We considered many options for a place to live as the wedding day grew closer. Apartment complexes were an option since they were conveniently located to our jobs and with nice amenities. As we debated which we liked best and tried to decide on a location, my father sat closely by and listened. He is a quiet man, only speaking with intention, happy to watch the circus that is my family from the corner of the room. He is very smart, one of the wisest people I know. He waited quietly for the opportunity to share his wealth of experience at the perfect moment. He asked, “Why would you rent? You’ll just be throwing your money away.” This reality was something we had never considered.
Let’s examine the math. For example, calculate a rental fee of $1,500/month. Imagine you stay in the rental for 10 years. $1500 X 12 X 10 = $180,000. That is money you will never see again.
Now, let’s look at a $250,000 home mortgage with 10% down which results in about the same monthly payment. In that same 10 years, if your property appreciates at 5% each year, the home value would be about $412,000 with a profit to you of about $237,000 at the sale after paying off the remaining loan balance. Another benefit is the tax write-off for the interest. That is money in the bank.
My dad was right. A home is an investment. We lived in our first house for several years and received a good return. I often imagine the results if we had never moved. Many of our current neighbors are moving as they retire after living in their home for 30 years. Most of them bought their houses for about $75,000 and many are selling now for more than $350,000. Think about that profit. A home is truly an investment in your future.