RELIT? Real Estate Literacy. This is a subject that I as real estate professionals should dig into in a much more serious way. Why? The need for Real Estate - or a home - is the one thing all 8 billion of us on this planet have in common. And for the vast majority of us, the cost of a home, whether renting or owning, is the single largest consistent expense we face. That's how important real estate literacy is.
While we may assume that the vast majority of wealthier people who can afford to buy a home are real estate literate, I'm consistently reminded by how little they know on this subject. Obviously, there is no need for the consumer to be a specialist and have the vast knowledge and expertise I've accumulated over the years and can share. However, there are Five basics that escape far too large an audience, and this lack of knowledge is being manipulated by those who seek profit. Here are Five common real estate literacy themes that urgently require our action:
1. DUAL PURPOSE INVESTMENT: Solid real estate and home knowledge is an important investing strategy: your home is the only investment that simultaneously satisfies an essential need: Everyone has to live somewhere. It's the one entity that provides both an essential need and an investment vehicle.
2. THINK 60 YEARS: Most people mistakenly think of a home as a 30-year need. If we live on average to around 80 years old and leave our families nest around the age of 20, that is 60 years of home need.
3. FORCED SAVINGS: When comparing renting to buying, the best investor argument against ownership is that many houses don't escalate in value as much as equity markets. They fail to mention that most are not great with their investments. They fail to mention that the difference between a monthly mortgage payment to a bank in lieu of a rent check paid to a landlord ultimately delivers ownership - or equity - and acts as a forced savings account. While a home may not increase in value at all, the vast majority retain most of its value.
4. INFLATION: Rents go up. They rise with inflation. Real estate taxes and maintenance costs go up too, but for the most part, the largest monthly cost of ownership is the mortgage payment. When that interest rate is fixed, it acts as a housing cost stabilizer.
5. TAXES: Ownership delivers certain tax breaks for mortgage interest and real estate deductions. Improvements add to your cost basis, thereby reducing any capital gains. Depending on new tax laws, upon your death, the cost basis is reset for your heirs making it an invaluable estate planning tool.
Consumers should understand that real estate is far more complicated than some lead them to believe. Navigating the complexities of buying and selling, timing, improvements, positioning, etc are complex and differ on a case-by-case basis. An informed insightful professional can make all the difference. No, real estate is not brain surgery, but too often its complexity is under-stated. Dr. Google is a dangerous place for medical self-diagnosis: so too is it - and many other entities - for do-it-yourself or discounted real estate advisory. There is way too much confusing, irrelevant, and inaccurate information out there. Technology can help dramatically, but just like a doctor stares at a screen these days as tech aids them in their role, so too will technology aid the role we play in the real estate sphere, not replace us.
Ken interprets market data, staying in constant communication and offering valuable insight that then translates into an informed decision.Contact Us