Publications

- July 1, 2016; Vol. 3, Number 7

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Homes as Investments: To rent or to own, that is the question

by Steve Hovland

It is often argued that buying a home to live in is a good investment and generates “forced savings” for the homeowner. Although true, homes should not be considered as an investment unless the home is generating rental income. Nonetheless, there are advantages to owning compared to renting. Namely, homeowners are putting their monthly payment toward something of value, and that value generally rises over the long term. However, the rate of home appreciation is closely aligned with inflation, and ownership generally does not produce above-average returns unless the market is timed perfectly. As more investors acquire properties, home values are expected to fluctuate more like other investment vehicles based on supply and demand.

Purchasing single-family rental homes has proven fruitful for many investors looking for diversification. Over a recent 30-year period, single-family investment homes returned an average annual return of 6.4 percent after taxes, and 7

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