LOUISVILLE, Ky. (WDRB) -- Do you think buying a home is always better than renting? Do you think home ownership is the key to wealth? Financial expert Mark Lamkin from Lamkin Wealth Management says it might be time for you to think again.
Basically, whether it was due to the housing bubble, the foreclosure crisis, or something in between, the housing market has charged over the past decade and, with it, so have the rules of home buying.
Five myths of buying a home:
Myth 1. Buying a home is a great investment
If the house market crash taught us anything it taught us that buying a home can be just as risky as the stock market. During the 2008 meltdown some markets had more risk! During the housing bust, homes lost a third of their value nationwide and some markets lost even MORE!
It is also worth noting, that over the past 10 years the price of homes have only risen about 0.3% annually, while the S&P 500 has returned an average of 8.26%.
Myth 2. Buying is always better than renting
For most of your life you've probably heard that it's better to buy than rent. But the problem is now that the housing recovery has taken hold, some markets are just too expensive for home buyers.
And don't forget about the maintenance and repair expenses that come with owning a home. Have to repair a leaky roof? There goes $500. Need a new water heater? There goes another grand.
Something else to consider, is what kind of return will that 20% down payment on a home give you if it is invested in stocks or bonds instead? And what additional money could you be investing that you will no longer need for putting towards home maintenance and repairs.
Basically, it comes down to how many years you plan to stay in the home. If you plan to stay in a home for five or more years, it might be worth the plunge. The more expensive the market, the longer you need to stay for it to be worth the buy.
Myth 3: The three most important factors are location, location, location.
Searching and finding the perfect home use to be all about being in a well-established community, with low crime rate, the best schools, far from annoyances like airports, etc.
But today, you really should focus on what areas are GOING to be well-established in the future. Keep an eye on locations that have potential for growth and value.
Myth 4: Buy the worst home in the best neighborhood.
This sounds like great advice, and sometimes it is. After all, flipping a bad house is easier than fixing a whole neighborhood. But you have to remember, those 'fixer-uppers' can come with the some pretty expensive flaws. Make sure your get an engineer's report because it could become a money pit.
A lot of the times, people end up paying more to flip a house in a well-established neighborhood than to buy a home that's in better condition in and up and coming neighborhood.
Myth 5: All real estate is local.
Diversification is an important part of investing. And in investment real estate, geographic location can be a very good diversifier. House on the beach? Out west? Mountains of Colorado? What are you investing for growth or income? Then use the internet and research possible areas.
Also interesting, in the last 12 months, international buyers account for 7% of all U.S. home purchases and many of these buyers paid in all cash which drove prices way up.
Lamkin Wealth Management 5151 Jefferson Blvd., Suite 102 or 901 Lily Creek Drive Ste. 102 office: 502-961-6550 Office toll free: 866-961-6550 www.lamkinwealth.com
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