The Wistrick Team - Why First-Time Home Buyers Can't Afford To Wait
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Why First-Time Home Buyers Can't Afford To Wait

April 08, 2019

Does the idea of home ownership sound unrealistic, intimidating, or even pointless? There are a number of reasons why people continue to rent before ever considering home ownership. But there are also reasons why choosing to wait leaves more money on the table than most renters realize.

Let’s tackle the biggest hangup with buying a home—the monthly payment, right? Here’s a look behind the curtain.

Lucky for us, the Atlanta real estate market increases in value at an average rate of 3-6% per year. If you’re new to this world of real estate, I want to explain in simple terms how that translates financially. So let’s do the math on a $250,000 home. The average first-time home buyer stays in his or her home for 5 years. With compounding appreciation at 4% per year, here’s the breakdown of the financial gains.

Year 1:  $10,000 appreciation = $260,000 new total value

Year 2: $10,400 appreciation = $270,400 new total value

Year 3: $10,816 appreciation = $281,216 new total value

Year 4: $11,248 appreciation = $292,464 new total value

Year 5: $11,698 appreciation = $304,162 new total value

Not too shabby! The average total appreciation is $54,162 after just 5 years. And this breakdown doesn’t include other financial benefits to being a homeowner, such as the ability to write off your mortgage interest and property taxes every year.

You might say, “that’s nice Mike, but a mortgage payment would be more expensive than my monthly rent.” That may be true, and none of us has a money tree to make up the gap. But if you do have any wiggle room and are actively saving each month, consider a different angle. Think of owning a home as a mandatory savings plan. Here’s another financial breakdown.

If you’re paying $1,800 in rent per month, but a mortgage payment would run you at $2000 per month, then it’s true you’d spend $12,000 more over 5 years. However, in that same period of time, your home’s value will grow and earn $54,162 in equity. That amount sets a new homeowner up for a strong financial future when the time comes to sell (or for a home equity line of credit in case of emergencies).

With a small down payment, you gain ownership of an appreciating asset worth hundreds of thousands of dollars. No other investment vehicle allows you to do this. You would never take a $250,000 loan out on stocks because it’s way too risky and volatile. Real estate is steady and predictable and can be proven by 100+ years of data.

If I still haven’t convinced you of the financial genius of home ownership, it could be that you don’t want a higher monthly obligation to disrupt your savings plan goals. It’s a fair point. But again, the average bank only pays .08% interest on your savings balance. Meanwhile, stepping into a $250,000 home earns 4% appreciation on the full value. Mathematically, there’s no comparison between the two options when it comes to securing your financial future.

Over time, owning property is the best vehicle to building wealth. And the earlier you start, the greater the long-term gain. Not to mention, what investment out there allows you to live in it, work in it, raise a family in it, and make amazing memories? Pretty cool if you ask me.

So … what are you waiting for?

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