The Value of Owning Real Estate

Why is home ownership a good value? Why is the ownership of real estate a good value? For me it’s easy. My grandparents on my mom’s side homesteaded in Montana, grew their farm holdings and eventually sold when they retired. But before they retired, they had also purchased two single family homes in a nearby town. One was a rental and the other was their in-town home. Although my parents only had an apartment when I was born, they soon purchased their own home. As a young kid, the local Realtor lived just across the street. The point here is, as a youngster, home and land ownership was all I knew or had ever been exposed to. Even when my grandparents were contemplating the sale of their farm, I recall arguing with my grandmother that she should lease their farmland. But she prevailed and all of their property was sold. Heck, I was hardly 12 years old. Yet, even then, I understood that there was a value in owning land or homes.

Later on, in fact I hadn’t yet graduated from college, my family took a mortgage on their home and used the money to purchase a six unit apartment building. When I graduated from college, instead of pursuing a career in journalism, I instead earned my real estate license and began selling homes, investments and land. Later that year, I purchased my first home. Two years later my wife and I purchased another home. A year later a triplex and some time later another home and several lots where we had duplexes built. Again, the point here is, I really didn’t need anyone to describe or explain the benefits or value of owning property. It was something I inherited. It was in my DNA.

As a young Realtor, I think I was the youngest in the state in 1972, in observing people and the way they lived, it seemed evident that, “The wealthy invested in things that appreciated in value and the poor seemed to overwhelmingly invest in things that depreciated in value.” That point is further reiterated and emphasized in The Appraisal of Real Estate published by the Appraisal Institute where it states, “Land is also a major source of wealth which, in economic terms, can be measured in money or exchange value.”

Another value is, whether buying or renting, most of us will always have a monthly housing expense. As a renter, you pay monthly rent to your landlord who, in turn, gains all of the benefits and liabilities of owning the property. Typical repairs and updates to the property rely entirely on the landlord. On the other hand, when buying real estate the property owner gains all of the benefits and liabilities. Among the many benefits that exist, if when buying a property there is a mortgage, the mortgage interest plus the real estate taxes can be itemized on ones tax return. Let’s say that, during the course of a given year, the cost of mortgage interest and real estate taxes is $10,000 and a 30% tax bracket is applicable, a tax savings of $3,000 would result. However, if ones tax bracket is only 15%, the savings is only $1,500. If tax brackets ever get to 50%, savings of $5,000 would apply. Please consult with your tax adviser to review how those deductions would impact your personal situation.

Easy access to a variety of home improvement centers to correct, modify or update general maintenance issues has certainly changed what some might have previously considered a liability to another distinctive benefit of owning property. In today’s world, it is common for homeowners to change the interior colors of their rooms multiple times over a short period of time. But there are also so many choices of cabinets, sinks, countertops, floors and most homeowners are eager to take advantage of such products to further personalize their homes. Some of these changes even fall into the category of major household renovation. Unfortunately, as a tenant, you’re stuck with using decorations, wall hangings, throw rugs and furniture as your only means to personalize your space.

This is an important topic because, with so many attempting to liken the value of your home to a volatile security, we need to remind ourselves and find comfort that there is continued value in our homes and investments alike. As we’ve discussed, there are many reasons why real estate ownership is and continued to offer great value. Perhaps you have some you’d also like to add to what I’ve described. I’d love to hear from you. Write me at kthiem@msn.com.

Future postings will continue to explore additional benefits and values of property ownership. In the meantime, I hope you have a wonderful day where you allow yourself the opportunity to achieve great personal success.