It’s a longstanding debate with proofs trotted out on both sides: should you buy or rent? One side claims that rent is just wasted money, and the other side claims that buying isn’t really all that good an investment. There are, however, definite financial benefits to buying and owning your own home. Here’s how buying will save you money over renting in Los Angeles.
If you have any doubts that buying will save you money over renting in Los Angeles, here’s some statistical proof. As of 2013, buying in any one of the 100 largest US housing markets was cheaper than renting by 44%. That savings will vary, of course, according to local housing markets, but it exists if all deductions are taken and the homeowner keeps the home for a minimum of seven years. For example, in San Francisco, the savings was around 19%, but in Detroit owning yielded an impressive 70% savings over renting.
RENTS KEEP INCREASING
The act that rent just keeps going up may be the number-one reason why buying will save you money over renting in Los Angeles. When you buy with a fixed-rate mortgage, your payments will remain the same, and you’ll have some financial stability, as well as being able to accurately plan and budget. Basically, your financial situation won’t be controlled by the unpredictability of a landlord.
YOU BENEFIT FROM TAX BREAKS
Buying your own home also carries with it several significant tax benefits, so buying will save you money over renting in Los Angeles. At income tax time every year, you can deduct mortgage interest and property taxes, among other things. In many cases, the impressive tax benefits can result in such substantial savings over renting that owning – despite the down payment and homeowner’s insurance and costs of maintenance and repairs – is far more affordable than renting.
You Have a Built-In Savings Account
Although renting is occasionally a better option for some people, for most others paying rent each month is just throwing money away. Once you’ve paid your rent, that money is gone forever. But when you make your mortgage payment each month, you are building equity – which is much like a built-in savings account. Even though a portion of your monthly payment goes toward interest, the rest of it is applied to the principal, and that means you are creating value in your home.
Also, buying will save you money over renting in Los Angeles because buying a home is usually a good investment. Historically, buying and owning a home has been a better investment than investing in stocks (which is usually the first thing we think of when we turn our minds to investing). Home ownership can net your more return on your investment and at a faster pace.
Most of the time in most areas, homes usually appreciate over the long term and so increase in value, giving you a greater return on your initial investment. Historically, homes appreciate a minimum of 3%, which for stocks would be a very good return. Another plus is that if at some time in the future you sell your home, you’ll be exempt from paying taxes on any profit resulting from appreciation. The upshot is that not only will buying save you money over renting in Los Angeles, but it can also make you money.
It’s easy to see, then, how buying will save you money over renting in Los Angeles. So if you’re now convinced and are ready to buy, it’s a good idea to enlist the aid of qualified real estate professionals for such a huge, life-impacting purchase.