The current real estate market is plagued with a plethora of for-sale signs, dropping house prices, and articles of doom and gloom speculating when the market will finally hit rock-bottom. We no longer live in a market where one can make a gain of tens of thousands within a few short years after purchasing a home. But amidst all the pessimism, there are still reasons why buying a home makes sense.
Most regions of the country have already hit the bottom of the housing market. The housing market will be slow and steady over the next several years, making it a great time to buy a home. Investors are out buying up property and you have to ask yourself why? Here are five reasons:
1. Prices - They are low and bargains are readily available.
2. Write offs - Real estate tax and mortgage interests are deductible claims on personal taxes.
3. Equity - Paying down your mortgage note each month builds net worth.
4. Future Potential - Buy in at a low price now and make $ when the market turns around.
5. Buying Power - Interest rates are super low, allowing buyers to get more home for their money (bigger, better home for a lower payment).
If you are a homeowner interested in moving and don’t have to sell your current home to get financing, consider renting your current home to double-dip on the write offs and equity for both homes. It doesn’t make sense to sell your current home if you are required to bring money to closing or just barely break even. You may want to consider renting out your current home. For one, there are a growing number of renters who don’t necessarily want to live in an apartment or condo. Single family homes are a more appealing option to renters. Secondly, keeping your current home provides an opportunity for the renter to pay your principle, interest, taxes and insurance (PITI), while you benefit from claiming write offs, continually reducing your mortgage, and allowing the property value to rebound to sell at a later date.
If you are someone who is trying to settle on whether to rent or buy, it is important to consider how long you plan to stay in set residence. Renting is smart if you know your stay will be for a short period of time. Making a home purchase for the short term is never beneficial for buyers when you consider closing costs, realtor fees and slow equity growth. Buyers really don’t start paying down their mortgage until after the first five years; until then, you’re basically paying interest. Thus, it makes sense to hold off on buying until you are planning on making that your home for an extended period of time. Long term renting, on the other hand, is only beneficial for the landlord and leaves the tenant with nothing. If you or someone you know is renting long-term due to fears of owning, you may be missing out on the five reasons to own in today’s market.
By: Damien Baden