As in all good investments you want to “buy low and sell high” with regard to your home. As this article points out there are 4 key considerations when buying a home with “investment” in mind: Don’t buy the nicest home in the neighborhood; look for a home which needs a little T.L.C.,; of course location is very important and plan on living in the home at least 5 years,. 10 years is even better. Regarding location, look for a home in a nearby suburb of a job-rich metropolitan area and, off the main thorough fairs. Morgan Hill, Gilroy and Hollister, CA for example, are ideal communities near the San Jose and Silicone Valleys.
The other side of the home buying equation is the financing of it. With the goal of living there at least 5 years it actually pays to buy down the interest rate of your home loan. If you pay 1.5 to 2.0 points (percent of the loan amount) you should be able to lower your rate by .25% for the term of the loan. This little tax deductible investment will repay itself within 3 – 4 years through the savings in house payments and will save 10s of thousands of dollars in interest over the life of the loan.
Lastly, design your budget to allow an extra payment toward the principle loan amount. Just an extra $100 or two paid with your regular payment each month will reduce the number of years you will pay on the loan and builds equity much faster.
Buying smart imitates the investment growth and the extra payments on points and principal will quickly grow your equity. When time comes to move up or, out, you should have a sizable profit from your home’s investment.
What’s your ‘buy low sell high” success story?