Is Your Home a Good Investment?

Your home is one of your most expensive possessions. That's why many people consider your house a status symbol. As with all large purchases, people want to get a fair value when they buy and a great value when they sell. Unfortunately, it can be difficult to forecast how the market will be when you decide to sell your home. Analyzing whether a home will be a good investment before you buy it can help you make money when it's time to sell.

Think About Location

Realtors often tell buyers to think about location. You need to consider not only what the location is like currently, but also how it might be when you wish to sell the home. Neighborhood decline can make it difficult to sell your home for a good asking price. Consider what amenities the area has and consider whether these will still be around in five to ten years.

Be wary of buying a home in a new construction area if you plan to sell the house within the first eight years. Most builders will still have new homes for sale during this timeframe, and they will be able to offer incentives for homebuyers that you can't match with a used home. If you plan to stay in the area longer than eight years, consider adding extras to your home. These may make the difference when it comes time to sell the house.

When you think about location, also consider buying an older home. Neighborhoods with older homes often have fewer swings in the economic status of the homeowners, and a well-established neighborhood will generally stay that way.

Along with the neighborhood's condition, you'll want to look at certain environmental factors that can affect your resale value. If the house backs up to a street, it may be slightly cheaper for you to buy. However, if the road gets busier, the noise may hurt your resale value. Large power line towers, industrial buildings, and apartments in your backyard can make it difficult for you to get your money back, too.

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Wait for the Right Time

Buying a home might not be the best investment for you. Look at the rental market in the area where you wish to move. You may be able to find a comparable home for less per month than what your mortgage would be. You may be able to save enough money for your home loan that you can pay off the mortgage faster and cheaper by renting for several years first. A mortgage calculator can help you run the numbers that factor into a mortgage rate so you can see whether it makes sense for you to rent first.

Consider the Retirement Value

A home is not generally a retirement investment. You can't take part of your house down to the bank to get cash for groceries. If you need to pay your bills, the only way your house may help you is if you can get a reverse mortgage, but this type of loan has pros and cons.

However, buying a house can be part of your retirement strategy. Retirement usually leads to a decrease in monthly income. If you pay off your mortgage, your home becomes a great asset. While you may not get money back out of the house, you won't have the monthly expense of rent or a house payment. In this case, you can consider your home a great investment toward the quality of your retirement.

Find the Right Price

To make money in the stock market, you need to buy low and sell high. The same is true in the housing market. Shop around for as long as you can before buying a home. If you only look at a couple of homes, you may buy the best deal out of the two, but you could overpay by as much as $20,000 - $30,000. You may find a better deal in the neighborhood across the street.

The housing market can be a difficult field to navigate. With many variables out of your control, like the job market and inflation, it is even more important to focus on what you can control. As with any investment, balance the "I've got to have it" craving with unemotional judgment. Find out which type of mortgage is the best option for you with our mortgage calculator.