Why You Should Hold On To Real Estate
This is a theme that has come up a fair bit on this blog in bits and pieces like here, here, here, and here. You may wonder why I feel the need to say the same thing more than once on the same blog. It’s because this is the single best peice of info I can offer the general public to improve their financial well being via real estate. Most people don’t know about this, and even among those who think they do, I often find out from deeper conversation that their understanding of it is a little distorted. So, until I am more surrounded by people who understand this crucial bit of info, I will continue to bring it up from time to time as I explore the various details of how it manifests.
The main reason why you should own real estate is because your equity (the portion of the value which is yours and not the bank’s) will almost certainly grow over time. It’s not so much a question of “if” it will grow as it is a question of “how long”. This is the part which I think loses a lot of those new to the concept of real estate. It takes time. In a boom market it may only be a couple of years, but generally speaking it takes more like 5-10 for a substantial change in the property’s value. Time and time again I see listings for places that have recently sold where the selling price is nearly double what they paid for it ten years ago. If they’ve done more than just replace the roof and the hot water tank in that time, it may be more. It may not be too, as it is very case by case but my point is that such an increase in value is not unusual. Of course, it should be mentioned that we had a boom time for most of the 00’s but I still stand by my point overall as although from 1990 to 2000 we only saw a 50% increase in average sale price for houses in Nanaimo, we saw it triple from 1985 to 1995.
Here are the stats from the real estate board to support my arguement.
Just in case that little drop during last year’s slow market is a concern for you let me point out that prices have already begun to climb again. Have a look.
You see, the bubble never burst here. Although there was certainly a big slowdown in numbers of sales we didn’t see a huge drop in prices like so many people who get their info from mainstream media were led to believe. We weren’t inundated with foreclosures, nor were places selling at a fraction of the value they were a couple of years before. People just seem to need something to freak out over once in a while. Besides, real estate was on sale for a time there and those of you who were to scared to buy at the time but could have, missed out on a good opportunity. Don’t fret though. I always say that in terms of the market, there are good times to buy and better times to buy. You just need to figure out what is affordable to you by talking to a mortgage broker.