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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: reaper who wrote (7253)12/11/2002 4:48:43 PM
From: JBTFDRead Replies (1) of 306849
 
Reaper,

Whether or not hers was a wise investment depend entirely on what assumptions you make, the #1 assumption being whether or not you assume there will be any growth in the value of the real estate in the particular area. If you assume bad economic times ahead and more unemployment, then it would be easier to make a case that she would end up worse off. The main features of owning real estate that are beneficial are:

1. the forced savings that has already been referred to. (note that this increases every year as you pay down the loan)

2. the tax benefits

3. the fact that by buying real estate you are locking yourself into a certain housing cost that will rise slower over time (due to tax rate and insurance rate increases) than rent will. The longer you stay in the house the more likely you will be paying less for your home than a renter would be paying for an equal space. This benefit is also dependent on housing costs rising to apply.

4. you can also make money by doing the right improvments to the home, an opportunity that is not there if you rent.

The shorter your time frame the larger the risk is. In this woman's case I cant blame her for attmepting to create some equity, when if she rents it is pretty much a guarantee that she wont create any.
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