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      Realty Complete

Five Reasons You're Losing Money By Renting

2011 brought us one of the best markets buyers have ever had to make a transition. A combination of low interest rates and bargain prices can allow someone to purchase a home with a lower monthly cost than we have seen in years. If you're able to buy now, you could lose tens of thousands of dollars, even by waiting a year or two.

Rent Money Is Gone Forever. When you rent a house or apartment, you're paying for your landlord's investment. When the property goes up in value, that benefit goes to your landlord. There is no return or profit on money you pay in rent, and you have not purchased ownership in anything. You are still making a mortgage payment. You're making the landlord's mortgage payment, PLUS something extra, so they can make a profit on their investment.

You Are Losing A Major Tax Deduction. There are several tax benefits associated with a home purchase and home ownership. You may be able to deduct interest paid on your loan, points paid on your loan, mortgage insurance premiums and real estate taxes paid, which can add up to thousands of dollars in deductions. Renters do not get any of these, so when you rent, you are paying taxes on a higher adjusted income.

Rent Goes Up, Mortgage Payments Don't. Landlords charge rent based on the current market, not based on when you moved in. Rent normally goes up at least every two or three years, and in many rental communities, it goes up every year. This means it will get more and more expensive to stay there. If you get a fixed-rate loan (which is generally the smart thing to do), your payments for principal and interest are established at the time you get the loan, based on the interest rate and the amount you borrow. The tax and insurance portions of your payment can increase, but this is not anywhere near as significant as the increases in rent.

Your Own Home Is An Investment With A Guaranteed Tenant. Any investor would be thrilled to have an investment property that is always rented. If you're renting, you are paying the money anyway, but to cover your landlord's investment, not your own. If you spend that same money towards a mortgage payment, it is paying off YOUR investment. If you choose to bring in a roommate, then someone else can be helping you pay for your investment. Plus the main person living in the house is someone you like - YOU!

When You Own You Are Building Up Equity. Equity is the interest you have in a property, and it has value. Equity is built up in two ways, by having the value of the property increase, and by paying down the balance of the loan. If you stay in a house for the life of a thirty-year loan, you could gain hundreds of thousands of dollars. Many homes purchased in the 1970's for $60,000 are worth over $300,000 now, and are paid off, so it's 100% an asset for the seller. If you sell your house after five or ten years and buy a new one, you will transfer that equity over to your new home. If you rent over the same thirty years, you will spend hundreds of thousands more, and have ZERO!

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