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A home may be the best investment you ever make. Aside from the potential profit you may make, you get a place to live and the personal satisfaction of owning your own home. You can also put a nail in your wall to hang a picture without worrying if you’ll get your security deposit back.
Selling your house someday for more than you paid doesn’t necessarily mean it was a good investment. In determining the return on your investment, you need to figure in the:
- Amount of money paid for home improvements
- Ongoing costs of home ownership, such as taxes, insurance and maintenance
- Cost of buying and selling the house, such as a real estate commission
- Lost investment of money tied up in your house
In theory, you might have invested your down payment, as well as some of the money that went toward the cost of owning a home.
You may have heard the term, “real estate bubble.” This term describes a period when the price of homes in one area, or across the country, are escalating rapidly. During a real estate bubble, there is a seller’s market and buyers are plentiful. During a buyer’s market, sellers are more desperate and are inclined to lower the price of their homes.
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