A purchase that I have made recently that I feel was a profitable one both currently and in the long term was our first home
Cameron
A purchase that I have made recently that I feel was a profitable one both currently and in the long term was our first home. There are many reasons both financially and non that I feel this purchase will benefit both my wife and I. Prior to moving into the house, my wife and I were living in an apartment and were doing so for roughly 3 years and in the span of this time we obviously were paying rent, which ranged from $550 a month to $800 a month. Financially speaking, living in an apartment was an expense, and not an asset like having a mortgage is. Each month we were literally throwing our money away because we had nothing to show for our living condition, in terms of taxes and equity. Over the course of those 3 years, we left with no ownership and could not use the money we spent on our could be “investment” in our best interest. Now that we own our home, each month that money reduces the total amount that is owed on the house, including the interest paid that can be deducted on our taxes reducing taxable income at the end of the year. On top of that, we own this asset where we have the option of selling it or retaining the house as a rental property that could yield an extra income stream when the time comes for us to move in the near future.
The net present value would be difficult to calculate because in the future when we plan to use this house as an investment property, the market value at that time is unknown currently but more than likely could rent the house for roughly $1200-$1300 a month. With a mortgage payment of $915, including escrow, would have a profit margin of $300-$400 per month, assuming we manage the property on our own and not use a property management company, which would cost 10% of rent, leaving our profit margin to be roughly $280. Any profit that we bring in would be put right back into paying down the principle to expedite paying the house off quicker, thus being able to keep more of the profits. Being that my wife and I want to make a business out of owning many rental properties, all profits at that point would be used to purchase another home and so on and so forth. Needless to say, all of this could not happen with paying rent each month for an apartment that would show no ownership or any possibility for an investment opportunity. The net present value of purchasing this home and any other home in the future is difficult to calculate in the present but more so a forecasted and analyzed assessment of the potential that it may bring. Along with the other parts to our financial plan that tie into this one of continuously building our career skills in our day jobs to live off of a salary and not need to touch any income brought in by investment properties. I compare my example to that of purchasing solar panels. Rather than viewing the purchase as a short term investment, the benefits really start to show itself when the timeline is extended.
…………………………Answer preview……………………
There is no doubt that Cameron made the wisest decision by acquiring a mortgage to purchase a family house. Although it came late after spending much in the rental houses, I believe that the action is not only beneficial to……………………….
APA
167 words
Get instant access to the full solution from yourhomeworksolutions by clicking the purchase button below
