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Crofton Home Buyers Question the Power of Leverage

Oh Crystal Ball, should I buy a home now?In this market, it’s easy for Crofton home buyers (and buyers everywhere) to question whether real estate is a good place to invest their limited resources.  After all, home prices have been leveling off – even dropping – for the past two years.

Yet we all know the real estate market goes in cycles, with ups and downs from year to year or even month to month.  We really have to look at real estate in longer terms, just as we do other investments.

While no one has a crystal ball, it’s reasonable to speculate that real estate will go up over the course of ten years – it certainly has over any 10–year period during my 35 years in Crofton real estate.  So let’s take a look at this chart, with the understanding that it is for illustration purposes only.  None of these figures are either predicted or guaranteed:

Leverage - Power Of

 

 

 

 

 

 

 
As you can see, this assumes the same appreciation rate for both real estate and savings, for the sake of illustrating the power of leverage.  There’s no real estate in Crofton priced at $100,000, of course, so that’s a number used for illustration purposes only, as well. 

Nay-sayers will quickly point out this doesn’t account for the selling costs, in order to capture the return on your housing investment, so let’s take this a step further.  Of course, if you’re going to count the selling costs, you also need to consider the equity growth for pay-down on your mortgage.

Leverage - Beats the Bank

 

 

 

 

 

 

 

 

You can draw your own conclusions about the power of leverage – whether it may benefit you to invest in real estate.  Or you may wish to discuss it with your own accountant or financial advisor.  The goal of most investors is “buy low, sell high” – with that in mind, today is a GREAT time to buy a home! 

If you’ve never purchased a home before, leveraging your money is just one of the factors to consider.  For information about the home-buying process, qualifying for a mortgage, and all things real estate, SUBSCRIBE to this blog so you don’t miss any future posts – or give me a call. 

 

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