11.24.2009

4 Real Estate Ownership Myths

Owning a Home is a Solid Investment”

The recent challenging market has proven the problem with this statement. You can lose money investing in property whether it is for your personal residence or investment property.

Real estate ownership is can be considered “good debt” especially if you have paid down your mortgage and despite the declining market, have equity in your property. But, as many people have learned when selling their homes, the loss in market value of a home can reduce your “investment” significantly. Conversely, during an “up” market many see large increases in value.

For most people, a real estate investment is considered a “long term” investment even if they don’t intend on living in a home for an extended period.

“Distressed Properties Mean Big Profit”

You may buy at a great price, but after adding in the cost of buying, selling, property taxes, and renovation costs (especially the undiscovered problems that crop up) your return on investment is considerably less than you had anticipated.

Added to these concerns, living through a “renovation” requires a high tolerance for chaos, stress, and unusable areas of the house. Or if it is empty during renovation, you incur the cost of the mortgage, taxes, utilities, and landscape chores etc. subtracting from your rate of return.

“You Make All the Decisions”

Of course, you decide when to buy, where and how to pay. You decide how to decorate, upgrade, and landscape. What you have no control over is the condition of the neighborhood or how it changes. Foreclosures, zoning changes, governmental regulations, association rules, negligent neighbors . . . all effect the value of your home.

“You Can Sell When You Choose”

You are personally invested in your property and it is not an easily liquidated interest. You could be stuck in a bad situation longer than you are comfortable with if you find your neighbor is a drug dealer, has the dogs from hell, fixes cars in their spare time, parties heavily on the weekends or just hates you.

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