by John Adams - www.Money99.com
Sunday, 02 November 2008

With the roller coaster ride on Wall Street continuing, many have asked me whether this is the right time to buy a house. Maybe it's a better idea to stay put and wait until the economy recovers, and then a logical course of action may seem clearer.

I beg to differ.

We have seen economic ups and downs before. Postponing the decision to own real estate was the wrong path then, and I believe it to be the wrong path now.

For starters, there are at least five compelling reasons to buy and own real estate today. Let's take a look:

1. You have to have a place to live.

Let's face it. When you write that rent check every month, you are throwing your money down the drain. The only return you get is the receipt your landlord politely hands you.

Most real estate markets are truly beat up right now, meaning that any serious seller understands what it will take to make a sale. The house has to be in good condition, priced right, and made attractive in every way. Smart buyers can get a bargain in this market.

In addition, because interest rates are at or near historical lows, you can buy a house today for only slightly more than it costs to rent. The interest expense of owning a home is far and away the largest cost associated with ownership.

And you've got to live somewhere.

2. Your government wants you to own a house, and will give you tax breaks for doing so. And those tax breaks are substantial.

The interest you pay on your home loan is probably totally tax deductible, and so are the property taxes you pay. These two expenditures make up the bulk of your

monthly payment in the early years of your mortgage.

And the benefits get better from there.

When you get ready to sell, you can likely pocket one hundred percent of the profit and pay no tax whatsoever, amplifying the dollar value of any appreciation you might experience.

And both these benefits can be used again and again, within certain limits.

3. Your investment in real estate is likely to be worth more in the future.

I know, I know. You've heard that real estate has lost most of it's value and that it's a bad investment because it has gone down so far in value. And you heard just last week on cable TV that the housing market might never recover.

Well, take a deep breath and listen to this. The last time I checked, there were 305 million of us living in this great nation, and most of us prefer to live indoors.

The reality is that certain regional markets, particularly Florida and California, have experienced extreme price volatility, allowing some pundits to focus on the down side of the run-up in prices. In contrast, homes in Georgia have, with some exceptions, maintained their value.

Appreciation has, in the past, rewarded homeowners who owned for any substantial length of time. While there is no guarantee that your home's value will increase in the future, history tells us that is the most likely outcome.

4. You will be paying back your loan, little by little, month by month.

On a typical home loan, the portion of your monthly payment allocated to debt reduction is small. But with each passing month, your loan's principal balance gets lower and lower.

This build-up in equity occurs regardless of any appreciation, and will eventually result in a home that you own free and clear of any debt. Whether you select a traditional 30-year loan or a lower interest rate 15 year program, the eventual goal

is the same. And it happens automatically.

5. You can use a very small cash down payment to purchase a large investment.

While the days of the 103 percent loan are mostly behind us, you can still find 90 percent and even 95 percent financing available for well-qualified buyers.

And depending on the lender's guidelines, you may be able to use a gift from a family member as some or all of your required cash at closing.

This ability to leverage your purchase and to obtain long-term fixed rate financing has made home ownership affordable to more of us than ever before.

I understand that home ownership isn't right for everyone.

If you plan to relocate in the next three years, or if you aren't ready for the financial responsibilities of ownership, then it likely makes sense to wait. Furthermore, there are some folks who highly value their freedom to make a move on a moments notice. For these and some others, owning might be a burden and a mistake.

But if you are planning on settling down for at least a few years and you understand what you are getting into, owning a home might very well be the best financial decision you make this year.