With the tax reform that was passed late in 2017 and whose effects will be felt when filing your taxes over the next few months, some people question if buying a home is even relevant in 2019. If you live in Southern California, the short answer is very much “Yes”.
Stabilize your future
When you rent, you leave yourself open to the whims of the rental marketplace. We are already experiencing a housing shortage so landlords have no problem raising rents. You can search from the beaches to the mountains, from the border to Camp Pendleton and you will see that rents are going up with no end in sight. By buying a home with a fixed interest rate loan, you have fixed monthly payment for the next 30 years. After that you own the home outright and only have to pay property taxes. These will be a very small fraction of your monthly payment.
Part of your monthly payment goes to pay down your debt. This means that with every payment you are essentially setting something aside. Between this savings and the appreciation of the home itself over time, you are creating a retirement or rainy day fund. By the time you pay off the loan, your home could be worth 3 to 5 times as much as you paid for it. And you can use any of a number of ways to fund your retirement without having to sell or leave your home.
If you ask current retirees, they will tell you that much of their wealth comes from their home. For some people, this may be all of their savings. The ones who lived in their home the longest are benefiting the most. Why? Because they have seen the greatest appreciation in the value of their home, their property taxes are tiny and they may even have already paid off their mortgage.
Besides leaving your future payments in the hands of the market place, renting does not provide a significant tax shelter. It does not give you any chance to re-coup a portion of the money you paid in rent and there is no chance to participate in the appreciation of the home you’ve lived in. However, it does give you the feeling that you can up and leave any time you feel like it. Unless you are moving out of the area, there is no benefit to moving as other rentals will be at least as expensive.
If you have any questions on any of this or any other aspect of buying a home, contact me at 760 622 5087 or firstname.lastname@example.org