In the spirit of full disclosure, I am a licensed real estate agent. Now I this does not seem to serve me well as a real estate agent. But I believe that saving money is essential to everyone’s success. Saving money will ultimately allow you to buy a home – which incidentally helps me if I”m your agent.
Usually, renting is not in the best interest of our country as far as national GDP is concerned. When you purchase a home you create jobs – you employ an agent, mortgage broker, builders, construction workers, buy furniture, the additional TV for the bonus room you will never use.
This activity helps the economy and people. However, if you continue to consume consume eventually the chicken will come home to roost. As your debt levels increase you only spur the economy to the extend that you make interest payments. You can no longer invest in that start up company or go out and buy other items. This is the situation Americans are faced with in the next 5-10 years.
In this light, I want every person buying or selling to look at the numbers and determine what makes financial sense.
When saving money there are a few important factors:
- Utilities can be split when you room share by a half or thirds.
- RE taxes
- Affordable cities
- Rental income multiple
- Test it – start moving money aside every month. Call this your “mortgage” account and see if those transfer put your checking in the red.
There is talk about tax benefits, which there are:
- Interest deduct-ability is at the END of the year. If you’re a W-2 employee you need to be able to afford it now.
- Depreciation – this only applies if you’re renting a property. Remember if you sell a property there is still depreciation RECAPTURE which means the income (if any) is deferred to a later time.
- The biggest benefit is perhaps the capital gains exclusion of $250k for individuals ($500k for married couples).
It goes without saying owning a home is an American dream. This unquantifiable attribute has created much grief for families and the US Financial system. But it has to be in moderation and it has to be sustainable. Anything that isn’t sustainable is a bubble that inevitable busts.