Real estate is considered to be the safest industry to invest in. The overall investing scenario has changed for every field but real estate has managed to stand the test of time. Despite getting hit in 2008, the industry is now back on its feet and offering a plethora of opportunities to homeowners and investors alike.
Since there’s money and long-term commitment involved in a real estate purchase, many new homebuyers shy away from making the decision of purchasing a home. They end up dragging things and when they are ready, the market becomes too expensive to afford.
3 Reasons Why Owning Real Estate is Rewarding:
Many real estate gurus out there tell people that buying a home is a good investment. This statement is totally relative and you can turn your first purchase into a great investment if you know what you are doing.
Here are 3 reasons that justify that homeownership is the way to go.
1. Tax Benefits
Homeownership comes with several tax benefits. Here are some to begin with.
Mortgage Interest – As a homeowner, you get to enjoy deductions on interest payments of up to $750,000 in mortgage debt if you are filing as an individual. This cap is increased if you and your spouse file jointly. These deductions are applied if you have ownership of any kind of living space.
Property Tax – Under the Tax Cuts and Jobs Act, you can receive deductions on property taxes that are associated with the purchase of a property.
Mortgage Interest Credit – Homeowners can use the mortgage interest for deductions. If you qualify low income, you get to convert the mortgage interest as credit and received major deductions on the tax.
There are other tax benefits associated with being a homeowner. They include benefits applied on Home Equity Loans and points you paid to lower the interest at the time of closing.
2. Gaining Equity
As you move forward with mortgage payments, you build equity in the property. Part of the mortgage payment goes to interest while the other part goes to lower down the principal balance. This is the reason why homeownership is a sound investment.
As you lower down the principal, you get to build equity which is the percentage of the home your already own. The payoff reaps results in the long-term when you move to another home or reinvest in the existing one. It’s more like continuously depositing money in the bank and withdrawing it whenever needed.
New homeowners select a fixed mortgage which enables them to pay a fixed amount for the entire term. If we compare the fixed amount to paying rent, we can clearly see the difference. Rent keeps fluctuating and only knows the upslope, whereas the mortgage is fixed as it is not subjected to fluctuations.
At the same time, owning a home instills peace of mind and puts you in the drivers seat. You get to control your property and even rent out a portion with the help of modern rental platforms like Airbnb to generate passive income. This strategy can be applied if you live around areas with a lot of visitors.
The Power of Leverage in Real Estate Ownership
Lastly, you need to remember that purchasing real estate offers great leverage. Leverage is the extra benefit you get while choosing to invest in real estate. This means that you don’t have to pay the entire value of the house. Investing in real estate gives extra benefits to the investor. In comparison, all the other investment means fall short.
Kevin Hancock ~ Hancock Realty SD @ Realty ONE Group San Diego