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Honoring MLK, Jr:
Buy Vs Rent Building Wealth: I recently was privileged to work
with a buyer who until then was living for the 11th year in an apartment where he paid an average of $1,000.
He had started around $800 per month – but, at that point in time, he was already paying over $1,100.
My client decided to leave because rent was to go up yet again …by over $200 per month to an amount of $1,350.
And he thought that it was time to try a different approach: Ownership!
My buyer was pretty much 'converted' to give it a try on the buy Vs rent building wealth side.
After looking at several options he was able to buy a 3 bedrooms / 2 baths home in a cul-de-sac in his preferred area of town and in the school district that he wanted his daughter to grow up in.
Homebuyer qualified for an FHA as a first time buyer with 3.5% down payment.
Although, with this small percentage of down payment, his loan requires MIP [Mortgage Insurance Premium… sometimes also referred as PMI: Private Mortgage Insurance] and after adding home insurance and property taxes; his monthly payment will be still below of what his now former landlord was set to charge.
Please keep in mind that property tax and home insurance can go up [and rarely, but sometime they can also come down] …however the principal and interest in a fix mortgage loan will never go up!
In this case when he pays an aggregate of equivalent over 20% of the home value, he can apply for the MIP to be removed …or he can refinance the loan and further reduce his monthly payment.
We made a rough estimate that since he started paying $800 per month and at the end he was paying $1,150, he must have paid an average of $1,000 a month …for 11 years for something around $132,000!!!
Not a small change, hum?
Please think about for a minute and make the math how much have you paid in rent in the last 5 years …then how much you have paid in the last 10 years…
It is a staggering amount of money, isn’t it?
My buyer left from the apartment that he rented over a decade without a single penny of that ‘small fortune’
Conversely the young couple from whom my buyer purchased the home walked away with a ‘nice’ check – over $60,000!
It seems that they read my mind or, at least, this buy Vs rent building wealth page ;-)
They certainly recovered some or most of the moneys they had initially put down into the house and ‘a little appreciation’ to go with it ;-)
For all I know this will be free of capital gains tax. Please visit my page Buy Vs Rent Tax Advantages for more details.
Okay, you may say that the seller had ‘lucky break…’
I could not disagree more:
I think I do not have to twist many arms to demonstrate the buy Vs rent building wealth highly favors the homebuyers.
If you were to combine the moneys a homebuyer can accumulated you indeed end up with a ‘small fortune.’
No wonder rich people ‘buy’ homes and do NOT rent – it is part of the strategy to accumulate wealth! :- )
Lastly, I would like to point out that we are living longer, much longer! Are you thinking of continuing to pay rent for another 20 or 30 year after you retire?
I would like to suggest that even that you approach the age of retirement – if you are still paying rent, “there has never been a better time to buy a home than ‘now’”
By the way there is age limit for you to acquire a home mortgage loan :- )
Knowledge Base - This series dedicated to explore the Buy Vs Rent quest is comprised by 8 intertwined articles. I recommend that you further your knowledge by reading all of them - enjoy …AND learn!
Now it is YOUR turn: Please give us your input!
Do you have some great comments on this topic you would like to share? Any question burning on your head? I would love to publish
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JC Fagundes, Head Broker
EQUAL SERVICE TO ALL.
Residential. Commercial. Investments.
Ph: 404 801 4141