How Owning a Home Can Save You Money
It’s no secret that buying a home will cost you a pretty big chunk of change. In fact, at the time of writing this blog, the median home price in Portland was around $425,000. That’s a lot of money! But did you know that owning property can actually save you money? It might seem counterintuitive, but I promise it’s true. In fact, real estate is the number one way that people are made millionaires in the United States. But how is this possible? Well, let’s talk about it.
First things first, let’s talk about your potential tax savings. Let’s say you earn a salary of $50,000 per year. For the sake of easy math, let’s say you pay 30% of you wage in taxes every year, which means you’re giving Uncle Sam $15,000 every year. Now let’s say you buy a house and your mortgage is $2,000 every single month, or $24,000 per year. Again, for the sake of easy math, let’s just call it $25,000 per year. When you file your taxes, you can write off that $25,000 which means your tax burden is effectively cut in half. Your obligation to Uncle Sam just went from $15,000 per year, to $7,500. That’s quite a difference! If you amortize this amount over the full year, you'll end up saving over $600 per month. That monthly savings can help you get to a higher price point than you might have previously expected. Now of course, I’d always recommend that you talk to a CPA or a real estate attorney to make sure you get exact figures for your personal finances, but at least you have a rough idea of how this works.
Another factor you need to consider is that, by paying your mortgage every month, you’ll eventually pay off your home and own it outright. Now, you may decide to sell the home before you pay it off, but the principle still applies. You’ll have built up some equity to help you purchase your next property and over time, you’ll pay down what you owe to zero. Furthermore, over time, the value of your property will increase. Now, I know that home prices fell 10 years ago and frankly, they’ll probably fall again. Over a long period of time however, home values always increase. For example, my Grandparents bought their home in 1950 for $25,000. That same house now, is valued at around $500,000 and in 30 years, it will probably be worth over a million. That’s how real estate works. Over time, property values will always increase, regardless of how they fluctuate in the short term.
How to Start
Now in my opinion, if you’re really smart, you’ll buy a duplex or something similar and live in one side while you rent the other. Or maybe you can buy a two or three-bedroom home to live in for a few years, then turn around and rent that property out while you purchase a new home. You can repeat that process a few times and start making some real money.
So whether you’re looking for rental properties, or you just want to start your journey into homeownership, give us a call. We’ve got the experience and expertise you need to guide you to long-term financial success. Please, share this blog with your friends and family and consider us your Real Estate Experts in the Portland & SW Washington areas!