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Real Estate Versus Other Investments
Statistics, News Flashes and blah blah blah...................... The Real Estate market is up! The Real Estate Market is down! We're in for a bubble crash! All phrases we have heard as of the past year about the real estate industry and what is going on. And to be honest, typically by analysts that are not in the industry, don't have a full understanding of real estate and manipulate numbers to make a point and stir the pot! Unfortunatly, their false pretenses and perceptions become the reality view of many...Accepting points of views and jaded figures as truth. I'm still a firm believer that real estate is one of the best investments that you can make...and here's why: 1.) The power of leveraging works to your advantage. IE: A Mortgage Example: If you put $100,000 into the stock market, you hold an asset that is worth at that very moment $100,000. What can you do to increase the value of that asset? Spend all of your discretionary income purchasing the products that that company makes? No...Most people just pray. And after all is said and done, you will need to pay capital gains tax on the return. On the flipside, if you purchase a $500,000 home with 10% down ($50,000) and the home appreciates at a more normal rate of return (5%) and not the crazy 20% we have been experiencing lately...that means the home will now be worth $525,000 after year 1. Is that $25,000 increase not a 50% return on your original $50,000 investment? Yea...It is!
2.) Uncle Sam rewards you with tax writeoffs (the ability to depreciate) your home and write off mortgage interest! Example: Lets say you have a positive cash flow (income minus expenses) of $5,000/year on a rental property. For me, the interest on my mortgage alone allowed for a $24,000 write-off this year on my income! If I had to pay taxes on that income at an income tax rate of say 40%...that would have translated to a $9,600 tax savings! NOTE: I always recommend my clients talk to a CPA, to understand local tax laws as they apply to your individual situation...The benefits are amazing! Why? Uncle Sam wants to promote home ownership!
3.) In Real Estate in a "Buyers Market", you can realistically purchase a home for $500,000 that is worth $600,000...Right off the bat! Example: Foreclosures, financial troubles, divorces, passed on properties from previous generations, people needing to move out of the area to relocate immediatly, inexperienced agents and sellers, sellers looking at Whereas, if you invest in the stock market, mutual funds and other investments...you typically invest the same dollar amount as that investment is worth on that day....a simple rule of supply and demand.
4.) You have an immediate and direct ability to control the value of a home, whereas, you can't with stocks and other investments! Example: If you purchase a "fixer-upper", you have the ability to update the kitchen, improve the "curb appeal" of the home with trees,lawn and grass and the addition of a new paint job! Through some work and effort, you have the direct ability to improve the value of Real Estate! Can you do this with your stocks and portfolio? Maybe you can spend all of your income, purchasing all the products that your stocks make...or maybe better yet...PRAY! These are just some highlights that I feel I needed to bring to the attention of those that are "on the fence" about purchasing Real Estate. Time over, Real Estate has shown to be a worth investment.
My name is Scott Gormley, I'm the Broker/Owner of Oak Valley Mortgage in Northern California and Beach Town Mortgage in Southern California. If you would like to learn more about how you can leverage your Real Estate purchase up to 100% of the purchase price of the home, feel free to give me a call. I'm a straightforward, licensed California Mortgage Broker that tells you how it is and I get the job done with clear lines of communication throughout the purchase process.
California Home Loan Testimonials Blog: http://www.CARealEstateBlog.com "You find the perfect home, we'll find the perfect loan!" |
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Oak Valley Mortgage-California Home Loans and Refinancing Chico, CA Office Phone: (530) 592-8362 Cell Phone: (530) 592-8362 More information... Contact Oak Valley Mortgage-California Home Loans and Refinancing |
Yet...after depreciating appliances, curtains, permanent fixtures and anything else allowable by Uncle Sam in the home, you show a loss on paper! 
home sales around them and being stubborn on what their home can sell for...neglecting the fact that their home has a better view,pool and a multitude of upgrades are all factors that explain why people would sell a home for less that fair market value! 
