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To Buy or Not to Buy
Purchasing a home is a major emotional and financial decision. Often times, people want to buy a home; however, emotionally cannot afford to commit to the home-buying process. They are, in fact, afraid. "My payment will be too high" or "What if I lose my job," are some of the "excuses" which I often hear. People do not realize that they are able to meet all the commitments over their life span. In any event, when everything is said and done, here are some of the major advantages of buying a home: 1. Quality of Life. Home-buying and living in your home affects the quality of life. It adds to your confidence, giving you a sense of pride and satisfaction. You have a sense of emotional well-being as well as peace of mind. 2. Tax Deductibility of Mortgage Interest. The entire mortgage interest payment is tax-deductible and the "net" cost of the mortgage payment actually puts money in your pocket. 3. Tax Deductibility of Property Taxes. Similarly, the property taxes are due and payable twice a year and may seem like a lot of waste of money. Typically, property taxes are $1.10/$1,000 of your purchase price. However, the property taxes are also tax deductible and you get it back in the form of tax savings. 4. Appreciation Potential. Typically and historically, nationwide property values have gone up in value at 7% per year. In California and some other states, properties have, in certain good economic times, appreciated at the rate of over 20% per year. At 7% conservative rate, the property doubles up in value in 10 years. So, a property worth $500,000 will be worth $1,000,000, equaling a gain of $50,000 on a yearly basis. For an average person, it is difficult to save that kind of money. 5. Deferred Capital Gain Treatment. Real estate investment capital gains can be deferred by exchanging the property for like-kind property. So, when the property appreciates and you decide to sell it and do no want to pay the capital gains tax, you can buy another property of like-kind and avoid capital gains tax. This allows you to switch properties when required, for example, an area might be facing downturn or you might be moving, etc. 6. Once in a Lifetime Exclusion. Upon the sale of a personal residence, the IRS allows an exemption and one does not have to pay taxes on a gain of $250,000, if single and up to a gain of $500,000, if married. For example, if you're single and buy a property and live there for five years and the property appreciates by $250,000, you can sell the property and not pay any taxes at all. 7. Principal Accumulation. This is strongly tied to appreciation in the property value. Payments made toward the mortgage payment help you accumulate principal which essentially helps you establish a reserve savings account which you can later tap into by obtaining an equity line of credit or getting an equity loan, if needed. 8. Pride in Your Home. It is fun to invite people to "your" home and feel good about it. It also instills confidence in your family, your children and makes them more confident individuals. 9. No Landlord. You are in-charge and do not have to deal with a landlord who might not make repairs or maintain the property as you would like. 10. Leverage. Where else can you buy this size of an investment with 0-5-10% down. You can buy a property for a personal residence for as low as zero down or an investment property with 5-10% down, if your credit is good, and watch the investment grow. This, in turn, allows the net investment return to be much higher (than the actual appreciation rate on the value of the property). To follow up on the example earlier, if the property grows at 7% and doubles in value, since the amount invested in buying the property might be only $50,000 (at 10% down payment), the actual return is much higher on $50,000 investment. 11. The Real Cost of Renting! At $700 per month, with a 6% rental increase per year, you will pay $110,719 over a 10 year period. If the rent is higher, you can count on paying much more and not getting any return or tax benefits at all. Madan "Raja" Ahluwalia is an Attorney at Law and Realtor. Raja possesses a thorough understanding of the real estate market and trends, based on years of involvement in real estate, both for his clients and for his own investment purposes. Contact Raja via e-mail at raja@kw.com and at 650.430.4023.
MORE RESOURCES: Refined Real Estate: Unique Leschi home with lake views lists for $1,395,000 seattlerefined.com Erie County real estate transactions Buffalo News Real estate mogul cautions about avoidable mistake when buying a home, explains how to avoid 'drowning' Fox Business Worcester County real estate transfers, Sunday, May 19 Worcester Telegram Massachusetts real estate transactions for Hampden, Hampshire and Franklin counties May 19, 2024 edition MassLive.com Portside Real Estate acquires Belgrade Lakes brokerage Kennebec Journal and Morning Sentinel Berks County real estate transactions for May 19 Reading Eagle The same, yet different – seniors and real estate in the Tri-Valley danvillesanramon.com Slow April real estate market among Pueblo's top business news Pueblo Chieftain REAL ESTATE | A look inside The Lofts at Cedar Lake on the campus of Cedar Community washingtoncountyinsider.com Illinois real estate: Home sales in Peoria, Tazewell, Woodford counties Peoria Journal Star Agent Spotlight: Andrea Haitz Grand Junction Daily Sentinel Hawaii Real Estate Sales: March 11-15, 2024 Honolulu Star-Advertiser Luxury Homes Are Booming in These 10 Unexpected Cities in 2024 Norada Real Estate Investments REAL ESTATE | Check out Braund's Flooring & Remodeling LLC in West Bend, WI washingtoncountyinsider.com Revised Mortgage Rate Predictions Signal HIGHER Rates in 2024 Norada Real Estate Investments Letter to editor: On recent misinformation regarding upcoming changes to the real estate industry Woodland Daily Democrat Wellesley resident Peter Covo joins Conn Kavanaugh as partner in firm's real estate practice The Swellesley Report Top 10 Brooklyn Listings: A Flatlands Standalone Brownstoner STAR resource center Department of Taxation and Finance Increases in interest rates stress commercial real estate Richmond Times-Dispatch Egypt boasts real estate portfolio valued at $200bn, ready for international export - Dailynewsegypt Daily News Egypt Private Advisor Group LLC Purchases 1425 Shares of Doubleline Commercial Real Estate ETF (NYSEARCA:DCMB) Defense World Celebrity Real Estate Realtor.com News Connecticut real estate law changed after MV Realty investigation Eyewitness News 3 Coloradans negotiating lower fees for real estate agents with new law on horizon Colorado Public Radio Amalgamated Bank Trims Stock Position in Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI) Defense World Robert Willett may be targeting female Realtors in Northeast Ohio Akron Beacon Journal Real estate transfers: May 17, 2024 RiverheadLOCAL China Says It Will Start Buying Apartments as Housing Slump Worsens The New York Times Real Estate Briefs: Lakeside homes, new condos, and more news Rough Draft Atlanta Kenosha CubeSmart storage facility sold to new owner Kenosha News Real Estate Mogul Grant Cardone Closes Largest All-Cash Multifamily Deal In South Florida This Year Yahoo Finance Mid-May Greenwich Real Estate Market Report Greenwich Sentinel London Real Estate Is About to Get the ‘Selling Sunset’ Treatment Hollywood Reporter Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI) Stock Position Reduced by Victory Capital Management Inc. Defense World $6 million home was Houston's top residential real estate sale of its week (PHOTOS) The Business Journals Real Estate Newsletter Articles this Week: Housing Starts Increased to 1.360 million Annual Rate in April Calculated Risk What's real estate wellness? Fortune Billionaire Frank McCourt raises his hand to buy TikTok Business Insider Dodge County Real Estate Transfers Fremont Tribune News anchor sells luxury Scottsdale home he built for $6M The Business Journals China's real estate market sees surge in weekend consultations and trading, boosted by accommodative policy Global Times Ellison sues real estate broker Chad Banken over alleged schemes involving contracts for deed Star Tribune Home listings are on the rise in southern Colorado, while other indicators show a slowing real estate market Colorado Public Radio Busch relative settles squabble with Clayton investors over real estate trust St. Louis Post-Dispatch Southern fast-food chain Cook Out buys Tampa real estate The Business Journals See all homes sold in Garfield Heights, May 6 to May 12 cleveland.com MCB Real Estate Revives Long-Awaited Viva White Oak Mixed-Use Project Source of the Spring |
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