A brief conversation with a friend the other day has had me thinking about this topic. When it comes time later in life to no longer live on your own…usually there is a pretty substantial upfront cost just to move into an assisted living facility. Saving up hundreds of thousands of dollars seems unrealistic, right? So how does one save up enough money to pay that big chunk?
Simple answer is own a home. If you purchase a home in your 20’s or even 30’s...you will absolutely have that home paid in full by the time you are of age to move to an assisted living center. That means you simply sell your home and use the equity from that to pay the upfront cost. Boom.
If you rent for your entire life, when you’re ready to move into a care facility you will not have any equity to roll into that. Most likely your monthly cost was the same while renting as it would have been while owning, so you hypothetically would have the same amount to put towards savings each month. But the significant difference is, when you move out of your rental you only take with you whatever you have put into savings above and beyond your monthly housing cost. When you own your home…you take whatever money you’ve saved up PLUS whatever your home is worth. That’s likely going to be several hundred thousand dollars.
Owning a home is like a forced savings account. Instead of your entire monthly housing expense going to your landlord…if you own the home, a large portion of your housing cost is going into a “savings” account for you, held by your home as collateral. This is what we call building equity, and this blog post is just one example of why that is vital for your life.
To discuss this concept further, or to ask any questions you have about real estate of money goals, email me anytime at firstname.lastname@example.org.