? Is the contractor building the house a reliable company, or is it someone’s cousin doing the work for only the first time in his life?

Due diligence in asking a lot of questions can help to keep you from shelling out an extraordinary amount of money for something you will have cause to regret within a few weeks of moving in.
It’s your money. It’s a lot of your money, your time, and effort as well, don’t be afraid to ask questions. Make a pest out of yourself; be demanding, and go for the best you can afford in building quality. Otherwise a mortgage as a long-term investment could become a long-term headache leaving you wishing you had stayed in your rental. Make sure that it’s built to last, has a fixed interest rate so you can always afford it, and that you have funds set aside for regular repairs and maintenance. Follow this advice and a home could possibly be the best investment you’ll ever make.

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