Many people rent their home, but why?
Why Do People Rent Their Home?
Studies have shown that when people own their homes, they have a greater financial wealth than tenants. In fact, home owners can sometimes have as much as 45 times greater net worth than a tenant.
I know that some people say that when you’re a tenant you don’t have to pay real estate taxes. Nor do you need to perform the necessary maintenance and repairs on the home. However, you need to realize that because the landlord incurs these expenses, they will be passed on to the tenants.
Saving the Down Payment
We realize that, for many,it’s difficult to save the down payment necessary to purchase a home. However, for now, let’s just take a look at the monthly expenses of owning a home. And, at least for now, let’s discuss the expenses that you, as a homeowner will face. For this purpose, we won’t discuss utilities.
Of course, you’ll need to pay the mortgage and taxes. However, the mortgage interest and the real estate taxes are deductible from your income in many cases. As a result, you won’t need to pay income tax on those amounts. You’ll also be responsible for for homeowners insurance, and it will be a little more than you’re paying for renters insurance. But, in the long run, most people will pay these expenses, and these expenses will usually be less than the rent on a similar home.
Another study says that a tenant living in an average property right now, could live in a nicer property than they are currently in. And they could live there without an increase in their monthly housing expense.
So why do so many people continue to rent?
Let’s look at it this way. As a matter of fact, rents continually are going up. But, your mortgage payment can be fixed for a 30 year period. As you pay the mortgage, you’re building equity in the home. And, the equity that you build up over period of time, can turn into non-taxable wealth when you sell the property. Consider your mortgage to be a forced savings account. And, as you get older, that equity in your home can be a financial resource. By selling the house you can cash out. Or, possibly you can take a reverse mortgage which will give you income after retirement.
When it’s time for you to stop being a tenant, and to begin to build your financial wealth, call us.