Why buy? – The long and short of it!

Overview

There are many reasons why people buy or not buy homes.  From financing limits to preference of area currently living to using the investment for cash flow or tax purposes.  Regardless of the reasons, exploring that right decision can be a bit overwhelming with self created fears and anxiety.  As my late mother would say to me, “step away from the wall to see the WHOLE picture.”  So, lets step back and categorize  the hurdles and benefits with two views, the Short Term and the Long Term

In the Short Term

The Mercedes vs Used Saturn Conumdrum

Housing is a basic need. And is an expense that some are willing to pay for a Mercedes, some are okay with an used Saturn and some are in between.  Yes, housing also becomes a personal choice, sometimes controllable and sometimes not.

In the short term, housing is a necessity and typically, the least expensive way to secure that need is the path most take.  Most would prefer a Mercedes over an used Saturn, but at certain times in our lives, the used Saturn is what one can afford and concerning the  decision to buy or not, usually means renting instead.

Renting in the short term works and it can allow one to become more established in the community and at work, can help pay off other bills and save money, and can help raise their credit score, the most important goal and measure to purchasing a future home.  Shared rental space is the most ideal for these goals.

But, once going solo or with family in tow, many times the ‘wants’ of a home out pace the ‘needs’ as ones rent increases and disallows one to maintain a good credit score and staying on top of bills.  And, of course, there are a plethora of  ‘excuses’ or hurdles on why  renting is better, another topic, later.  So, in the short term, people get comfortable in renting and ignore the benefits.

Long Term Game with Short Term Benefits

Yes, buying a home is a long term investment.  Rarely can you purchase a home and then resell it for a significant profit after expenses in a short amount of time.  Perhaps this is the ‘mind set’ that dissuades people from buying, but it shouldn’t, because there are a few other short term benefits that help out.

First, when you rent, you are paying a mortgage, not yours, but the owner’s mortgage.  And, most often, you’re paying more than the owner’s mortgage and the owner is using that extra profit to reinvest in more homes to rent or for personal reasons, such as paying the mortgage on their own personal home.  So, in short, why not pay yourself instead of an owner and benefit in the tax write offs, capital gains and collateral.

Second, buying a home does NOT definitively set roots, there are always options.  And, renting out your house is the best, because you remain owning the home for a possible future return while the tenant pays your mortgage.  Or, you simply sell the house and move on.  Either way, to whomever you rent, be it friends, family member or random public or sell, you have options and you are not stuck.  Being ‘stuck’ is an erroneous ‘mind set’ that is based on an unnecessary fear that your home will never resell or rent.

Lastly, another great benefit is that when you purchase the home,  you can rent the extra rooms to your favorite roommates you were living or going to live with!  Wow, having your friends pay over half your mortgage, doesn’t that sound awesome!  So, stop renting “with” and start renting “to”!

In the Long Term

One of the most popular reasons people buy homes are the Tax Benefits.   #Check With an Accountant!!!  Everyones financial situation is different, but generally speaking,  the increase in Itemized Deductions versus the Standard Deduction allows the homeowner to “write off” specific housing expenses, reducing the amount of taxes owed and increases the amount they can get back.  Plain and simple, check with an accountant on your individual case.

Another long term benefit is that in most cases, Real Estate generally increases in value over time.  As the population grows, the need and demand for housing also grows and the value of the land and home increases.  Basic economics, high demand = higher prices.  So, through time, your home increases in value and is worth more in the future.

As needs and familia status changes, so does ones housing.  But, this makes your house a great resource.  One, you can resell and use the profits for a downpayment on another home of choice.  Or, you can use the existing home as an Investment Rental, in which the tenant pays off the mortgage over time and allows for another source of income.  Or, you can use the house for family or friends.  The great thing is that you have options and any rents that you collect can be used as income for other debt purchases or one can borrow against the equity that is left in the house.

Conclusions that work for you

Yes, buying a home is a big deal, but it is a great alternative to securing a better future and fulfilling a basic need for you and your family.  The real trick is to review your needs and wants in a home and find a compromise between the two that fits your budget.  Many times, you can own a home with a mortgage that is very close to what you were paying in rent.  And knowing that there are many options you have if life changes and that you are NOT stuck, makes home ownership clearly a better option than renting. And that is why you should buy!!!

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