As you can see, all of the neighborhoods have performed well. With appreciation rates from 4.5% to 7.5%, the Tallahassee real estate market has done wonderful. Loaded with this information, I would like to demonstrate why home ownership in the Tallahassee real estate market is the single-greatest investment that a family can make. It blows away the stock market, and for most families, it is by far the smartest investment that they can make. In order to perform this analysis, we will look at a fictitious family, living in a fictitious Tallahassee Subdivision, and will use these assumptions (which are typical of what we see in the Tallahassee real estate market): Assumptions
- The family bought their home in mid-year 1991 and sold it in mid-year 2007
- The neighborhood in which they purchased experienced a 5% annual appreciation rate
- They purchased a home that was roughly equal to the median home value in 1991 for $90,000
- They financed the home with a FHA loan ($85,500 at 7% for 30 years)
- They could have leased a similar home for $900 per month (increasing 3% per year)
- Home Maintenance & Repairs for the family would be $2,160 the first year and represent 20% of each year's gross lease
Finally, to determine the investment benefit, we have to calculate the Internal Rate of Return on the home owner's investment and compare it with other investments the home owner could have made. The investment on the home would have been a five percent (5%) down payment (plus three percent in closing costs) which would have been $7,200. Had this money been invested in the stock market, in a fund matching the Dow Jones Industrial Average, it would have seen the following return:
Now we have a baseline for which to make a comparison. The initial investment (down payment plus closing costs = $7,200) could have been invested in the stock market for an after-tax internal rate of return for 10.2%. That is pretty strong. How will it compare with the Tallahassee real estate market?
Not even close! The median valued home in the Tallahassee real estate market would have yielded a comparable 37.5% internal rate of return over the same period. History keeps telling us to own our home.
As a reminder for those who subscribe to the Tallahassee Real Estate Blog by email, some embedded pictures and videos might not be appearing in your email and you might need to click the title header to go to your browser where all will be visible. Keep checking out the Tallahassee Real Estate Blog every day for updates that include charts, graphs, and analysis of the Tallahassee real estate market. If you like this Article then please subscribe to my blog through a full RSS feed. You will be able to stay informed about the happenings in the Tallahassee Real Estate Market. You can also subscribe to this blog and have it delivered by Email. Joe Manausa is a real estate investor and the Broker and Co-Owner of Joe Manausa Real Estate. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.