- Joined
- Feb 27, 2003
- Messages
- 4,224
- Reaction score
- 139
Ok, first of all, what I'm about to say here regarding why owning a home is better than renting, is my opinion whether you agree or disagree. No offense to the renters out there.
Many people say it's cheaper to rent than owning a home. Well, that's not necessarily true and here's why.
Let's say you rent an apartment for $1,500 per month for 30 years. $1,500 X 30 Years = $540,000. That's only an estimate, and let's not forget that rent goes up every year.
On the other hand, if you buy a home that's worth, let's say, $200,000. Your mortgage payment, including taxes and maintenance, is likely to be around $1,500 per month. If this is a "fixed" mortgage, your monthly payment will not go up over the years the way rent would. The only thing that goes up is the value of your house.
Ok, so let's say the value of your house goes up 6% a year (the national average is a little higher). After 30 years, your house will be worth around $560,000.
If you were to sell your house in 30 years, you will pocket more than $360,000 after paying back the money you owe the bank ($560,000 - $200,000 = $360,000). If you rent, you will pocket $0.00 and only have paid your Landlord's mortgage payments ($540k). Makes sense?
I know there's more to this, like the mortgage interest included with the monthly payments. In the beginning, mortgage payments usually are made up of mostly interest and not principle.
However, at least in New Jersey, the interest is tax deductible meaning that the government is giving you a tax break, and you can deduct from your taxable income the interest charges you pay to the bank. As a renter, you do not get this kind of tax break!
Under the current law, you don't have to pay the first $250,000 in profits after selling your house. If you're married, you don't have to pay the first $500,000 in profits after selling your house. In this case, you pay taxes only for the $110,000 amount which exceeded $250,000 ($360,000 - $250,000 = $110,000). If you're married, you get to keep the $360,000 profit and pay the government nothing!
I've heard that if you use the profit from selling your house, and reinvest it in another property, you don't have to pay taxes. Like if you're single and made over $250k in profit, you don't pay taxes as long as you reinvest the money. The same if you're married and made over $500k, you don't pay taxes as long as you reinvest the money. I'm still not sure about this, but when I find out, I'll post here.
Anyway, this is what I've gathered so far. I understand being a homeowner / investing in real estate isn't for everyone, but I wanted to share with you why I think real estate is a good long-term bet.
Many people say it's cheaper to rent than owning a home. Well, that's not necessarily true and here's why.
Let's say you rent an apartment for $1,500 per month for 30 years. $1,500 X 30 Years = $540,000. That's only an estimate, and let's not forget that rent goes up every year.
On the other hand, if you buy a home that's worth, let's say, $200,000. Your mortgage payment, including taxes and maintenance, is likely to be around $1,500 per month. If this is a "fixed" mortgage, your monthly payment will not go up over the years the way rent would. The only thing that goes up is the value of your house.
Ok, so let's say the value of your house goes up 6% a year (the national average is a little higher). After 30 years, your house will be worth around $560,000.
If you were to sell your house in 30 years, you will pocket more than $360,000 after paying back the money you owe the bank ($560,000 - $200,000 = $360,000). If you rent, you will pocket $0.00 and only have paid your Landlord's mortgage payments ($540k). Makes sense?
I know there's more to this, like the mortgage interest included with the monthly payments. In the beginning, mortgage payments usually are made up of mostly interest and not principle.
However, at least in New Jersey, the interest is tax deductible meaning that the government is giving you a tax break, and you can deduct from your taxable income the interest charges you pay to the bank. As a renter, you do not get this kind of tax break!
Under the current law, you don't have to pay the first $250,000 in profits after selling your house. If you're married, you don't have to pay the first $500,000 in profits after selling your house. In this case, you pay taxes only for the $110,000 amount which exceeded $250,000 ($360,000 - $250,000 = $110,000). If you're married, you get to keep the $360,000 profit and pay the government nothing!
I've heard that if you use the profit from selling your house, and reinvest it in another property, you don't have to pay taxes. Like if you're single and made over $250k in profit, you don't pay taxes as long as you reinvest the money. The same if you're married and made over $500k, you don't pay taxes as long as you reinvest the money. I'm still not sure about this, but when I find out, I'll post here.
Anyway, this is what I've gathered so far. I understand being a homeowner / investing in real estate isn't for everyone, but I wanted to share with you why I think real estate is a good long-term bet.