U.S. Millionaires See Real Estate as Top Investment in 2014
According to Morgan Stanley, U.S. millionaires see real estate as the top alternative-asset class to own this year. A Bloomberg Personal Finance article (dated February, 2014) reports that about 77 percent of investors with at least $1 million in assets own real estate. Direct ownership of residential and commercial properties was the No. 1 alternative-investment pick for 2014, with a third of millionaire’s surveyed saying they plan to buy this year. Twenty-three percent said they expect to invest in real estate investment trusts, the second-most popular choice. Wealthy investors are turning to a rebounding real estate market as fixed-income yields remain historically low and equities surge. U.S. commercial-property values rose 8 percent in the 12 months ended Jan. 31, and have jumped 71 percent since hitting their post-recession bottom in 2009, research firm Green Street Advisors Inc. reported. The S&P/Case-Shiller index of home prices in 20 cities is up 24 percent from its 2012 low.
Advice for the Average Person: Dave Ramsey, who’s shown more than one million families how to live debt-free and build wealth, recommends the “100% Down Plan” for buying real estate—pay cash for the whole house! If that seems too far out of reach for you, then at least hold off on your real estate purchase until you meet these three conditions:
- You are debt-free and have an emergency fund of 3–6 months of expenses.
- You have saved at least a 10% down payment. A 20% down payment is preferable to avoid Private Mortgage Insurance (PMI) payments.
- If you’re newly married: Don’t add the stress of a home purchase to a brand-new marriage, and never buy real estate with anyone you are not married to!
If you aren’t paying cash, get a fixed-rate mortgage for 15 years or less. Keep your payments low—no more than 25% of your take-home pay. Lenders will tell you that you qualify for more, but stay conservative. No one wants renting to be a way of life for you. Buy real estate when you are financially ready – that way, your home will be a blessing rather than a curse. The Mesimer Team is a Dave Ramsey endorsed realtor and can answer your questions and walk you through the entire process.