Published: February 22nd, 2013 | Author: Linda Daniels

There is no doubt that owning a home can be costly. But is it a smart decision financially? For many reasons, homeownership is one of the best decisions you can make. Below are 3 financial reasons why it absolutely makes sense to own a home:

REASON #1:  Renting a home is actually more expensive than owning a home these days

In the majority of the United States, statistics have shown that owning a home is financially less expensive than renting. Buying a home does not take away money from another investment. Because renting has no potential for a return on investment, buying a home gives you that chance. In the past it has been shown that renting appears to be less expensive than owning a home. But todays research shows that if you invested the entire difference between the rent payment and mortgage payment, you probably did better financially. Therefore owning a home makes more sense.

REASON #2:  Owning a home creates wealth

In a study done by  The Joint Center for Housing Studies  at Harvard University, experts were able to quantify the difference in family wealth between renters and homeowners. The study, entitled Americas Rental Housing: Meeting Challenges, Building Opportunities, spoke of forced savings and had this to say:

“[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

REASON #3: Investing in a Home Gives You Tremendous Tax Advantages

When you sell something such as an investment, you must pay capital gains tax on any financial gain you receive. This capital gains tax, however, doesnt apply the same way when selling your primary real estate residence.

Theresa Palagonia, a CPA and the Accounting Manager for the firm G.S. Garritano & Associates. explains the Home Sale Exclusion Rules:

“You may qualify to exclude from your income all or part of any gain from the sale of your main home.

You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

• You meet the ownership test.
• You meet the use test.
• During the 2 year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions listed above.

You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.)

Ultimately, the decision of whether or not to buy a home is up to you. Financially, owning real estate makes sense. The time to buy is now with interest rates low and housing prices competitive. If you are thinking about buying a home in the La Jolla area. The Daniels Group is here to help! Call us today at (858) 361-5561 or email us anytime by clicking here .