Should you still be paying rent, or should you buy? Now, that’s a question a lot of people are asking themselves, and I’m going to dig into it.
If you want to rent a home, you’re probably going to be spending about $1,700 a month or more for a studio or a one-bedroom apartment. I know this to be a fact. I’ve also done some investigating, done some research, and looked up rent prices, and I am shocked!
So, what if I told you that you could spend about $2,000 a month and you could actually own your own home? Now, what you’re doing with your rent money is you’re practically setting it on fire. You are practically setting that money on fire because you are giving it away to someone else.
Now, listen, I get it, everybody has to start somewhere, right? So, I rented at first a long, long time ago, and then I bought pretty young at around 26, which, you know, is not super young but it’s not old either. And I could have done different things if I had the opportunity to do, and it just didn’t present itself. But boy, do I wish that I would have done some real estate investing a little bit differently, because I’d be in a better financial position right now.
So, like I said, historically, it is one of the best investments that you can make, and you are building equity. You’re living there, it’s yours, and then you can do what you want with it and the proceeds in a few years once you are patient.
Now, you’re probably saying, ‘Yeah, but I want this big house with a pool. I don’t want to buy whatever.’ Okay, well, you know what, get over that. If that’s where you are in life, know that you probably should have bought real estate yesterday. Yesterday was a better day to buy real estate than today. And even if what you buy is the least nicest place that you’re going to live in for the rest of your life, so what? It’s the least nicest place. You buy it, you live in it, you use it, you make money on it, and you move on up a couple of years later. There you go, that’s the key, that’s the secret. It doesn’t have to be the biggest, best thing today. It’s starting a little bit smaller, and then you’ll be able to build up. Your investment will grow more as you are more patient.
You have to be patient in real estate; it’s usually not an overnight thing.
Now, here’s what we’re experiencing right now: inventory is kind of tight on the resale side. People who bought houses and have a very low-interest rate are not interested in putting their houses on the market because if they sell, then they’re going to have to buy another place and pay a higher interest rate. So, they’re just hunkering down. And then right now, you guys are searching the inventory, and you’re like, ‘Well, I can’t find what I want, so I’m going to wait till interest rates go down.’ But what’s going to happen is if interest rates go down, then more people will come out to buy, the competition for those homes will go up, and the prices will go up again. Yes, the prices will go up again, and that is not good for you. So buying now is better.
Should you buy new construction right now? The answer is yes, yes you should. You should buy new construction, and I’m going to tell you why.
Here’s something that Dr. Horton does right now, and it depends actually on the day, but they offer incentives for buyers. Because when you buy a new home, you will typically use their in-house lender. You will not use a mortgage broker. If you’re working with me and you want to buy a resale house, I have mortgage brokers that I can refer you to. But if you’re buying new construction, you will get the best incentives by using their in-house mortgage people, they’ll do things like give you $10,000 or $15,000. Now you can take that money and reduce the price, or you can take that money and buy down the interest rate, which I highly suggest you do because that will save you, depending on your purchase price, it will save you a monthly amount. And I’m not going to do math for you right now, but if you could save $150 to $200 a month instead of just having a slight price reduction, that’s going to be huge for you.
So, what if the interest rates are a little higher right now? You know what’s going to happen? They’re going to go down at some point in time, and then you’ll be able to refinance. In the meantime, you’re not setting your money on fire by giving it to someone else; instead, you are building equity. And if you stay in that home for about 5 years or so, you will most likely see the benefits of your investment. You can keep that home and rent it out and have started a new fund for a new purchase, or you could sell it, take the proceeds, and buy something else. So, you are on your way to creating some personal wealth by owning real estate. It is a good thing to do.
If you have been waiting around for interest rates to go down, stop doing that. Stop setting your money on fire and renting. If you cannot, not everybody has enough saved up for a down payment. Go ahead and do that first. Obviously, make sure your credit’s in line; we’ll get you pre-approved, all of that good stuff. So yes, you’re going to have a time period in your life where you’re either going to be living with relatives, living with friends, or renting. Okay, but once you get to a point where you have enough money saved up for an investment, for a down payment, you can get into a home with a new builder or even a resale home with a down payment of 3.5% of the purchase price. You can do that. So just know that you have to set your goals and be resolute in what your goals are because this is going to be the best way for you to earn some wealth in your lifetime, is investing in real estate. It’s been proven. Talk to your financial adviser if you don’t believe me because that’s not what I do. I just help people with the transaction.
Watch this video for more information: ARE YOU BURNING MONEY?
I’m Florida real estate broker Allison Newlon and owner of Platinum Properties of Florida. Info in this and all blog posts on this site is not legal or financial advise. Please consult your financial and legal professionals.
