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Rent or Own In Today’s Economy?
With the real estate market changing dramatically in the past few years and some regional markets more than doubling in property value, is it a good time to buy property? Consider the factors: real estate has increased in value while interest rates have dropped to record lows.
But real estate is like any other investment. If you look at the long-term picture, you can still expect to earn a substantial profit. Historically, real estate has been a strong, relatively safe long-term investment. Are you planning to relocate soon, or can you commit to living in the property for the next decade? Owning is ideal for those individuals or families who plan to stay in the same location for at least ten years. After all, you’re paying a large sum upfront, which includes your down payment, points, appraisal and application fees. These fees are typically recovered three or more years after purchase.
Your next consideration is asset appreciation. While payments are steep at the outset, topped with homeowners’ insurance, maintenance, repairs and any renovations you’re planning to make, you should still earn an average annual return of three percent. In ten years, your home could be worth 30 percent more than you paid today. While rental rates increase each year, your home will remain the same.
Next, understand the tax ramifications of ownership. These vary based on your unique situation. Yet most homeowners gain substantial savings as a result of mortgage interest and property tax write-offs. These savings move their payment closer to the rental rates.
Finally, research your area. Are you in an over-inflated region? Do real estate professionals feel prices are set to drop in the next few months? Get a few opinions and balance your options.
Net-net, how long will you live in the house? Property investing is not for the day trader. It’s a long-term investment that can still pay off quite well.
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