While some things get more valuable with age, it’s not always the case in real estates.
You probably have heard about the five-year rule, which states that new homeowners should generally stay put for at least five years before selling their property or risk losing money.
The reason for this rule is that closing costs and real estate commissions required to buy and sell will consume somewhere around 7-15 percent of the cost of the house. Your home will have to appreciate up to the costs of buying and selling just to break even. If you want to make money, then the value must exceed those fees.
Because real estate usually appreciates slowly and values aren’t an exact science, the longer you keep the house, the more money you stand to make. Markets are hard to predict. Historically 2 percent per year appreciation is an okay market, and 3-4 percent is a hot market.
When contemplating buying a home, it’s important to factor in closing costs. This is especially true for people who don’t plan on staying longer than a couple of years. Closing costs are expensive, and you’ll want to get that money back when you sell your home.
If you move out before you sell, you’ll continue to pay taxes and your mortgage, plus keep the water and electricity on for real estate showings—expenses that erode your profits. For folks who need to move before they’ve built up an enough equity to cover the fees, renting out their home can be a good option. Generally, homeowners can cover their mortgage payments with rental income.
After all is said and done, buying and selling a house is a costly endeavor. This is why it’s so important for homebuyers to consider where they want to be in the next 5-10 years before they lock themselves into a mortgage. If you don’t plan on being in the house for more than five years, then you should seriously consider renting or, if you’re in a strong market, renting your property and letting the value tick up while you move to a new location.
For more information go to https://homesalesneworleans.gardnerrealtors.com/