As young people enter the full-time workforce and begin to think about living on their own, it may not seem practical or wise to consider buying a home. However, it may be a pivotal decision for your financial security and future retirement.
Rents are going to increase based on the shortage of rental units needed for the demand of the market. Buying a home is a way to control those costs and even provide income by converting it to a rental as you decide to move up into another home.
There is an advantage to buying a home before a person gets married, starts a family, and has their standard of living at a higher pace. Their expenses are lower, and it is easier to not only qualify for a loan but possibly, take advantage of programs for down payment assistance, grants, or other options like gift funds or co-signers.
Purchasing a home is a significant financial decision, particularly for first-time homebuyers. However, there are several benefits to buying a home early in your career, even if it is not your dream home.
One of the most significant benefits of buying a home as an investment is that it can help you build equity. Equity is the difference between the value of your home and the amount you owe on your mortgage. As your home's value increases, so does your equity. This can be a valuable asset in the future, as you can use it to finance other investments or retirement expenses.
Another benefit of buying a home as an investment is that it can generate passive income. If you rent out a room or two in your home, you can use the rent to help cover your mortgage payments and other expenses. This can free up your disposable income to invest in other areas, such as your retirement savings.
Of course, there are some risks associated with buying a home as an investment. The value of your home may not always increase, and you may have to deal with unexpected expenses, such as repairs or maintenance. However, the potential benefits of homeownership can outweigh the risks, particularly if you are strategic about your investment.
When choosing a home to purchase as an investment, it is important to consider the location. A home in a desirable area that is likely to appreciate in value over time is a wise investment. It is also important to consider the size of the home. A home with three or four bedrooms will be easier to rent than a property with less.
The strategy can be as simple as:
- Buy a house when you enter the workforce and take on paying roommates. Declare the income on your income tax.
- It doesn't have to be the perfect home, but it does need to be a good home in a good area.
- Never sell the home; instead, convert it to a rental when you move up in the near future as your income goes up.
If you have young adult children who would benefit from this advice, please share it with them along with our Buyer's Guide. If they would like to learn more specifics, we would love the opportunity to meet with them.