The Benefits of Owning Property

There are multiple benefits of owning property.

For individuals, home ownership offers an opportunity to invest in your future and take advantage of major tax benefits unavailable to renters.

When you are renting, you are simply throwing money out the window. For this reason, "RENT" is a four letter word.

Below, in plain English, are some of the major advantages of home ownership.

Mortgage interest is deductible (up to a limit of $1.1 million principle loan). (https://www.irs.gov/publications/p936/ar02.html)

Property taxes are also deductible, as well as mortgage insurance premiums.

The Bottom Line: benefits vary depending on many factors, including the value of your home, the interest rate, property tax rate, etc, but the average annual savings generated by home ownership are about $2,500/yr.

Your home is an asset. Over a long enough period of time, you are almost guaranteed that the value of your home will rise.

When selling your home, you can exclude gains by $250K ($500K for married couples), if you pass the primary residence test set forth by the IRS. (https://www.irs.gov/publications/p523/ar02.html#en_US_2015_publink1000200611). This means that if you and your spouse bought a home for $1M in 2012 and sold that same home in 2014 for $1.5M, you will not be taxed on the gain from that sale!

It is hard to overemphasize the value of this exclusion. It can potentially reach values in the six-figure range.

A recurring theme when it comes to finances is that, "it takes money to make money." You cannot enjoy the many benefits of home ownership unless you have the money for a down payment and the credit to secure a loan with a low, affordable rate.

This is why it is important to save as much as possible as soon as possible. Earning more than you spend sounds simple, but it is much easier said than done.

You also need to plan ahead in order to build your credit. There are firms that specialize in improving your credit score, but some simple things you can do to improve your score is pay bills on time, use credit cards in a responsible manner, and create a budget for yourself that has you spending within your limits.

Planning on buying a house?

Congratulations! Let us help with navigating the loan process, understanding the tax benefits and implications of home ownership, and filing the necessary paperwork with lenders and taxing authorities.

We can introduce you to a network of realtors in Southern California specializing in single family homes, apartment buildings and mixed use properties.