Return on Investment 2015 had a clear winner
Sure, sure… It’s easy to look in the rear view mirror and determine the best course of action for 2015 from your cushy seat in 2016. But you know it was predicted in 2014 and 2015 that the market was hot and was going to stay hot. So when you look back at 2016, a year from now, don’t say I didn’t warn you that real estate would still be a good investment in 2016.
Many of my clients are first time buyers and it’s not easy. Making the huge decision to become a home owner is a little like deciding you are ready to have a baby… Except in my opinion while your new home is like taking on a dependent – with obligations regarding maintenance and commitment to paying for it, your new home also comes with some advantages that kids don’t.
- Yes, a house has a much bigger upfront cost when you factor in down payment, loan related fees and closing fees. Let’s be honest, you’ll probably get all enthusiastic and do a few home improvement projects too – paint, replace carpet, fix a few things your inspector has recommended etc. But perhaps no more than preparing for a new baby would inspire. As the years tick by, the house begins to become MORE affordable and the child less affordable. Eventually daddy’s little girl will need more than diapers and pacifiers. She be begging for the latest iphone, a car, that school trip to Europe… and if you are lucky, she’ll be college bound in 18 short years too.
- At some point you’ll wake up with the notion that something about the house no longer agrees with you. WAY easier to hire a handyman to remodel your bathroom that to find someone to exorcise the eye-rolls, back-talking and curfew breaking behavior from your teen, no?
- And then there’s the option of selling. Doesn’t matter what the real estate market is doing, you will still have an easier time getting someone to give you money for your house, than your kid – who will be a depreciating asset until the day he gets a real job! Staging, photography and a good marketing plan will go a long way toward your new goal… Moving to a bigger house, changing location or finding a place that better fits your new phase of life. But while you might be able to convince Eddie Jr to pull up his pants and brush his teeth, you are still going to be stuck with him until he is 18….25… 35 years old?
Return on Investment: Kid vs House
Ok, so don’t go getting your knickers in a twist. I’m not suggesting you not have kids or even that your existing kids are not totally worth the money, effort, time and hair that they cost you. Of course they have advantages too. (If you need a good tax accountant to grab some of those advantages in your 2015 tax return, then ask me for mine. He is great!)
What I am suggesting is that over time, homes appreciate. This factually inaccurate chart illustrates an opinion, but there is plenty of data to back up the opinion. Over 30 years in fact, your house is likely to way more than double in price. Over the last 15 years, home prices along the Front Range have doubled. Since it doesn’t take a genius to work out that kids cost money in the first 30 years of their lives, it stands to reason that financially, real estate is the most lucrative investment.
This is what I propose:
Buy a house and raise those kids in it. Over time the house pays for the kids! You also get a stable environment and a place in which family memories can be created and kept. Yeah, the stock market offers a financial return on investment too, but it doesn’t help create warm family memories!