When you buy a home, you are buying a wealth-building tool to avoid throwing your money away on rent. Although there will be booms and busts, your home’s value most likely will not outpace inflation. Overall, however, you’re saving your money instead of throwing away monthly rental payments.
Your Home’s Expenses
The purchase of your home is not the only cost you should be prepared for. Expenses such as annual insurance, taxes, and maintenance, should also be part of your budget plan. After calculating these expenses, factor in estimated costs you would be paying in rent and deduct your annual expenses. This will give you a more accurate figure for your return on your annual investment.
Your Leverage In The Market
Owning a home builds equity. Similarly, margin trading boosts stock market returns. Utilizing a mortgage for leverage can boost the cash-on-cash return of a real estate investment. With this leverage, there are risks, but it’s important to compare and consider a real estate return as if you are paying cash.