Advantages of Owning Real Estate

December 29, 2020

Advantages of Owning Real Estate

There are many great reasons to own a home.  I have yet to hear anyone tell me that they wish they HAD NOT purchased a home 30 years ago!  I do here many people telling me they wished they had purchased a home sooner.    Here are a few of the top reasons to purchase real estate as mentioned by one of my favorite author’s David Bach.

 

Forced Savings.  Paying a mortgage, which goes goes towards paying down the principle, is a forced savings mechanism.  These payments turn into home equity, which can be tapped into in the future.  Home equity lines of credit allow homeowners to borrow agains the equity in their home for home improvements, or to purchase other real estate.  This equity can be turned into a new home through selling the current home, and then purchasing another.

Leverage.  Banks provide mortgages with as little as zero money down to VA borrowers.  Lenders will lend qualified home buyers up to 95% of a home’s value as well.  Borrowers use leverage to purchase a valuable asset, while only putting down a fraction of the cost.  $50,000 down on a $500,000 purchase looking pretty good if that $500,000 home that increased 10% puts builds $50,000 worth of wealth.  In this example a borrower doubled their money.  That $50,000 making 10% on it’s own only made the saver $5,000.

OPM.  Banks allow you to use  Other People’s Money to make a purchase.  You don’t have to buy a home for all cash.  That being said, you can’t borrow money to invest in the stock market.

Tax Breaks.  The interest paid on a home mortgage is tax deductible.  Homeowners can take a deduction on the interest they pay, but renters can’t do the same.

Stability and Pride of Ownership.  Owning a home creates stability.  You don’t have to worry about a landlord telling you to move.  It’s also rewarding to make home improvements and put your personal stamp on where you live.

Real Estate is a great investment.  The National Association of Realtors claims that real estate investments have averaged a 5.3% return in 1968, when they started keeping records.  There can be dips in the market, but in the long run, like I mentioned above, I have yet to hear of someone regretting a home purchase in the long run.


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