All Renters, Stop the Bleeding Now!
There’s an even stronger reason for Americans to buy a home than the emotional benefits of owning a home, and that’s the financial benefits of owning property. Consider the following financial drawbacks to renting:
- Rising Costs – Rental rates increase nationally each year about 3.5%. In highly desirable locations where there is strong demand for housing, this rate can be even higher. Many renters could find the most desirable retirement areas too expensive to afford, if they don’t buy at today’s prices.
- Forced Savings – Don’t kid yourself into believing you’re going to put money aside for the future. Americans have proven themselves to be among the worst savers in the world, especially when it comes to retirement savings. Most Americans don’t have near enough to provide for a comfortable retirement lasting into their 80’s, making for “not so golden years”. The fixed cost of home ownership, equity realized from appreciation, and the pay-off of the original purchase mortgage, help insure there will be extra money for the golden years.
- Tax Benefits – Rental payments are not tax deductible. When you factor in the tax write-off associated with primary residence mortgage deductions, the cost of home ownership is almost always far cheaper than the rental payments associated with living in a home.
- Real Estate is Still Undervalued – Renting doesn’t allow for any return. Most cities and towns have not fully recovered from the recession. Additional
appreciation over the standard 5% per year could be much greater during the next few years as the economy fully recovers.
- You’re Helping Your Landlord Become Rich – When you rent, you’re covering the landlord’s costs. He or she receives all of the appreciation and tax benefits associated with home ownership. Why would you want to help someone who is already financially secure to grow their assets at your expense?
- Rental Income – Even if you were forced to move, it still makes sense to own a home in a growing area. The rent you receive from tenants will offset your costs and depreciation of the structure for tax purposes and annual rises in the home values should provide for a healthy return on your investment.
- No leverage – When you rent, all your payments have no long-term value. When you own a home and have a mortgage, the appreciation you are receiving is not just on the amount you put as a down-payment. It is based on the full value of the home. Where else can you get a return on $100,000 worth of an asset, for only 10% or 20% down?
It’s frustrating to think of the number of “Generation X’ers” and “Millennials” that will reach their late 30’s before they realize they’ve made a big mistake by renting for the past 20 years, instead of buying. Worse yet, will be the number of “Baby-Boomers” that reach 60, 70 or even 80 and find they still have to work to make ends meet, because they never took advantage of leveraging real estate.
The choice is yours. You must decide to make the best decision!