I do not think there is a social stigma about renting, it is just that from a financial standpoint in is much better to own your own home. When you own a home you are actually investing money in an asset that you OWN. The hope is that as you move forward in time, the value of that asset will appreciate. Just like stocks or bonds, there is potential for that asset to grow. There is also potential for that asset to shrink! However, when you analyze the risk associated with owning the asset, and the potential for growth of future value... owning your own primary residence is the safest investment you can make. Where else can you invest your money with a lower risk and greater potential?
Although there have been moments in history where property values went down for some time, they have always recouped. The only time buying a primary residence was a bad investment is if you purchased right before the great depression or between 1988 and 1992 or between 2007 and 2010 AND SOLD the home within 3 years of purchasing it. Even if you purchased during those years and sold after MORE than 3 years of ownership, you still made out okay! I would also point out that if you had money invested in the stock market during those bad years, you probably lost more money than if you had the same money invested in your own home!
Owning your primary residence is the safest and best way to accumulate wealth in America today. Keep in mind I am not speaking of an investment property that you do not live in. However, if the property is going to be your primary residence, you get a BIG income tax write-off! All the real estate taxes and the interest you pay on your mortgage become tax deductions and ultimately save you a lots of money!
As an example, lets say if you are currently paying $2,200.00 per month for rent (very common here in Brooklyn). Well, you can own purchase a home for $400,000, put down as little as 3.5% ($14,000.00) and your monthly living expense (including mortgage, real estate taxes, homeowner's insurance and mortgage insurance) would cost you about $2500.00 per month. For a middle income tax payer you would probably save at least $300.00 per month on your income taxes.* Hence, after you adjust for tax savings, it would only cost you about $2200.00 per month. Basically you are owning an asset which is costing you the same as renting! In the same example, if you were to purchase the property using a down payment of 20%, the monthly living expense would be a mere $1550 per month!
Each month you pay your mortgage you gain more and more equity in your home. Thusly, when you go to sell the property, you have more equity in your home. Also, assuming that real estate values will continue to rise over time, when you sell, odds have it that you will walk out with a lot of money.**
Being a real estate agent for 20 years, it is extremely rare that I witness someone who actually regretted buying thier own home as opposed to renting. I have witnessed many people who never purchased a home and have do regret it, especially when they witness a friend selling their home and walking out of the deal with $500,000 dollars! There is absolutely no chance of something like that happening when you are renting.
The bottom line is that owning your home home is the best investment you can make, you will be hard pressed to find a CPA or Financial Analyst to disagree with that sentiment. Having said that, often times people may have personal reasons why they choose not to own a home, maybe it not about the money, maybe it is something else. Don't worry about what other people think, in the end, as long as you are happy, that is all that matters!!
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
*These tax savings are not guaranteed and vary from person to person, they could be more or less. Speak to your tax advisor to find out exactly how much money you would save when purchasing your primary residence.
**Like most things in life there is no guarantee that you will make money. We do not have a crystal ball to predict the future with 100% accuracy but statistically speaking, owning a primary residence over the long term has proven to be a sound investment.