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Chapter 17: 28RQ (page 426)

Is investing in housing always a very safe investment?

Short Answer

Expert verified

Yes, it is a risk-free investment because it will not lose money.

Step by step solution

01

Concept introduction

Financial investment: An investment that yields a profit asset.

02

Explanation of solution

Real estate investments are a commonplace investment. Because earnings cannot be realised in a short period of time, it should be for the long term. When purchasing a home, previous trends in the same location's appreciation are considered. However, additional factors such as mortgage amount and interest, property taxes, and house maintenance costs have an impact. All of this raises the cost of goods. If the mortgage payment is lower and the appreciation is good, the investment is better than any other. Otherwise, there is no way to say that buying a house is a hazardous investment because it will not result in losses.

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Most popular questions from this chapter

How do the shareholders who own a company choose the actual company managers?

How is buying a house to live in a type of financial investment?

Why is it hard to forecast future movements in stock prices?

How is buying a house to live in a type of financial investment?

Calculate the equity each of these people has in his or her home:

a. Fred just bought a house for \(200,000 by putting 10% as a down payment and borrowing the rest from the bank.

b. Freda bought a house for \)150,000 in cash, but if she were to sell it now, it would sell for \(250,000.

c. Frank bought a house for \)100,000. He put 20% down and borrowed the rest from the bank. However, the value of the house has now increased to \(160,000 and he has paid off \)20,000 of the bank loan.
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