Money is on sale right now. Buy a Home, NOT Retail.
Corporate America, specifically retail companies use consumer psychology as a way to create emotional decision-making when it comes to purchasing products. Black Friday and Cyber Monday are perfect examples of this.
First time home buyers have great grants and benefits available making it incredibly affordable to buy a home!
The other day someone told me they want to "retire early and travel the world." This is a GREAT goal. The next question is, how are you going to accomplish that? For which there was an 'I don't know' response.
You can buy retail on sale, or a house on sale. One makes you money, the other costs you money.
Black Friday and Cyber Monday sales are not really ‘sales’ they are intentionally designed to create buzz and sell people things they may not really need because they are attractive ‘offers.’
First, you start saying things like ‘wow, that’s a good deal’ and then next, you’re buying things you don’t need. My friends, just ordered 5 or 6 pairs of shoes, each, from Amazon on Black Friday. This is only a small portion of their purchases, between now and Christmas. There isn’t a ‘need’ for that many pairs of shoes, for which they will quickly develop a favorite pair, and the rest will be worn once or twice. Here are some recent photos of their purchases:
What’s most important to realize here, is that this is the majority of consumers. Buying things based on emotional decisions and consumer psychology that is manipulated by corporate America.
Think about how much money these companies are able to generate. What if you could generate money for yourself vs. buying into these promotions? Let’s look deeper into what you may be missing... If you can buy an asset (something that makes you money) on sale, why would you buy a liability (something that costs you money)?
When you’re saving $100 bucks here and there on the things you may not really need, consider that you could be saving tens of thousands of dollars on a house or even an investment property that will cash flow at a higher return since it's on sale!
If you follow my blog you’ve heard me say it before. Buying ASSETS vs. LIABILITIES is one of the best things you can do to help yourself become financially free and build a retirement fund.
No one wants to be financially dependent on their job for the rest of their lives. For those that want to live a life that is not always concerned about finances, it starts by making the right decisions on the things you buy. This means buying things that will make you money, vs. buying things that cost you money.
Have you heard things like ‘on sale’ ‘limited time only.’ ‘50% off,’ and the effective marketing goes on. Especially with days that include titles, ‘Black Friday’, ‘Cyber Monday’… Who came up with the titles for these days? Exactly who you think.
So right now, on sale, is the home of your dreams or the investment property you know is going to build your retirement nest egg. What are you doing about it?
While everyone else is out buying liabilities here’s why you should be buying a house, home, or investment property during these holidays…
Interest Rates are LOW (Money is on Sale)
First and foremost there is a sale right now on home loans. A lot of people don’t see low interest rates as a ‘sale’ and that is exactly what it is. The average price of a residential home for sale in Raleigh, NC is around $265,000 and you can find ways to finance this with as little as 0%. Let’s use these numbers as an example…
Above you will see that at today’s interest rate of 3.75% (I just closed on a home at 3.6%) you can buy an average home for sale in Raleigh, NC for $265,000 with monthly payments of $1,227 (principal and interest). The total cost of this mortgage is $441,812.
Compare that to a few years ago when they were just under 5%. In this example, you can buy an average priced home for sale in Raleigh, NC at $265,000 with monthly payments of $1,423 (principal and interest). The total cost of this mortgage is $512,128.
Right now you can buy a house and save $2,400 per year ($200/month) over the next 30 years. Whether you’re buying a house for yourself or an investment property, that piece of real estate is on sale for those looking at home loans.
I know people who will go to multiple grocery stores because they want to save on the things that they have coupons for, or there are items they need that are on sale. These stores are designed so that each consumer who walks in will end up buying more than they originally came in for. For instance, you're standing in line at the checkout, you look to your left (or right) and there's the most recent edition of 'U.S. Weekly' with a front page shot of Kim Kardashian and Kanye West with a title that reads 'Friends say Kim and Kanye are headed towards divorce.' Next thing you know the magazine is in your shopping cart.
Investing in Real Estate
Let’s say you qualify for a house or investment property at $1,500/month (principal and interest not including insurance, taxes, and mortgage insurance). At today’s interest rate of 3.75% you can effectively buy a house worth $360,000 At an interest rate of 5% you can buy a house worth $310,000 So for the exact same payment you can afford a house worth $50,000 more. For each quarter of a percentage point, you’ll see your purchasing power reduced by $10,000.
How much House can you Afford?
One of the best reasons to buy a house right now is that you can but it at a discount. What do I mean by that? Let's say you set a budget and it comes to monthly payments of $3,000/month. That's your budget so let's see what you can buy with that monthly budget...
Since money is on sale right now at 3.75% you can afford a home up to $647,786 while staying inside your monthly budget of $3,000/month. This means the home of your dreams or investment property you can buy is at a discount of just under $90,000. This means those who bought real estate investments in 2010 paid $90,000 more for their house than you would pay today. This is better than any Black Friday, or Cyber Monday sale! Here's what the numbers looked like 5 years ago...
At a budget of $3,000, if loans go back to where they were in 2010 you will lose $90,000 of purchasing power. Anyone who purchased a home for sale in 2010 spent a significant amount more than you would pay today. You can't connect the dots looking forward, you can only connect them looking backward. Historically, this is the biggest sale of money, ever.
Best time of year to buy a House
I’ve often heard that the winter is not a good time to buy a house, and I would take that with a grain of salt. While everyone else is out shopping for Christmas gifts, you can be one of the few shopping for investment properties or a house.
The holidays, and winter time, in general, is a great time to be a home buyer for a few reasons.
The pool of buyers is smaller in the winter because it’s either too cold to go outside or people are so busy with the holiday parties they don’t have the time to be actively searching for properties. With the reduction in the pool of buyers, you will notice that you are competing for homes far less than you would be in the spring or summer time.
One of the other reasons it’s a great time to buy a house in the Winter is that everyone else is spending money on gifts, and other items for sale. There is a growing concern after spending a lot of money that they need to save. There is likely a lack of inventory in the Winter time when compared to the Springtime, so you’re also afforded an opportunity to be patient if you can’t find the right property for sale. However, if you start shopping homes for sale in the Winter you will be able to act swiftly come Springtime.
Here’s why you should be buying ASSETS vs. LIABILITIES... Let’s assume that my friends team up and buy an investment property together in Raleigh, NC vs. buying shoes and other gifts. They can take their combined $5,000 and put it towards a 3 bed 2 bath near NC State that can rent for over $1,100/month and ultimately cash flow between $200-$300/month (this accounts for the HOA fees). After property management expenses of $1,200/year (8% of monthly rent), they can net $1,200-$2,400/year while building equity in their rental. After 30 years that $5,000 investment becomes a home that is completely paid off by other people. This home could be worth greater than $200,000 by 2045. Where will their shoes and other Christmas gifts be?
Final Thoughts: Buying a Home for Sale, Not Retail
Money is on sale right now making it an excellent time to move forward with the purchase of real estate vs. spending your money on something like shoes or clothes that you probably already have.
If you want to travel the world and retire early it starts with making the right buying decisions and controlling your emotional responses to when things are 'on sale' for a 'limited time' or buying more than you need with the 'buy one get one free' promotions!
When a company becomes undervalued on the stock market it is effectively on sale. Instead of rushing to buy this investment, people would rather run to the grocery store to save $5 on paper towels.
Right now the real estate industry is in a unique position where interest rates are under 4%.
You can't connect the dots looking forward, you can only connect them looking to the past. These are historically low-interest rates, which every way the needle moves going forward is anybody's guess. My guess is that if real estate has always been a great investment, and you can buy it at a discount today... you'd be crazy not too!
Hi there! I'm Ryan Fitzgerald, a REALTOR in Raleigh-Durham, NC and the owner of Raleigh Realty. Chances are you and I share a similar passion, Real Estate! I also have a passion for technology, sports, and people. Would love to hear from you. Drop me a note in the comments section below and feel free to share this article socially!