By Holly Henbest, Realtor
When people ask me about my career in real estate and specifically ask me if I have any regrets, I have one immediate reaction. I wish I had bought more real estate.
When you talk to wealthy people, the common denominator is typically that they have built and continue to build their wealth by owning real estate. There is a reason that big businesses, like Black Rock, are buying real estate and trying to control more of the market and push for a bigger renter community. Like others, they want to grow their assets in real estate and build their wealth.
Building wealth via a real estate asset does not provide immediate gratification. It takes a long time generally to build wealth in real estate. Ask anyone who bought a home 10, 20, 30, or 40 years ago and sold it and see their facial reaction when you talk about what that house would be worth now. It’s not realistic to think that every home you purchase you would never sell, but you’d be hard pressed to find someone who doesn’t wish that they had held on to their properties because they would have gained so much more wealth.
I’ll give an example – a single family home (three bedrooms, two baths, 2,400 square feet) bought in Desert Ridge in 2000 was worth $270,000. The property was valued at over $800,000 in 2006 and then dropped in value to around $450,000 in 2011, but now it is worth around $1,000,000. So, over the last 24 years, that home has appreciated over $700,000.
I especially love to give this example because whenever the market feels unstable, people may worry that there may be a market crash. We lived through a market crash, and we understand the results. Yes, if everyone had sold their home during the crash, a greater number of people would have lost money. The key was to hold on to see the recovery and appreciation following the crash. Owning real estate is like owning stocks. The investment may go down in value, but the key is to not sell your home or your stock when the market is low and hold on until it goes up.
A lot of parents are worried about how their kids are going to afford to buy a home when they grow up. We’ve been working with a lot of clients recently who are helping their “kids” in their 20s and 30s with a home purchase. If you have the means, this can be a great investment towards helping your “kids” or helping yourself build wealth, rather than continue to have your “kids” spend money on rent. When you do the math, if your “kid” is paying $2,000 a month in rent and maybe paying that amount for the next two to five years, that can add up to anywhere between $48,000 to $120,000 of rent paid. When rent is paid, there is no return on investment.
In addition, there may be an opportunity loss from what may have been appreciation were home prices and values to rise during the same two to five years. We all understand that postponing the purchase of real estate oftentimes results in a higher price to pay when the purchase finally does occur. The saying – “the best time to buy real estate was five years ago” is a saying for a reason – it holds truth.
You may find that talking with a lawyer and tax advisor may be helpful in determining a course of action to best accomplish your goals and protect your real estate and other assets and wealth. You may find that your plan to purchase real estate should involve a trust, an LLC and/or other choice(s) for ownership. You may also find it prudent, too, to set up or update your will and estate planning giving full consideration of real estate investments.
As a Realtor I have a passion for real estate and investing. I’m definitely biased to real estate and doing everything possible to protect the “American Dream” for our future generations. My biggest concern for the future is related to companies purchasing real estate and creating renter communities. The American Dream of buying a home is critical to success in many ways. It is well understood that homeowners care about their home’s value and their community. Buying a home does not just add to one’s personal wealth, but home ownership creates safety, stability, better communities, and schools. On the other hand, an area of predominantly rental properties does not create a strong fabric to support community, and such areas with a general lack of care among residents likely manifest higher crime and diminished values.
Bottom line, invest early and for the long-term whenever possible, and if you can and want to help someone in your family purchase a home, then that can not only help build wealth, but you can build better communities.
Holly has been a Desert Ridge resident since 2000 and has been a Realtor since 2006. She is the leader of The Henbest Team with Realty One Group. Holly is ranked in the top ½ of 1 percent of Realtors in Arizona and is a certified luxury marketing expert. She has been ranked #24 in the Top 50 Realtors by the “Phoenix Business Journal” for the past several years and recognized by “So Scottsdale!” magazine as a Real Estate Superstar for 2019, 2020 and 2021. She’s also been the #1 ranked realtor at Realty One Group/North Scottsdale for the past several years. Learn more at henbest.com.
