Why Small Houses Are a Better Investment
Saturday, November 22nd, 2008
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Bigger is not always better. When it comes to buying a home, especially a first home, choosing a small space can actually be the wisest choice.
Assuming a 30-year fixed-rate mortgage and a low interest rate (8 percent or less), a small house will probably end up costing you the same per month than you would be paying for rent. This is a huge plus, as many people put off buying a home because they assume the costs would be astronomical. On the other hand, a large house that costs twice what you would normally pay in rent could end up being a huge financial burden.
Smaller houses are easier and quicker to fix, a big plus if you’re planning on selling early or are interested in an investment, rather than looking for a permanent place to live. Also, the smaller the home, the easier it would be to make at least part of the repairs yourself without feeling overwhelmed.
If you’re a first-time buyer who just spent all his money on the down payment, a smaller house could also benefit you because it’s easier to maintain: less electricity, less furniture to buy, less heat needed during the winter to keep the place cozy. While these may sound like small things, they add up over the course of a year.
Finally, buying a smaller home can mean having some money leftover every month to invest in other ventures. For example, you could contribute more to your IRA or 401(k) or buy stocks. You could probably also afford to repair your car without having to use your credit card in the process.
