When my husband and I bought our first home, we didn’t really have our financial future in mind. We were getting married and we needed a place to live. After 4 years of college and sharing dorms and rental houses with friends, we knew a lease wouldn’t work for us. Without the advice of any financial planner, we instinctively made one of the best financial decisions of our lives…one that would affect our net worth for years to come.
Recently, I got together with four single friends from high school. It was interesting to see how their financial paths differed over the past 20 years. All four started with similar degrees from four-year universities. All four started with similar salaries but in different industries. The two girls who bought their houses were doing much better financially than the two who continue to live in apartments. As a real estate agent, this intrigued me and I decided to do some more research.
Homes are a smart investment for anyone
According to the Federal Reserve Board’s VIP forum, your net worth is directly related to whether you own or rent a home. The statistics are staggering.
According to consumeraffairs.com, the national salary for the average American worker is $40,409. His statistics show that the net worth of a home-owning family with an annual income between $30,000 and $50,000 exceeds $126,000. Compare that to a renter with the same income and net worth being in the $10,000 range. If the average American owns his home, his net worth is likely to be 12 times that of his renting co-worker. Even with a low income, he can have significant net worth if he owns his home.
Stop increasing your landlord’s net worth
With every rent check he sends out, the landlord gets a little richer. And you don’t. It’s that easy.
Many young singles are waiting for the “right” time to buy a home. Single women don’t want to buy a house and “put down roots” until they are in a permanent relationship. Single men don’t want to feel tied to a home or community. This is outdated thinking. The mortgage products offered today allow almost anyone with a stable income to buy a home. Whether you’re married or single, male or female, the sooner you become a homeowner, the more financially stable you’ll be.
So what does this mean for the average American? Dont wait!
Are you a university student? Consider buying a house near campus and renting rooms to other students. Your tenants will often pay your mortgage!
Single with limited funds? Start small and consider roommates. Remember that as a homeowner, you will be responsible for maintenance and repairs, so factor all costs into your budget when making your decision.
Do you think you can move soon? If you are not going to stay in the area for three years, it is best to rent. If you currently live where the rental market is active, you may want to buy and hold as an investment if you have to move.
Be smart! Treat home ownership as an investment
Maintenance is essential for your home to increase in value. Regular updating and basic home care is required. You have to keep the gutters clean and the roof in good repair. The heating system needs to be repaired and the exterior painted or stained to prevent weather damage. A good home repair book will give the first time homebuyer a guide to the routine maintenance required for their home.
Of course, to continue to increase equity, this means you must maintain equity “IN” the home. Avoid tempting offers to refinance with 0% down so you can take a vacation or buy a new car. Using a home equity loan may be beneficial to you if you are using it to improve or remodel your home or to purchase a second home for recreation or investment.
Want to learn more?
Get in touch with a real estate agent! In most states, the buyer does not pay an additional fee to use a real estate agent. Sellers traditionally pay realtor’s fees. And the advice of an experienced real estate agent can be of great value to find the home that best suits your needs and situation.
Copyright 2006 Teri Eckholm