We always talk about buying and owning a home as an investment, and as something that just about everyone will eventually do – even if you’re not quite ready right now. But how do you really profit from having a home? After all, how can paying hundreds of thousands of dollars over 30 years be profitable? The common answer is that after 30 years, you have a house that’s paid off, so you can begin to enjoy the investment. But this doesn’t seem like that good of a deal, because had you chosen to rent for 30 years, you probably would’ve saved money each month too. So what is it about owning a home that’s soo profitable?

The Cost of Inflation

First of all, renting for 30 years is more expensive than paying a mortgage for 30 years. A 30-year fixed mortgage (which is the most common choice among home buyers) means that your monthly payment will never change. Rent prices, on the other hand, do change, and they increase with inflation. Paying $500 a month for rent now may seem cheaper than renting, but in 30 years when rent is much higher, your mortgage payment will still be the same.

The Appreciation of Your Home

Secondly, property becomes more valuable over time. The current property values are the lowest they have been in decades, meaning that another drop in property values is extremely unlikely. Buying a home now only means that it will appreciate significantly in the next 30 years, beyond what you pay for.

This is where having a house becomes profitable. Because your home will appreciate within the next decade (assuming you didn’t pick a rough neighborhood filled with crime), you now have additional options to sell it for more than you paid, or rent it out and have renters pay your mortgage.

The Option to Rent or Sell

Buying a home now, while property values are low means that your mortgage payment will be low. If you decide to move, and property values aren’t quite as high as you’d like – you could always rent it for higher than your mortgage, thus making a profit each month.

The key to profiting from your home is to always make financially savvy decisions as opposed to personal ones. For example, if you decide to do renovations, always keep in mind you want to get the most money out of them if you decide to sell. This means not pricing out the neighborhood, and keeping the décor neutral. Always keeping the potential seller in your choices of home improvement will get you the highest return on investment.

For more information on renting versus buying, check out this great tool for finding which is better by the NY Times.

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Related Information:

• Get more info about buying your own historic home from In-House Realty.
• Get started buying a home with the Quicken Loans Home Buying Center.
• Get started refinancing your mortgage with the Quicken Loans Home Refinance Center.

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Tags: 30-Year Fixed, Home Value Appreciation, Inflation Costs, Investment Home