Is purchasing real estate still a good idea?
With home prices as high as they are, does it still make sense to buy real estate in 2021? It all depends on your circumstances, but by and large, yes, it is a great time to buy.
The reason is that the return on money is historically low. Often, it’s under 1% even for a certificate deposit that runs five years. We can’t predict the future, but when it comes to real estate, you don’t actually lose money over any seven-year period.
Many of the people who are thinking about buying a home are currently renters. Rents this year increased between 20% and 30% across Orange County, and there are a number of reasons why. For one, some landlords have raised rents for tenants to offset the ones who aren’t paying rent due to COVID-related financial stress. Whatever the reason, if your rent rises by 20% or 30%, that can affect your lifestyle because incomes haven’t increased by a comparable amount.
Another thing to consider is that when you buy a home, your mortgage is typically fixed. When you rent, you’re paying someone else’s mortgage anyway, so you might as well pay your own. A mortgage is like having a forced savings account that grows as you pay down your balance and gain equity.
Buying investment real estate also comes with its own benefits. My parents didn’t have huge pensions or 401(k)s set up for them over the years, so when they could afford to, they purchased homes. They owned a total of four homes, which we’ve sold off, and used the equity to fund their retirement. You can also turn your investments into other assets through a 1031 exchange and roll the gains forward until you actually need them.
In the end, real estate is a great vehicle to save up and plan for your financial future, but there are a lot of things to consider. If you have any questions about buying a home or you’re looking to purchase an investment property, please reach out to me via phone or email. I’d love to be a resource for you.