Many first time home
buyers are pleasantly surprised at the financial advantages
of owning their own homes. Often the cost of owning your
home is actually lower than the cost of renting.
In most cases,
all of your mortgage interest is tax deductible. This
can make a significant increase in your take-home pay. The
mortgage interest deduction is the oldest income tax deduction
in the United States. But, remember that tax laws are constantly
changing, so be sure to check with your tax professional for
details. Michael Cornell
can refer you to a financial advisor and a tax professional.
If you are
renting now, you can probably expect your rent to
increase virtually every year, FOREVER. In most cases,
your monthly home loan payment will stay basically the same
for a number of years, and then it will disappear, because
you have paid it off. You never
pay off rent.
there are expenses and responsibilites associated
with owning a home that you don't have when you rent.
As an owner of real estate, you will be responsible
for annual property taxes. Property taxes can be substantial,
so ask what the taxes are on the home that interests you.
In most cases, you can have your annual property taxes collected
with your monthly mortgage payment so you don't have that
big bill all at once. Also, the property taxes you pay on
your home may be deductible on your federal income tax return
(check with your CPA or tax professional. Remember that property
taxes in Washington are can change often and generally increase
need maintenance. When you own your home, you are
responsible for your own maintenance; you don't call the landlord
when a faucet leaks or the toilet is clogged. Of course, many
landlords fail to properly maintain their rental property
or fix problems quickly, so taking this into your own hands
may be an advantage for you. Many homeowners like
the control they have over their own home's maintenance and
improvements. While maintenance and repairs are not
generally tax-deductible on your primary residence, improvements
and upgrades you make can be a deduction later, when you sell
the property. Again, check with your tax professional for
When you move out of your rental, you may get your deposit
back, but that's about it. If you made improvements, those
improvements become property of the landlord. When you need
to move out of a home you own, you may sell your home or rent
it out to tenants.
for information on deals, incentives and rebates and how the
government may help you pay for home improvements that save
energy and water.
Improvements you've made
are YOUR assets.
Usually homes appreciate in value, so
you will probably make a profit simply by living in your home
and making the mortgage payments on time. Sometimes this profit
can be substantial. In booming economic times, it is not unusual
for a home to double in value in just a few years. Some people
use these value
increases to help them move up to a larger or more expensive
home. Some just use it as a way to help them retire in financial
comfort, or to make other investments.
have clients who made a substantial profit on their homes
in just six months, but it is important to remember that this
is not a typical result. Unless you really know what you're
doing, flipping is for pancakes and NOT for houses,"
In some cases, such times
of extreme economic downturn, the value of your home can decrease.
While this is extremely rare in Seattle, it has happened at
least three time in the past 100 years. Usually, if you keep
your home past the end of the economic downturn, you will
recoup your losses and then some. Michael Cornell suggests
that you plan on keeping your home at least four years. If
you don't expect to keep the home four years or more, it might
be better for you to rent. If you buy a home and then need
to move too soon to have made a profit, you might rent the
property out until your equity has increased more. Many successful
long-term real estate investors never sell; they only buy
and keep because rents nearly always increase over time.
gives us an extremely rare confluence of financial factors
that make this one of the best times in history to buy a home
or investment property. Interest rates are rediculously low,
prices are at the end of a major down cycle and economists
are telling us to expect a housing shortage in our area within
now, before the interest rate and price increases get going,
may be the best thing you could ever do for your financial
Michael Cornell can provide you with a "Buy vs. Rent"
comparison worksheet, that demonstrates approximately the financial
differences between renting and buying your home.
is the best way to be aware of what's on the market?
tips on saving energy, water and MONEY around the house