Whenever real estate conditions shift, there is always a rush to discount homeownership. There are those who remember the sting of the Great Recession, those who expect unrealistic real estate gains in a short period of time, and those who simply benefit from a culture of renters. Our family has been in the residential real estate business for over 50 years and for decades we have witnessed first-hand how real estate creates wealth and financial stability for clients from generation to generation. Here are a few distinct advantages to owning real estate over renting.
APPRECIATION
No matter how long you rent you will never benefit from appreciation. In fact, appreciation will cause your rent to increase. Over time, real estate has always appreciated, and that appreciation builds equity, financial stability, and wealth.
ANNUAL TAX BENEFITS
The IRS provides no incentive for renting. However, if you are a homeowner, you can deduct your mortgage interest on a primary residence and second home, and you can deduct up to $10,000 in state and local taxes, including property taxes.*
CAPITAL GAINS EXCLUSION
If you own your home and live in it for at least two out of the last five years, the capital gain on that home will be excluded up to $2
STABLE HOUSING AND SOCIAL BENEFITS
A 30-year fixed mortgage offers the ability for homeowners to have fixed housing costs and helps homeowners better manage budgets. Children of homeowners are more likely to stay in school, and a study by the Federal Reserve Bank of New York revealed that they have a 19 percent higher graduation rate. According to an Ohio State study, the children of homeowners also outperform children from renting families in math and achievement tests — even when other factors are the same.
REAL ESTATE AS A TOOL
When you own your real estate, you have the flexibility to use your property. You can choose to rent out your property and essentially have someone else pay down your mortgage. You can refinance and use a portion of your acquired equity to start a business, improve the property, or buy additional property.
Depending on your situation, you may be able to move your office or business to your home to save on rent elsewhere. You could even sell your home and roll your equity into a bigger, newer property or two smaller properties. Real estate can be leveraged, modified, and utilized in a way that rented property cannot.
NEIGHBORS AND COMMUNITY
One of the great benefits of homeownership is the connection to the community. Our family was lucky to make lifelong friendships with many of our neighbors and our larger community has enriched our lives, as well. The positive social value has been priceless.
If you or your loved ones have not yet had the opportunity to purchase a home, please give us a call. There are many pathways to homeownership, but the most important first step is getting information about the process. We are here to help and give us a call anytime to discuss your real estate goals.
*KOR Properties does not provide tax advice. Please consult with your tax advisor.
John and Natascha Karadsheh are co-owners of KOR Properties, a boutique real estate brokerage serving the Valley of the Sun.
John is the Designated Broker of KOR Properties and has been a Multi-Million Dollar producing agent for over 20 years. He is an Accredited Buyers Representative (ABR) and Certified Residential Specialist (CRS), and serves on the Arizona Regional MLS (ARMLS) Rules & Policies Committee, ARMLS Appeals Committee, and the West and Southeast Realtors of the Valley Professional Standards Committee.
Natascha is a Multi-Million Dollar Producer and Accredited Buyers Representative (ABR). She is the Founder of Mesa Food Truck Fridays, a Member and Past-Chair of the City of Mesa Economic Development Advisory Board, and on the Board of Directors of the Greater Phoenix Economic Council.