Buy A House Vs Purchasing An Investment Property | Blog (2024)

FAQs

Is it better to invest money or buy a house? ›

Real estate does tend to increase in value over time, but appreciation is not a guarantee. You may get a better return on your money by investing in bonds or the stock market, although the value of these investments can fluctuate more dramatically.

Many people believe homes are a good investment because housing prices will continue to go up and homes will increase in value. In a good economy with a strong market demand, that's true. But timing the market and selling your home in a way that maximizes your profit can be tricky.

Investing in a rental property is a great way to generate steady, ongoing income. And if you hold on to a rental property for many years, it could appreciate quite nicely in value over time. But investing in real estate isn't the same thing as investing in assets like stocks.

Financial Advantages of Homeownership

This stability protects you from rising rents, which can increase significantly over time. Tax Benefits: Homeownership comes with tax advantages that renters do not have. You can deduct mortgage interest, property taxes, and certain closing costs on your federal income taxes.

Generally, if you intend to stay in a property for more than 2-5 years, it becomes more worth it to buy a house in California. Over this time, you will build equity and benefit from property appreciation. This point is often referred to as the 'breakeven horizon.

It's typically smarter to pay down your mortgage as much as possible at the very beginning of the loan to avoid ultimately paying more in interest. If you're in or near the later years of your mortgage, it may be more valuable to put your money into retirement accounts or other investments.

If you're in a financial position to do so and ready to stay put for at least a few years, buying a house is totally worth it. You'll gain stability, build equity and a retain sense of ownership and control, rather than being at the whim of a landlord.

In addition to the down payment, there are a number of ongoing costs specific to homeownership, too, including mortgage payments and interest, property taxes, utilities, homeowners association fees and ongoing repairs. All of these expenses may make homeownership out of the question.

As mentioned above, stocks generally perform better than real estate, with the S&P 500 providing an 8% return over the last 30 years compared with a 5.4% return in the housing market. Still, real estate investors could see additional rental income and tax benefits, which push their earnings higher.

Strategic Real Estate Investing

Real estate investors who develop their portfolios strategically and with determination can realize their dream of living off rental property income. Location, revenue potential, property management, and long-term financial planning are essential components for success.

What is the best investment to be in right now? ›

Yes, it is possible to purchase an investment property without paying a 20% down payment. By exploring alternative financing options such as seller financing or utilizing lines of credit or home equity through cash-out refinancing or HELOCs, you can reduce or eliminate the need for a large upfront payment.

Owners come out ahead of In at least seven major cities in California, long-term renting is cheaper than owning a home. Renters save $900,540 on average in California over a 30-year period. in at least 51 U.S. cities. On average, owners saved $175,811 over a 30-year period.

If your time horizon is more than 5 years away, you may be safe buying since chances are it will be less expensive than renting over the same period. The state of the housing market and housing availability can both be big factors when it comes to the rent vs buy decision.

A larger down payment means lower fees and interest over the life of the loan, while the costs of a smaller down payment add up over time: you may pay more in fees and interest. You can often secure better rates with a larger down payment, but you also need to understand how much you can afford.

It's harder to get rich off stocks than it is to get rich off real estate. The main reason why is due to the absolute amount of money you need to risk to get rich in stocks. Even if your $5,000 stock investment goes up 50%, that's only $2,500.

Investing in individual properties requires a lot of capital and comes with a high risk. Investing in other options available through the stock market -- REITs, mutual funds and ETFs -- can give your portfolio real estate exposure without having to lay out hundreds of thousands of dollars.