Love and Real Estate
In honor of the month of Valentine’s, an exploration of Love and Real Estate is on the agenda. Real Estate provides so many opportunities that it is difficult to escape falling in love. Maybe its flirtation caught you long ago. Or, maybe you've just been introduced. Either way, we hope that this short list of the benefits of owning real estate intrigues you:
Investing in real estate offers you the opportunity to invest in a highly leveraged transaction. This means that your limited investment puts you at the helm of a major asset that can appreciate greatly over time while delivering all of this increased equity to you alone. The lender only takes their annual interest; they do not take any of your equity gain.
Speaking of payments of interest to the lender, the interest paid to the lender is partially, or wholly, deductible for income tax purposes. This means that the government is subsidizing your investment.
As long as we are discussing tax benefits, local real estate taxes paid are also tax deductible for federal income tax purposes. This deduction has recently been limited to $10,000 for all state and local taxes paid so, this benefit may or may not currently help you. If your real estate is for investment purposes, this limitation does not apply and you can deduct all of your real estate taxes along with other expenses of holding the property.
Another tax benefit is that your investment grows tax free until you decide to sell it. And, when you do sell, your gain may be excluded for tax purposes, or at least delayed, thanks to preferential tax laws. The gain on the sale of your personal residence can be sheltered from capital gains tax by as much as $500,000 for married couples, and $250,000 for singles, if you meet the exclusion criteria. For investment properties, your gain is delayed if you exchange into another real state investment, as long as you follow all of the relevant requirements for such treatment.
Beyond tax benefits, real estate leads to generational wealth. Families that invest their money into long term appreciating assets like real estate are able to leave assets for their children and future generations.
Real estate provides a good hedge against inflation. Real estate’s intrinsic value and inflation actually contribute to the property’s long term value.
Your home is a personal use asset but it comes with investment benefits. You can make your space what you want. Paint the walls red, if you want. Although, we suggest that you repaint those walls if you decide to sell!
A benefit to owning versus renting your home is that by purchasing, you are locking in your housing costs and avoiding those periodic rent increases. Owning your home also allows you to avoid unplanned moves when the landlord unexpectedly sells the property and gives you notice to move-out.
Share the love! Contact us with your thoughts and ideas and we will show you how we can help you in your real estate journey.