Like so many people, you are probably asking yourself “is it really worth buying a property in this market?” With the property prices and mortgage rates renting can seem like a better option.
Honestly, for some people renting is a better option! There is nothing wrong with that. However think about the following 5 advantages of owning a property:
1) This one is the most important! When you own, you build YOUR equity and wealth, not your landlord’s. When you own a property you build something called equity. This is the difference between what the property is worth and the amount you owe (mortgage) on the property. This equity grows every time you send your mortgage payment and grows even more as home values increase (appreciates) over the years. With timely payments and the appreciation of the property equity grows quicker then you might think.
In fact, the National Association of Realtors (NAR) says homeowner’s net worth is 43 times greater than that of a tenant (and that gap has been growing over the years).
A Bank of America survey found that 70% of aspiring homeowners worry about what long-term renting means for their future. This is all due because renting does nothing for your future. As Yahoo Finance explains:
“Paying rent doesn’t build equity. You get a place to live, but no ownership stake, no price appreciation, and no asset to leverage for future borrowing or investment.”
This is not because a homeowner does anything different on a daily bases. It’s because over time owning builds something and renting does not!
Bottom line is that at the end of a lease, a tenant walks away with nothing when the lease ends. However the landlord built equity on the tenant’s expense. Rent or own, you are paying a mortgage! Is it yours or your landlord’s? You are also building equity! Does it belong to you or your landlord?
2) Access to the equity: Once you build up equity you will have a huge advance over a tenant. The home equity can be used in a number of ways. Through a home equity line of credit (HELOC) or a cash out loan, you can access your equity to re-invest in other revenue streams like another property that you can use as rental income. Or maybe use it to make improvements to your current home that will help faster increase the equity in your current home. Or maybe you need to use it as an emergency fund for unexpected repairs or expense. However you wish to use it, it will be available if you are a homeowner when you need it.
3) Tax Advantages: Owning a property can help save you money on your income tax. In most cases your mortgage interest is tax deductible along with the amount you paid on that year’s state and local property taxes. (We encourage speaking to your tax adviser for more information.)
You might be thinking that it is a wash or that you are even saving money by not having to pay the property tax in the first place. The truth is that you are in fact paying the property tax. Landlords work mortgages, property taxes, insurances, repairs, and in many cases some profit into the rent price.
4) Financial and housing stability: Owning a property creates financial stability because year after year, your rent payment might increase with each lease renewal. You either pay the new increased rent or it may cost you thousands of dollars in deposits, move-in/out fees and moving expenses. However when you buy with a fixed rate mortgage, your payment will never change during the time of the loan. Of course there are 2 exceptions: first, the escrow account which might include your property taxes and home owners insurance. Second if you move into a property with a Home Owners Association (HOA), the monthly HOA fee could change. These changes could be minimum compared to the possible yearly rent hikes. (We recommend speaking to a realtor or loan officer regarding these possible changes.)
You also get more housing stability. Tenants are far more likely to move more frequently than homeowners. That is due to several factors including poor property management, rent hikes, or landlord’s decision to sell the property you are renting without any obligation to the tenant.
5) Make it YOUR home: As a tenant even the smallest nail holes may result in a damage fee when you move out. But as a homeowner, you call all the shots on the look and feel of your home. The only exceptions are rules for the exterior if you are in a HOA community. However you are allowed to:
* Paint the walls any color you like.
* Decorate as you please.
* Adopt the pet you always wanted.
* The list goes on and on.
So if you are ready you fire your landlord and start building your equity and wealth, it starts with a simple conversation with a realtor and a loan officer. At Varo Real Estate, we have experienced agents ready to have that conversation with you, point you in the right direction and walk you through every step of the way. If you want to find out your buying power, we recommend speaking to a loan officer. At Varo Real Estate, we highly recommend reaching out to Olga Battista with Mutual Financial Corporation. You can reach her via the contact info below, or click the link to be taken to her profile page.
