A general rule to keep in mind is that, homes appreciate about 4-5% a year. Some years maybe more or less, and differ depending on where it’s located.
At first, 5% may not seem like a lot. At times, stocks appreciate more, and could easily earn you over the same return with a safe investment in treasury bills or bonds.
Assume that you bought a $200,000 home that you didn’t pay cash for and you have a mortgage, too. You put up to 20% down that would be an investment of $40,000.
With a rate of 5% appreciation annually, a $200,000 home would go up in value $10,000 over the duration of the first year. What this means is that you’ve earned $10,000 from a $40,000 investment. That makes your annual return on investment 25%.
Keep in mind that, you would be making mortgage payments, paying property taxes, and other costs. But, because the interest on your mortgage and your property taxes are deductible, your home purchase is basically being subsidized by the government.
So in conclusion, your return rate when buying a home is higher than, most any other investment you could make.
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