Invest in Real Estate, Invest in Yourself
Most of us tend to have financial goals or dreams that require the financial ability to attain them. While these goals can be very different from person to person, the fact of the matter is that a lot of people look for ways to invest their money to improve their current situation or improve their future.
There are many ways to do this, from investing in stocks, to setting money aside in a 401K. However, given our nature of business, we would love to share why we believe that Real Estate can be a great way to invest for today and for your future.
Renting vs. Owning
We could discuss this over and over! In fact, we have discussed the renting and owning debate before in our blog. You can read about it here. We've also discussed what millennial's are spending on rent in comparison to the generations before them, read it here.
What is important to remember about renting instead of owning is that when you rent, your money goes directly to a landlord or company that owns your building. When own a property with a mortgage, your payments are going towards the mortgage and in essence building your equity should you ever decide to sell the home. Having this equity can help in the future should you decide to sell and you want to use the proceeds for another down payment (psst, we'll discuss below!), to get a home equity loan, or use the proceeds for really whatever you would like. Hello, vacations in retirement!
The great news is, is that home values have steadily appreciated in the last few years, and this should hopefully stick. Even if we see a slight down turn, if you were to wait a couple more years, the values should continue to go up, so you are continuous paying for your own money back in the future.
According to our Twin Cities region Multiple Listing Service, Northstar MLS, the median sales price has gone up 7.9% from January 2017 to August of 2018. If increasing values continue to go up, in theory if you were to buy a home this year, it should increase in value even by the same time next year.
Again, we completely understand that sometimes owning may not be in the cards for you right away. As always, we would recommend meeting with a lender to discuss what you can do to be ready in a shorter time frame, or to see if you actually can make something work. Did you realize that it may be possible to get a conventional loan with a 3% down payment? If you need a lender recommendation, please reach out to us or check out our website for lenders our clients have worked with.
Own to Move Up
We gave a slight teaser above, however, this is a very common trend amongst first time home buyers! In many cases, the first home you buy, may not be your forever home. This is completely fine and actually a great way to practice homeownership and get a few DIY home remedies under your belt!
What's great about purchasing a starter home is that once again, your payments go to help build your equity over the course of the years through mortgage payments and hopefully rising property values. You may then be able to use your net proceeds from the sale of your first or current home towards the downpayment of your next home. Hopefully, that will mean less money coming directly out of your savings that can then be used to help make that new house a home.
Buying a home to help increase your equity, instead of paying rent, for your future dream home could be one of the best ways to get into that home!
Purchasing Rental Properties - Passive Income!
This is one of our favorite ways to help invest in your future, and in a way to make some passive income. Investing in real estate to turn into a rental property is a great way to have someone else pay your mortgage, or if you own the home free and clear, just some extra cash in your pocket.
There are a couple of ways that you can set yourself up to own rental properties. One of them is to buy a home to live in it for a few years before turning it into a rental. This could give you the opportunity to fix it up a little, or just help you build equity and not put your money towards rent. You would then want to talk to your lender about what your options are for purchasing a new home while maintaining the current property. Remember, you want to make sure it is in your financial means to do so before you have two mortgages!
The other primary way to do this is to buy a property for the sole purchase of turning it into a rental. There can be different mortgage rules on this, so again, plan on having a thorough meeting with your lender before you start this process! However, this is a great option to turn a single family home, condo or townhouse, into a passive income generator.
If you aren't sure if you want to manage a property that's a rental, there are plenty of companies that help with this so you do not need to worry! Renters Warehouse is a big one in the Twin Cities that people use to help manage leases and any issues a landlord would typically deal with. This will help you continue on with your normal day to day life, while still enjoying the benefit of having additional properties build your wealth.
All in all, we don't believe that real estate is a great investment, just because we are in real estate. If you have ever owned a home, you likely have seen firsthand how owning your home can be a benefit to you and your future financial situation.
If you have any questions about buying, selling, or investing in real estate, please reach out to us! We would be honored to help you begin the process and discuss your options.