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Real Estate Reading Room [General Real Estate]
Articles and Advice about General Real Estate from Real Estate Reading Room

Top 7 Benefits of Home Ownership, Part 3
by Tim Lockhart

Would you like to know how you can make a quarter of a million dollars by sleeping? Well, keep reading. The last few years have been really difficult for the real estate market, and many people are wondering if now is really a good time to buy a home or not. Many other people want to buy a home, but are stuck in the rent trap because the banks continue to tighten their lending standards and shut people out who would have qualified only a few short years ago. This article will discuss the Top 7 benefits of owning a home versus renting. In Part 1, we saw that homeowners enjoy steady payments helping them fight against inflation and the wonderful tax savings we can have by being able to deduct the mortgage interest from our regular income. Then, in Part 2, we looked at the benefits of building equity. In Part 3, we’re going to put it all together and see the phenomenal difference the tax benefits and equity build up can make on your family wealth. So, now we are ready for benefit #5:

5. Increased net worth. All that we’ve discussed in benefits #1 - #4 leads to the fifth benefit which is increased net worth. It has been proven that the net worth of home owners dwarfs that of renters with the same income, and everything else being equal. Your net worth is very easy to figure out. You simply just take the value of everything you own and add it up, and then you add up everything you owe. Then all you have to do is subtract what you owe from what you own, and you get your net worth. For example, if you own a car that is worth $15,000, and you borrowed the money to buy it and the balance of your loan is $10,000, then this car adds $5,000 to your net worth. You can add up any money you have in savings, furniture, or other things you have to the value of this car and get the total of all you own. Then subtract everything you owe for this car, your credit cards or any other loans. The difference between what you own and what you owe, whether that’s a positive or negative number is your net worth.
There is a study I stumbled across on the Internet produced by Harvard University that was very eye opening to me. The study, “Housing Wealth Affects: Housing’s Impact on Wealth Accumulation, Wealth Distribution and Consumer Spending”, December 2004 by the Joint Center for Housing Studies, Harvard University, p10, Chart 5 shows the difference in net worth between renters and home owners in three different income brackets. The results are staggering. For families with incomes less than $20,000, the median net worth for renters was a mere $900, but for that same group, homeowners had a net worth of $12,500. That is a $11,600 increase in net worth for owning versus renting for a family with a very, very modest income. The next group was families with an income of $20,000 - $49,000, and the difference in net worth was $7,670 for renters versus a phenomenal $111,890 for home owners. Please keep in mind, this is the median net worth for families earning less than $50,000 per year, and just by making the decision to own a home rather than rent, they have increased their net worth by $104,220. A renter in this group would have to work for over two years and not spend a dime on anything just to make up this difference. The last group in this study was families with incomes of over $50,000 per year. The difference in net worth between owners and renters for this group was $37,700 for renters versus $291,120. This is just extraordinary! Making the simple choice to own a home rather than rent earned this group of families who just earn over $50,000 per year $253,420, that’s over a quarter of a million dollars! That is the equivalent of over 5 years of pay from your job before taxes and insurance, so to make up the difference a renter would have to work for over 5 years and not spend any of their income… oh, that’s right they have to pay their rent which increases every year. So, how long would they have to work to make up this difference? We can safely estimate this is worth 10 years of working. Have you ever thought that renting costs so much and that you could possibly retire 10 years earlier just by owning your home?

6. Owners more likely to save and invest. This study by Harvard looked at how owners and renters spend their money as well as how they save and invest. It would be easy to dismiss this study by saying, well yes these home owners have a higher net worth because it is all tied up in the home equity, and they can spend or eat their equity. The equity in their house is usually a large portion of a family’s net worth, but not all. The study also compares the non-home net wealth of home owners to the net wealth of renters which is a direct apples-to-apples comparison. And the results are just as staggering. The study proves home owners are much more likely to save their money and invest in things like stocks, bonds and mutual funds. So, home owners are more likely to have savings to be able to send their children to college and provide their children a better future.

7. Family Stability. The last benefit is less tangible than the dollars and cents we spoke about above, but it maybe even more significant for you, your children and grandchildren. Many parents who own their home are able to provide their families with a stability that renters just aren’t able to provide. When children grow up, get married and move away, it is a wonderful thing to have their childhood home to come back to, especially for holidays such as Thanksgiving, Christmas, and other similar holidays. This last holiday season, I was able to spend in the home I grew up in and see friends from my childhood even though I moved away almost 20 years ago. Many families have a tradition of taking time off of their jobs and gathering together for this time. I know my father’s family is large, and I used to always enjoy traveling to one of my aunt’s homes as we joined their family at Thanksgiving. They have a tradition every year of getting together and pulling names out of a hat for a Christmas gift exchange. They have about a dozen people together just with children and grandchildren. This is such a wonderful tradition, and gives the whole family a stability that just can’t be offered unless they owned the house they live in. Many people say that the stability home ownership gives to their family is much more important to them than the increased net worth they have gained, but what a wonderful thing it is to have both.

So, now over these 3 articles, we’ve looked at 7 benefits of home ownership versus renting. And I have one remaining question for you. Do you have to sleep somewhere? Of course you do. The main difference that caused one group to be a quarter of a million dollars richer is that they slept in a home they owned rather than sleeping in a home they rented. You’re going to provide a home for your family in one of two ways. You are going to own or you’re going to rent. Who do you want to have that quarter of a million dollars? Do you want to give it away to your landlord? Or, do you want to use it yourself? In another article, I will speak on the struggles many families are having buying a home in today’s market, and it may be that someone else like a bank is making the decision for you, forcing you to rent. Please check out other articles we have on our website www.QuelleProperties.com, and see the solutions we offer to those who have been turned down by the bank, but still want to own a home. There are other options, and we even allow you to build equity while you rent. Check it out. You can also contact us at Tim@QuelleProperties.com to request a copy of our new eBook Buying a Home in Today's Market.

Key words: homes Wichita Falls, buy a home wichita falls, homes for sale Wichita Falls, new homes Wichita Falls,

Tim Lockhart is the President of Quelle Properties, Inc. They’ve been real estate entrepreneurs since 2002 and their mission is to improve their community by increasing home ownership in north Texas. He has many articles and news items related to real estate on his website, www.QuelleProperties.com.



Tim Lockhart is the President of Quelle Properties, Inc. They’ve been real estate entrepreneurs since 2002 and their mission is to improve their community by increasing home ownership in north Texas. He has many articles and news items related to real estate on his website, www.QuelleProperties.com.

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