Many people consider buying a house as a certain milestone in their life. It becomes a part of their life achievements. After finishing college, and getting a good job, people marry and settle in a nice home.
It is even considered the American dream- it is what many people strive for. Moreover, you must have come across the old wisdom of buying a house being the best investment one can ever make.
However, we want to put this statement to a test. Is buying a house really a good investment? Is it really worth it?
To answer simply- in a traditional sense of the term, buying a house isn’t a good investment. But, there are many factors that make this process worth its cost.
What are some of the reasons we want to avoid investing in a house?
It is true that owning a home comes with a sense of security and peace for many people. But that does not equal the creation of a good investment. Let’s take a lot at some of the reasons-
Breaking even
As homeowners, it is quite common to think that they are paying just the mortgage. Top builders in Chennai will tell you that house buyers pay for the additional expenses from their pockets which go up if the property in itself is from the higher range.
As a result, it takes around four to five years for you to break even on your houses once you pay your closing costs. Talk to your bank if you are curious to know the duration to break even on your mortgage.
Maintenance costs are hefty
While you are checking out posts like ‘house for sale in Mogappair’, you will only see the price of the house. But have you ever given a thought to how much you need to pay in order to maintain it? It is quite expensive to maintain a house because unlike the purchase, it is an ongoing cost. If you have a conversation with any top builders in Chennai, they tell you the cost of routine maintenance.
Here are some common maintenance costs that you need to look out for:
– Air conditioning
– Doors and windows
– Washrooms
– Drainage systems
– Refrigerators
– Lights
– Roof damage
– Pools and yards
– Structural issues
Low appreciation rates
Understanding the rate of appreciation is important because it will help you determine whether buying a house would be a good investment. Any seller would be keen on making a sale. But they hardly tell you the rate of appreciation. Unless it is high enough, you would not earn any added value on purchasing the house.
Unfortunately, since the pandemic, appreciation rates have hit a record low of -11.4% in September 2020. With the national average hitting rock bottom, you need to reconsider before rushing a purchase just because you saw a Facebook ad showing a house for sale in Ayanambakkam.
Top builders in Chennai might tell you that the local rates of appreciation vary from the national average. But it is hardly anywhere close to a good rate.
Difficulty in timing the market
People consider homes to be good investments because they believe in housing prices to increase. Hence, the value of houses will also increase.
This is far from reality. Why? There are a couple of reasons. The above scenario can be true in a good economy with strong market demand. But most people find it difficult to understand the market of real estate. If you are trying to make a profit out of buying a home, you need to do it in a buyer’s market where there will be more sellers in comparison to buyers.
This usually ensures a better deal on your property. However, while selling your house, you would want to be in a seller’s market so that you can demand higher prices.
However, it is almost difficult to get these two scenarios right. Most people either wait for too long to make a sale or sell it too soon.
Now that we have discussed some crucial points on why investing in a house is perhaps not the best investment, it can still be important for a sound financial future.
Renting or buying?
According to top builders in Chennai, buying a house is a better option than renting because the former lets you build equity. Experts say that when you are paying rent, you are simply paying the mortgage for someone else.
Whenever you are planning to stay at a particular place for more than three to five years, buying is a better option than renting.
However, in some cities like Mumbai, the price of houses are beyond the reach of most of the population. Hence, renting is common and economical.
Financial stability
For many people, owning a house is equal to financial stability. With time, you will be able to predict your housing cost in comparison to rents.
Owning real estate is also a great way of handing down wealth to the future generation. For high-risk averse people, investing in a house is a safe option- the value of homes is less volatile than the stock market.
Takeaways
Homeownership can be a good investment for some people, owing to financial stability. Whereas for others, you perhaps need to reconsider your choices. With this exhaustive list, you now have a better idea about home investment and will be able to make an informed decision.
