Well… in my personal opinion and not just because I sell real estate, I say homeownership. Here are some reasons why.
- With homeownership you are investing in your future. With renting you are paying for someone else’s investment in their future. It doesn’t make much sense to invest in bonds, mutual funds or stock if you DON’T own a home. You have to think of it as long-term leverage. This is an important concept to understand. Say you buy a house for $150,000 with 20% down payment of 30,000. If you house appreciates at 4% a year (the average historical appreciation for real estate) it will increase $6000.00 a year. That appreciation represents a 20% return on your original $30,000 investment and a tax free return on your investment to boot! The way our tax system is structured you can sell your primary residence after 2 years and pay NO capital gains on the first $500,000 for a married couple and $250,000 if single. Where can you get a return like that on an investment elsewhere?
- With interest rates historically low right now, it is a perfect time to buy. People often think that the house payment is going to be so much more than rent. This isn’t necessarily true either. If you look at these same figures we used above. You buy a home for $150,000 with 20% down and a loan balance of $120,000 @ 4.35%, your monthly payment with taxes and insurance will be apprx., $795.00 per month. So let’s say you are paying an average of $650.00 month rent. So your annual house payment would $9540.00 – $2385 (25% tax savings) = $7155.00 . You annual rent payment would be $7800.00, with really NO tax advantages or appreciation value to you.
3. Your house is one of the only investments you get to really “enjoy”. If you have money tied up in stocks, bonds, or iras you can’t “enjoy” them. You can’t even really touch them. The same thing true with art, jewelry or collectables. They aren’t really marketable investments; they don’t necessarily increase in value or even hold their value. This is why a home is a much better investment in your future.
The only time that renting would be a better scenario for someone would be if they are not planning on staying in the area or home for at least 5 years. Then the costs of trying to sell the home and gain any profits MAY not be feasible.
So what if you think you can’t afford to pay 20% down??? There are answers and ways to get into a home, an investment in your future…. With little or NO MONEY down. How???
More to come in my next blog.