Is my home an investment?

The finance gurus will say no, because an investment is something that will either generate income, or for which you will gain a large return. As long as you are living in your home it will not generate income, (unless it has a side rental) nor will it provide a return, (other than the non-tangible returns associated with owning a home.)

There is however, a “perk” associated with owning a home, and that is equity. Equity can be defined as The value of a property minus the owner’s outstanding mortgage balance. This means if you purchase a home for $248,000, and find that it appraises for $320,000 in five years, it could be said that you have $72,000 in equity. However, just because the bank is willing to provide a loan to you based on equity, it’s important to remember that the “value” of your home and what your home might actually sell for may be two different things. You would also need to actually sell your home to realize any equity you have in the home. While your primary residence may not be considered an investment from an economic perspective, it may still be considered an investment of your time, energy, and your credit. Regardless of whether you plan on living in your home for 2 years or 30, make sure you have a solid maintenance plan in place to protect your home’s value.

Your home may not be an investment, but it can still save you money. When you leave your job for the day, do you take work home with you? if so, make sure you have a home office set up, so you can claim the home office deduction on your taxes. If you receive a 1098 from your bank, be sure you claim the mortgage interest paid as well. Also remember to deduct your property taxes, and homeowners insurance as well. 

For more info about the value of your house call me, Susan Phelps, at 941-726-2227.