Millennial buyers are sometimes hindered from entering the real estate market. They lack knowledge and education. They have fear around what they don’t know.
And, yet, a lot of millennials, or other first-time home buyers, have the ability to enter the market, buying homes from $300,000 to $500,000. They have the buying power to get the home they want and get it updated. And, it can be a way to build wealth.
So, what do millennials need to know?
Let’s start with equity. Equity is the difference between the current fair market value of a property and the amount a homeowner still owes on their mortgage. It’s the profit the owner would receive after selling the property and paying off the mortgage loan. It’s also called the “real property value.”
Then there’s appreciation. Appreciation is the increase in the value of a home over time. It can be because of property improvements the owners make. It can be a result of increased demand or limited supply. It can be caused by inflation or increasing interest rates.
Finally, there’s amortization. Amortization is a method of equalizing a home owner’s monthly mortgage payments over the life of the loan. The proportion of principal to interest is adjusted over time. Initially, mortgage payments are mostly interesting with little impact on the principal. As the mortgage matures, the payments begin to draw down the principal significantly.
So, how does this create wealth? As your property appreciates, your equity increases. As your loan matures, due to amortization, your equity increases. The two together can create substantial wealth in a relatively short period of time.
And, what constitutes a short period of time? People in Irving today are seeing 8% to 10% appreciation in two years. That used to take five, six, seven years to see returns like that. People are kicking themselves for not buying years ago and taking advantage of the market.
What makes Irving especially hot right now? It’s known as a location for Fortune 500 offices. But, Irving has seen substantial growth over the last few years. It’s become a true live, work, and play area. There are over 55,000 millennials here–more than most metropolitan areas.
So, as a millennial should you buy in Irving? Absolutely!
