When you have extra wealth or savings it’s best to think of ways that you can invest those funds. The reason that you want to invest is to earn a return on the money that you have saved. It is an easy way to think about having extra money. Once you have some disposable income or extra cash, you’ll have to start making decisions about what to do with that extra money. There are a lot of investment options that you have:
- Invest in stocks or equity
- Invest in corporate bonds, high yield bonds, government bonds
- Invest in international bonds & stocks
- Invest in commodities, currencies, derivatives, options, etc.
- OR you can invest in real estate
So, I know what you are thinking…how do we decide what to invest in? Well this isn’t an easy answer, and definitely not an answer that be be answered in a blanket response to all readers. Deciding what to invest in is a person specific response that will be based on many factors that include: risk tolerance, return profile, taxes, timeline, liquidity needs, and any legal issues. To delve into all of these issues, is really a book and not a post. BUT, don’t fret we cover most of those issues on this website and much, much more. The goal of this website is to be a hub of information for our readers learn more about how to grow their assets, earn more income, and to have a more profitable and enjoyable life.
So, when you think about investing into real estate there are some common traits shared by these type of investments. First, real estate is thought to be a relatively stable form of investing. Second, even though real estate can drop significantly in value, it is commonly thought that real estate will raise 5% in value on average, compared to a historical increase in the stock market of approximately 8%. For this extra return in the stock market, the investor will take on more risk and uncertain in the return that is earned.
How much house can you afford?
You can easily find out how much house you can afford by using an online mortgage affordability calculator like the one provided by Bankrate.com. Once you check out the bank rate calculator, you’ll have a better idea about wether or not you should be investing in a single family home.
Do you own a Single Family Home or Rent?
The math used in this decision is based on whether you are using this house as a place to live or for our family, or will this house be strictly an investment property? There are a lot of people who feel that they must own a home no matter what, and therefore the decision to buy or not for a first home is affected by many behavioral or psychological preferences.
What is the Purpose of Wanting to Buy a Home?
If you want to buy a home for an investment or for living? Do you feel that owning a home is essential goal or necessity for you to have in order to feel your life is complete? I know a friend who feels that in order to feel like a provider for his family…he must own a home. So in his case, he would choose to own a home, if it meant that this was his only form of investment for his savings.
What is right for you? Please comment down below.
I’d love to hear your thoughts about what you feel about investing into a new home. I know that there are calculations that can be done that would prove mathematically what you should do regarding buying a single family home…but maybe that is not the right answer for you.