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.

---

Selling Your Home - A FSBOs Guide to Keeping It Safe

Sellers need to keep their safety in mind when prospecting... Read More

Estate Agents on the Costa Blanca Spain

Properties for sale or to rent on the Costa BlancaAs... Read More

The Real Estate Agent Alphabet

Alphabet Letters after a person's name seem to bestow some... Read More

Much Ado About Mansionization?

Is there a perpetual shadow hovering over your house? Do... Read More

How To Give Your Home A Face-Lift: The Sellers Guide To A Quick Sell

One of the great challenges to selling a home can... Read More

Why Do Realtors Advertise Your Home in Print,on the Radio, on Television, etc.?

Why Do Realtors Advertise Your Home in Print,on the Radio,... Read More

Are You Profiting From O.P.P.?

Are you profiting from O.P.P.? If not, why not? We... Read More

Important Information For Condo Buyers

Here is a step by step guide for buyers looking... Read More

The Most Sensible Investment Decision Youll Ever Make

So much advice is bandied about on the internet and... Read More

Spain Excellent Choice for British SIPP Investors

Second homes in favourite holiday destinations such as Spain are... Read More

Selling Houses: Cutting Edge Design Tips for Selling

In this article, you're going to discover new techniques for... Read More

Buying A Home ? What Is That Noise!?!

You've found the perfect home, closed escrow and just finished... Read More

Hey Landlord! Is Your Lease Legal?

The longer you are a landlord the more you strive... Read More

Give Your Home A Timeless Feel

In the world of real estate, there is a huge... Read More

Want To Be Profitable In This Real Estate Bubble? I?ll Show You How In Just Three Easy Steps

STEP#1. First you have to recognize that in order to... Read More

Do I Have To Buy Real Estate Through An Agent?

Sometimes when we are very busy professionals and very rich... Read More

Buying a House in Scotland

Buying a house in Scotland is slightly different from buying... Read More

First-time Home Buyers - 100% Home Loans

There is an increasing trend in South Africa that is... Read More

I have a buyer for your property and I can sell it now!

A Realtor has just talked to you and said, "I... Read More

What are the Elements in Real Estate?

Each element has a specific color associated with it. Because... Read More

Real Estate Remains A Strong Investment

Opportunities to make big, quick profits in residential real estate... Read More

Lock In Big Profits By Offering Rent To Own Deals

Why would anyone accept a lease option, rent to own... Read More

A Powerful Suggested Technique for YOUR Home & Property Search

A Powerful Suggested Technique for YOUR Home & Property Search... Read More

Four Reasons To Offer Seller Financing

An example of seller financing: Years ago I bought a... Read More

The Secret To Marketing Your FSBO Home For Sale

You're ready to put your home or land (house, townhouse,... Read More

Buying Houses: Types of Bargains to Find

To make a good profit in real estate, you must... Read More

Expense List for Buying a Home

There are many expenses that come with buying a home.... Read More

Are Signs Important?

Signage, though quite fundamental in nature, plays an important role... Read More

Will The Real Home Buying Guide... Please Stand Up?

Use Google right now and do a search on, "Home... Read More

Directionals Move Properties

One of the most effective and frequently overlooked methods of... Read More

How to Build A Rental Property Money Machine

If you are looking for a steady, income-producing investment that... Read More

Market Reaching its Peak

I do not profess to "Know" what the real estate... Read More

Master Builders Ask, Do You Know What Design/Build or Design/Construct Means? You Should

These real questions are answered by me and US Master... Read More