Don’t buy a car, buy a house instead!
It’s an exciting time of life. You’ve just graduated college. Or, alternatively, you’re celebrating landing your first job out of college. Either way, it’s an exciting time of life. You’re funded by a wallet a little larger than you’re used to, so it’s tempting to funnel your finances to a big purchase. You’ve been driving the same car for a few years, probably something second hand.
Tempted to buy a new car? Don’t give in to that temptation. Buy a house instead! Here’s what you need to know to understand why you should invest your money into a property instead of a vehicle. Let’s talk investments, assets, and values.
What’s a Depreciating Asset?
Essentially, a depreciating asset is something that will decrease in value over time. Physical property is a great example of a depreciating asset because over time, physical things breakdown. Just like a car (see where this is going?)!
As an asset, it loses value over time. Consider this: you finance a loan for a $15,000 car. You pay the loan off over several years, but you end up spending more money than $15,000 because you’re paying interest, too. Over several years, you lose money that you won’t get back when and if you sell the car.
A car is an expense, not necessarily an asset.
So, what’s an Appreciating Asset?
Fortunately, this concept is pretty easy to understand. An appreciating asset is something that increases value over time. Simple, in essence, right? The increase in value can come from increased demand, lower inventory or supply, or as a result from inflation or interest rates.
Because you can improve a home, update a property, or invest in remodeling, a house’s value can increase from the time you purchase it to the time you sell it. Especially if you “maintain your asset”. Real estate can be purchased with the mindset that it’ll be worth more in the future, unlike a car which has a finite life span.
Don’t Buy a Car, Invest in a House
Even though we’re on the topic of what not to buy, we’ll suggest this: learn the power of principal paydown over time. By paying more towards your mortgage, you’re saving money in interest.
Check out this example of why paying down your mortgage can save you money.
Extra payments add up. A $200,000 30-year home loan with an interest rate of 5% would cost $186,512 in interest with the traditional 12 payments a year. Make the equivalent of 13 monthly payments every year, and the loan will be retired in 26 years and you will pay only $153,813 in interest — a savings of $32,69
You can save yourself money in the long term by investing in a house, paying down your mortgage, and focusing on assets that appreciate instead of depreciate.
But Wait, What If You’re Going to Move to a New City?
Of course you’re not sure if you’ll stay in the house forever! There’s a lot of unknowns, especially early on after graduating college. What if a job takes you somewhere else in the country?
Here’s where the term investment property comes in. Consider renting out your property, or choosing a property management company to hold the fort down for you. If and when you need to move, a property management company can manage your investment for you.
Property Management With Real Estate Experts
Our property management team is ready to hear from you if you’re looking to turn your home into a rental or investment property.
At Real Estate Experts, you pay zero lease-up fee, which means we don’t get paid until you do. Once your property is leased, we charge at the bottom end of the spectrum, just 8% of the rent. And that’s our only fee, ever. Not only do we provide some of the cheapest rates, but I also feel confident telling you that we provide the best service you can get.
In order to charge the least and give the most, we can only work with excellent clients. Learn what’s required to be a Real Estate Experts client.
Real Estate Experts
If you’re ready to take the plunge into home ownership, we’re ready to help. Yes, it’s one of the most expensive decisions you’ll ever make. However, we’re advocates for the first time buyer and have years of experience helping new owners get into the home of their dreams.