Why You Should Buy A House and Not Rent
#1 EMOTIONAL BENEFIT
You feel a sense of accomplishment that you have finally owned a house.
This is a house that you own. Nobody can take it away. And you have come a long way to own a house. So that’s the number one benefit of owning a house, other than just a roof overhead. It’s a sense of accomplishment, especially coming into 2022 when the price is so high and everything else is so expensive. So when you do buy a house, that’s a big, big accomplishment. And also remember that one of the biggest transactions or one of the biggest investments the average American makes today is in their house. It’s their house. Not a rental property, not stocks, not big companies, but their house. So when you end up buying a house, it’s a big, big accomplishment. You should congratulate yourself.
#2 EMOTIONAL BENEFIT
You own your own space.
When you rent, you don’t own your space. You have restrictions. What you can do, you cannot do things. Maybe you cannot paint things, or do things in the yard. But when you own your house, that’s your own space. You own it. You can do whatever you want with it. Of course, within city guidelines and HOA guidelines, which is the homeowners’ association. But this is your property. Do whatever you want with it. Use the color you want with it. Do the yard you want with a barbecue or add a pool. You don’t have to ask anybody. It is yours to keep. It is yours to decide. You don’t have to ask anyone. It’s your own space. And that has a lot of advantages because you often have a lot of restrictions. You can’t do anything. And the other thing is, nobody can kick you out. Nobody can give you a notice that you have to move in 30 days, or move out in 20 days, or in two months. It’s your house. You stay as long as you want, and you do whatever you want with your house.
#3 EMOTIONAL BENEFIT
The more you own, the more the value of the house goes up without you doing anything.
They say patience is a virtue. Well, for not doing anything, your house value is going to grow over the long term. Of course, there are stats out there. And it’s a fact that, on average, when you buy a house over a 2030-year period, your house is going to increase in value by 4% per year, on average. So maybe you bought something at a high price, it may drop for a few years, then it’s going to come back up, or you may have bought it at a low price, get a good deal, then you have an advantage. It’s going to go up faster and faster. So the advantage is that without you doing anything, just staying there for years and just doing your work and just paying your monthly mortgage payment, the nature of the housing guards is going to increase the value of your home by 4%.
I was talking to an agent friend of mine. He is just retiring at the end of 2022, in December. He’s almost 70 years old. He’d worked in this business for 35 years, and he said, “I’m going to retire.” I only need five, or $6,000, to retire, and I’m glad I bought my house 30 years ago. And as we were talking, I asked him, hey, what’s your house worth today? He said, “Thank God.” I paid my dues every month. I was never late, I never refinanced. And my house is worth, in today’s market, over $2 million. Of course, he did not pay that much in 2030, 25 years ago. He probably paid $400,000, if I had to guess. But today is, what, 2.2? It’s fully paid off. Then he goes to tell me that, you know what? The good thing I feel good about is not only that my house is paid off. There’s $2.2 million worth of equity in the house. But if something ever happens to me, because he’s by himself. He does not have a wife anymore. If something bad happens to me, such as a medical emergency or a health problem, the kids can take out equity from my house and pay for my healthcare costs for the next ten years. 15 years. And he should not have any problems. So the benefit that he had is that when he bought the house, of course, he worked hard to buy the house. He worked hard to pay off the mortgage. Now he has so much equity, he can stay in there. It’s the way he has it; it’s totally remodeled. He owes nothing to it. But he’s sitting on a gold mine called “Equity” that his kids can use in case of an emergency. Or for that matter, he can use it to go on vacation, et cetera, if he needs to. But he has enough money saved up to go on vacation, take cruises, et cetera. So he’s enjoying life. It’s because he bought a house; he does not worry about paying rent every month, which could be $4,000 a month today. Where was he going to get $4,000 a month if he did not buy the house? So that’s a big advantage.
#1 FINANCIAL BENEFIT
You gain equity.
Of course, we talked earlier about equity, but there are two ways to grow equity. One is just waiting and doing nothing. But the second way is the difference between renting and owning. The way it works now is that when you rent and let’s say your rent is $4,000 a month when you pay the landlord, you pay the landlord’s mortgage, and you have no benefit. But when you own a house and every month you pay, like I said, about 4,000 a month in interest, a lot of that payment, let’s say 2,500 a month on average, goes towards your principal. So, every month that you pay your mortgage, you are reducing your equity in your house. So, if you bought your house for $500,000 and your loan is $400,000, each payment reduces your mortgage debt by $2,500 per month on average. And that’s just an example. So the financial benefit number one is that every time you make a payment, you’re cutting your debt and increasing your equity. I hope that makes sense. This is different than the equity that I talked about earlier, where your home price is rising just because it’s supposed to rise. That’s what real estate does. So there are two ways to gain equity. One is to just be patient and you will get your equity. The second way is every time you make a payment, or if you make faster payments, you’ll have faster equity.
#2 FINANCIAL BENEFIT
You get tax benefits for owning a house or owning a property.
When you own a house or when you buy a house, you have a lot of deductions that you don’t have when you rent. Some of the deductions are all the closing costs. If you buy a house, some of the closing costs are deductible, and you get tax write-offs for your property tax and your interest rates if it’s your own house or you own the house as a residence. But if you buy a property as a rental, you have a lot of other tax advantages, like depreciation. And when you sell your house to make a profit, you can have a 1031 exchange. So these are the tax benefits that you have. And you did not buy the house with tax benefits, but you do get those. So I would buy a house not only for shelter, as we talked about, but also as a tax benefit. One of the goals of a lot of investors and people who buy commercial property is to save money by reducing their taxes. And one way to do it is to buy property. And they have ways of reducing their taxes. So that’s a big advantage.
#3 FINANCIAL BENEFIT
We talked about equity. It’s a big thing. This is what I’m going to call sweat equity. When you buy a house, and if you’re going to stay there for 20, 30, or 40 years, then, of course, the house needs maintenance. Like anything else, our bodies need maintenance. We have to go to the gym, or we have to walk, or we have to run. We have to eat proper food. It costs money to survive today. The same thing with the house. You’re going to have to fix things. You’re going to have to replace the filter. You’re going to have to put manure in the yard. If you have a yard, you have to cut the grass, you have to plant, and all that. Your windows get old. You have to change them. Your paint gets old, you paint, and your style gets old. Your kitchen may be older. After ten years, you’re going to remodel it. Every time you do that, you are increasing the value of your home. And yet you’re doing it for your lifestyle. You’re not changing the stove because you want to grow equity. You’re changing your stove, buying a new refrigerator, buying a washer and dryer, or buying a new air conditioner to improve your lifestyle and be more efficient. But by doing that, you’re building equity in the house. Because every time you improve your home, whether it’s one thing at a time, changing the faucet, changing the sink, or changing the bathtub, you’re increasing the value of your home. That’s what we call sweat equity. So, not even knowing what you’re doing, every time you fix something, every time you remodel, you’re increasing the value. And that’s a big, big, big homeownership advantage.