(This article is part of a weekly guest column by Claire Moylan*)Housing used to be a solid investment, but it has become less so over the years. Now, we don’t know with any certainty when housing will recover enough to be worth looking at it as an investment again. Of course, the American Dream is all about owning your own home, and this has plenty of emotional payback, but if you want to just buy a home as an investment, you might want to compare several choices: renting an apartment or home, co-housing, and buying a smaller home.
How Housing Has Changed
There were red-hot areas in the United States that were seeing double digit appreciation on homes. Now, these same areas might be experiencing thousands of dollars in devaluation. Until the inventory in housing starts to lessen, the odds of getting a home that will retain or gain in value is an iffy proposition in some markets. Even if you find a home you want to buy, it has also become much more difficult to qualify for a mortgage because even lenders have gotten scared. Gone are the days of no down payment. Now, you will be expected to have at least 10% available for a down payment. Your credit score will also be very important. Your income will be scrutinized much more severely to make sure that you can make the payments on the home. If after all this, you qualify, you still might find your lender has collapsed and the deal has been canceled. If you do not qualify for the home, you still have an option to rent until the market changes or your financial situation improves.
Why Renting Can Be Good
Renting can be a positive experience, when compared to owning a home you can’t afford. You won’t be responsible for maintaining the structure of the apartment or home that you rent. In a market where the housing prices are dropping, people who own housing may try to meet their financial obligations by renting it out instead of selling it. This can lower the price of rentals. You can get all of the emotional benefits of being in a house without feeling the pain of having a mortgage over your head. You won’t get any tax write-offs, however.
If you don’t mind being in an apartment community, you can also wait for the housing prices to bottom out in a more luxurious setting. Apartment complexes do many things to attract renters, adding pools, clubhouses, and sometimes even on-site gyms. Any money you save when renting can be put aside for your down payment, when you see the housing prices start to recover slightly.
Co-Housing To Share Expenses
Some people get tired of buying a house with everything in it and instead opt for co-housing communities. These communities can offer a very neighborly feel and they share many resources too. You probably won’t save money on a price per square foot basis, but the homes are also built in these ecological-friendly communities to be smaller and more energy efficient than today’s standard McMansions. People who live in these communities are usually more involved in sustainable living and are apt to share anything from tools, to kid’s toys, and everything in between. Often, such communities have childcare options for the people living within the community that can be a substantial savings for family with children. Many offer community meals that can help save on food and preparation costs. The common areas are maintained and held in common ownership by all the members of the co-housing community. This means that you probably will have to give some of your time back to the community on a monthly basis.
Living Within Your Means
Sounds old-fashioned and boring, but it’s also the best way to have a sound financial footing when buying a home. It also means that if prices drop, your loss is less too. Most experts agree that drops in housing prices are temporary and if you plan on living in a home more than five years, you probably can ride out some if not all of the damage. In the meantime, you can get a smaller home that you can afford with your income. This will give you a tax write-off and the capacity to build some equity. This is good for people starting out buying their first home or for those who wish to downsize. By buying a smaller home, you save money on the mortgage, on the utilities, and on maintenance too. Plus, you won’t be tempted to buy a lot of extra stuff you don’t need to fill the house up. While it may not be the house of your dreams, it can be a very wise step towards your final goal of getting into another home that does meet the standard for being the home of your dreams.
About the author: Claire Moylan is a freelance writer specializing in ebooks and custom-tailored articles for niche websites. You can view her portfolio online or check out her constant content page for more information about her writing assignments.
*Image Credit: cumortgageservice.com
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