The Financial Benefit Of Home Ownership.
I’ve started to share these two graphs with clients as they give a clear snap shot of the returns that investing in home ownership provide.
Real Estate Rates Of Return Graph 1
The average home in Calgary costs almost $500,000. The blue line in the graph below shows the home appreciation over 25 years, based on 3.5% appreciation each year. This is an average appreciation. Of course in the real market, house prices will go up and down, but people that hold on, will achieve an average appreciation of 3.5% per year, based on historical house prices in Calgary.
The red line represents the principal pay down of the mortgage over a 25 year amortization.
The green line represent rental income for homes that become rentals. The principal and interest payments and taxes for this type of home are slightly less than rent for the same home. This graph applies to personal homes as well as rental homes.
After 25 years, the $49,408 down payment will be worth $1,167,627!!!
Real Estate Rates Of Return Graph 2
The second graph shows the same real estate investment in blue again.
The red line shows the returns if the down payment money ($49,408) was invested in stocks that provided at 10% return, year after year.
After 25 years, putting the money into real estate will provide a return that is more than double what stocks would provide!