The Basic Benefits of Home OwnershipMonday, January 4, 2010

When I was a first time home buyer, I remember the anxiety and doubts I had about buying a home. Was it a good investment? Could I afford the type of home I wanted to live in? Would the possible costs of repairs put me in a bind financially? I did plenty of research, but what really pushed me forward to action was seeing all of my friends buying homes. I asked them why they felt so confident and they told me their parents convinced them, and looking at what prices their parents bought their homes and what the values were currently put $$ in their eyes and they were sold. I followed suit and spoke with my parents, relatives and so on and arrived at the same conclusion - over the long term real estate has always appreciated and before you know it, you have accumulated a large sum of equity.

It is always vital to figure out what you can truly 'afford' on a monthly payment level to determine if you are ready to buy (and I stress the word 'afford' because it has to include your ability to save for cash reserves and retirement). The big benefits are:

1. Appreciation - the value of your real estate will move up and down, but the trend is upward over the long term. The long-term is relative, and depending on what type of real estate market you buy into will dictate the term needed to reach the appreciation (or increase in value) level desired.
2. Leverage - there are very few investments you can buy where you can leverage up to 100% of the cost. Real Estate allows you to obtain a large asset, let's use a $250,000 home for example, for a few thousand dollars in cost (and in some instances for $0). This allows you the compounding appreciation on an investment vehicle worth $250k versus a stock where you have to pay full price for it. In a few years time, your $250k investment could be worth $295k - and that $45k increase is something you could likely not achieve on a smaller asset that you could not leverage. Along with leverage, owning your home can allow you to easily purchase an investment property with the equity earned in the home.
3. Tax Savings - the mortgage interest you pay to the bank, along with several other costs involved in owning real estate, are tax deductible allowing you to keep more of the money you earn. Depending on your tax bracket, the amount you save by being a home owner can be considerable.

There are many factors to consider when buying your first home. Please contact me anytime if you have questions and would like to learn more.

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