Not yet anyway. In fact, it's actually a liability.
Yes, you heard that right: Your home is not the biggest investment you’ll make in your life.
In fact it’s just the opposite: It’s probably the biggest liability you’ll be taking on and you had better think it through clearly before making a decision. Unless you bought your home in Las Vegas with cash, or it is providing positive cash flow as an investment, it is not an asset.
About a decade ago, before the nation’s new found fiscal responsibility had come into vogue; I realized that it was common for Americans to stretch themselves thin. An unexpected job loss, or worse yet an illness, could place a Nevada family into a foreclosure situation relatively quickly, and that was when the economy was good. While the nation slowly worked out the kinks of the economic climate, a conservative approach to a first time home purchase is highly recommended. Although to be honest it’s probably not bad advice no matter how the economy (or you and your family) is doing.
“Home equity” almost seems like a concept of the past because many Las Vegas and Henderson homeowners were underwater on their mortgages. That should not dissuade a young or first time home buyer from the idea of creating equity and eventually turning your home into a true asset.
There are two ways to do this quickly and safely:
The first step to purchasing real estate in Las Vegas is simple: Buy less home than you can afford. Yes, that larger home you looked at in Aliante was alluring, and you were willing to stretch that budget a bit, but have you taken into consideration the true cost? Higher utilities, higher taxes, more work, higher insurance, and a higher mortgage payment just for starters.
Buying less than you can afford also helps create a safety net in case of financial emergency. As a couple, you should ask yourselves if one income could cover the payments if one of you were to lose their job? How much money do you have set aside for emergencies? At least six months of living expenses?
I can tell you from firsthand experience how handy this came in 2008 and 2009 for our family. In 2008 my wife was laid off from her job. Thankfully she eventually found new employment (although with less pay.) Shortly after that however, I became ill for nearly a year and was unable to work. Let me tell you, money goes quickly when you’re living off of savings! If we had not under bought based on our needs (and had some money stashed away) we very likely could have faced foreclosure.
The second step is to buy your Las Vegas or Henderson home with a 15 year mortgage. Fifteen year mortgages help pay down equity fast, and nothing is more exciting than seeing that balance go down. The principle portion of the payment will exceed the interest relatively quickly, and you’ll be on your way. Think about it, if you bought your first home in Centennial Hills (For instance) when you were 30, you could have it paid off by the tender age of 45. What a concept: A place to live and now you also have a true asset. Imagine how life changing that is to pay off your home! Sacrifice a little bit now, for a lot more later.
Yes I’m a contrarian, so listen up first time home buyers in Las Vegas: Buy less home than you can afford and pay it off as quickly as you can. You deserve it!