Why does it make more sense for a person to own a home rather than rent one? There are many benefits, but according to a recent study done by Harvard University, all of them fall under two categories: financial reasons and emotional reasons. These two reasons can sometimes overlap, but we’ll review some of the financials first.
For starters, housing is a leveraged investment. Ask yourself—what else can you get a 30-year fixed low-interest rate loan on for an investment? On top of that, homes in our area appreciate anywhere between 3% and 5% per year. The second financial benefit is that you’re paying for a home whether you own it or rent it. You need shelter and a place to live, right? You might as well own it and turn it into an investment instead of making your landlord rich.
The third financial benefit is that owning a home is a forced way of saving money. By that I mean a portion of that mortgage payment you’re making is going toward the principal that you owe on the home. As you pay that principal down over time, that becomes equity in your home. When you sell it, you get all of that money back.
There are also substantial benefits in regards to property taxes. For example, you can write off certain expenses of your home investment against your income. At the end of the year, then, you’ll either be paying less in taxes or getting a larger cash refund. For greater detail on all the specific tax benefits, be sure to talk to your CPA. Owning a home also allows you to hedge against inflation, since real estate is a tangible asset.
The emotional reasons need far less explanation. For one thing, we all share the basic human need for physical shelter. After that’s accomplished and you perhaps decide that you want children, you need a place to raise them. After those boxes are checked off, you have the ability to pass along wealth to your family. And finally, owning a home means having control over your living space.
If you have any questions about real estate or homeownership, give me a call or send me an email. I’d be happy to help you out!