State of the Union Address

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Filed under: Market Comentary

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The title of this video and post was my way of teasing you… I’ll never talk about politics on these videos. I would rather talk about hair product rather than the State of the Union address! So, instead of diving into the politics of that event, we are going to look at undeniable facts and trends in the real estate industry.

Even though the title is a bait-and-switch, there is something that is related that keeps coming up: people want to know more about the tax changes. Common questions that we hear include:

• How will the new tax plan affect my home purchase?
• Will all of my deductions go away?
• Is it a good time to buy a home?

We talked about this topic a few weeks ago about some of the deductions that are going away. There’s no doubt that a few changes will impact homeowners, such as the new rules for writing off the interest on home equity.

Looking at the Numbers

The numbers don’t lie, so I wanted to take a moment to compare the numbers to help you see why it is a good time to buy a home. What if you bought a house, held onto it for seven years, and assumed 3% appreciation on the property? Compare these numbers to 3% appreciation on a rental property. I also calculated in mortgage insurance and then zeroed out any tax benefit out of curiosity to see where the numbers end up.

Even without the tax benefits, you still have the benefits of amortization and appreciation. Also, it is important to consider cash flow. During the first few years, you will pay more for the mortgage than you do for the rent. But, the mortgage payment will stay fixed in the future, while the rent payment will go up during that time.

The numbers speak for themselves: there is still a $130,000 benefit to homeownership, not counting the additional benefits that come from taxes. Click here to see all of the details for this calculation. You have to pay to live somewhere, so it makes sense to put that money into a property where you can build equity. Benefit from your monthly payments, instead of paying someone else’s mortgage.

It is a common topic right now: real estate partners and customers are all asking about these tax changes and current trends in the industry. Make no mistake: it is definitely a great time to buy real estate. But, you need to have a long-term outlook on the investment.

Questions? Comments? Feel free to reach out anytime; I am here to help!

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