Real estate is often recognized as one of the most efficient ways to drastically increase your net worth. A method that many people take advantage of is renting out a property to tenants in order to generate passive income.
But, there's a large handful of advantages associated with buying homes instead of renting homes that not everyone is aware of.
Unsure about what you need to keep in mind? We’ve got all the information that you need to know.
Let's take a look at the benefits of buying vs renting in Utah.
1. Long-Term Payoff
Unfortunately, renting property doesn't reward you with any value in the future. Although it gives you a place to stay, you won't get any of this money back.
Buying a home, however, will eventually allow you to own the property. If you decided to sell it in the future, you could do so while keeping the money you receive from the transaction.
In some scenarios, you may even be able to sell your home for far more than you paid for it. So, keep this in mind when looking for a new home so that you can make the decision that's best for you and your family.
2. Rent Only Goes Up
As time goes on, there will be less and less land available for property development. As property becomes more scarce, the value will increase as a result.
Unfortunately, this means that renters will be stuck with higher rent payments that allow their landlords to compensate for the increased property costs.
In areas with a particularly high cost of living, rent rates are likely to skyrocket. If you own your home, though, this isn't something that you need to worry about, as you will only be responsible for your mortgage payment.
3. Equity
Speaking of rising home values, this makes it an even better investment for owners.
As you make mortgage payments, you begin to build equity in the home. This term refers to the percentage of ownership that you have.
To elaborate, if you've paid $50,000 toward a $200,000 home, you have 25% equity in the property. As home values increase, so does your overall equity, which directly contributes to your overall net worth.
This could allow you to take a vantage of options in the future that you normally wouldn't have access to, such as receiving a substantial loan to start a business.
4. Mortgages Are Lower Than Ever
It's no secret that the COVID-19 pandemic has drastically reshaped the landscape of nearly every industry, and real estate is no exception.
As a result, mortgages have dropped to historically low numbers. In many cases, homebuyers are now able to save hundreds of dollars per month on their mortgage payment compared to even one or two years ago.
By purchasing a home in Utah with the current rates, you'll be able to lock in these numbers even if rates rise in the future.
5. Predictable Payments
As previously mentioned, increasing property values could cause landlords to raise the monthly rental payments they require from their tenants. Unfortunately, this often places tenants in a position of financial hardship.
For instance, let's assume that our family rents a home in a nice neighborhood that's relatively affordable for them. If the landlord decides to increase the rent by $300-$400 per month, this could significantly impact their overall for your life.
As an alternative, owning a home allows you to have full control over your mortgage payments, meaning there won't be any surprises in the future. This makes it far easier to establish a budget for disasters, larger purchases, etc.
6. Tax Write-offs
Those who purchase a home will be pleased to learn that there's a handful of tax deductions you could take advantage of as a property owner. These include annual tax write-offs, deductions on your mortgage payment interest, and Utah's state taxes.
Those who work or operate a business from within their home can also write off the square footage of the home office. Although you shouldn't expect to save tens of thousands of dollars each year, the money that you do save through tax write-offs will add up over time.
Combined with the equity that you build on your property, this is a much more favorable option compared to renting.
7. The Ability to Rent Out Extra Space
It's essential not to overlook the fact that you can rent out extra space in your home to tenants in order to generate extra income. Depending on the area you live in (such as St. George or Southern Utah) and its proximity to major attractions in your city (such as downtown), you may find yourself in a situation where your rental income allows you to pay for your mortgage.
At the very least, you can bring in a bit of extra cash each month to help offset other expenses. This is a particularly attractive option if you have an extra bedroom on the opposite side of the home or have a detached unit on your property.
If you rent out multiple rooms at once, this income can quickly become a substantial revenue stream.
It Can Seem Complicated to Capitalize on the Benefits of Buying vs Renting
But the above information will make the process far smoother.
From here, you’ll be able to use the benefits of buying vs renting to your advantage and make the decision that's best for your future.
Want to learn more about what we have to offer? Feel free to reach out to us today and see how we can help.
Posted by David Ellis on
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