Why buy a home now?

Why buy a home?  What makes it so much better than renting a place to live?

Of course, as a real estate company, we make money when people buy or sell homes using our service, but it actually makes sense for YOU...for many reasons...but it's especially true for Detroit houses.  You really should buy now, because it makes sense.

Okay, how does it makes sense FOR YOU?

Reasons to Buy vs. Own a Home

However, there are very good reasons to buy a home vs. renting in general.

Reason #1: Building Your Own Asset--Building Equity

Essentially, you can work toward entirely owning a home.

When you first buy a home, unless you pay for the entire cost in cash, you will take out a loan to be able to afford to purchase your home, and your home will be mortgaged to the lender until you repay the entire loan.  That means you will need to make a mortgage payment.

Yes, a lot of this mortgage payment goes toward paying the interest on the loan, especially during the first 10 years of repaying that loan (assuming the buyer takes out a very common 30-year mortgage).  However, even in THESE situations, you will begin to own your home...which will become an asset.

Once you owe less on your home than the current market is willing to pay for your home, you can sell it and get cash...or use it toward a down payment toward your next (possibly larger?) home.  That positive difference between what you owe versus the amount you can sell your property is called equity.

You cannot sell a place you are renting; so you can never get equity.

When you own your home, you can.

It is also a sort of forced savings program.  Even if the market price of your home drops, once you've paid off your mortgage, you have an asset to sell...which allows you to collect money from selling it.

Again, you cannot do this with a place you rent, because the place is not yours to sell.

Buying a home gives you an asset that you can sell.  Renting does not.

This is a beginning step toward building your personal wealth.  There are not very many wealthy "renters."

In other words, when you rent, you are making your landlord wealthy.  When you buy, you are making yourself wealthy.


Reason #2: You don't need permission to make changes to your home.

Do you absolutely HATE that wall in the middle of the place where you're living?

Do you really like that carpet in that front room, or would you like to upgrade the hardwood floor?

Perhaps, your landlord will allow you to make these changes, but at the very least, you need your landlord's permission to make any changes, and THAT is the best case scenario.  Most landlords do NOT want you making any changes to his (or her) property.

There is not anything you can do, because it is your landlord's property--not your property.  So you can't make the changes to the way you live...unless you OWN your own home.


Reason #3: You get tax advantages.

Most people who rent, simply take what is called a Standard Deduction.  They do not get to itemize their taxes, because they do not have enough deductions to exceed that government-selected basic (standard) deduction level.

However, when you own your own home, (at least at the time this post is being written) here are some deductions you will be able to take:

Property Taxes: Yes, those property taxes you need to pay to your city can be (and should be) deducted from your income taxes.  That means that there will be less taxable money for the IRS to take from your income.

Mortgage Interest: There are restrictions, but home owners that borrow to finance the cost of their home usually have to pay mortgage interest on top of repaying the actual loan amount.  That portion of your mortgage payment that goes toward paying interest--not the loan base--can be deducted from your income taxes.  (This deduction might apply toward a second mortgage or even a couple of other different types of money that you might borrow.)

PMI Premium: Private Mortgage Insurance (PMI) is the insurance you purchase (and pay each month) to cover the lender (in part) if the person borrowing the money fails to repay the loan.  This applies to people who cannot make, at least, a down payment of 20% of the entire sale price of the home's purchase price.  Depending upon certain criteria, you might be able to deduct some of this "additional monthly cost" on your income taxes.

Property Improvements: No, you cannot deduct the cost of improving your home on your annual income taxes, but you can deduct them...eventually.  When?  Improvement costs are considered to be your "Cost Basis" when you sell your home.  Once you sell your home, in most cases you will be responsible to pay tax on the profit you made between your final sale price vs. your purchase price.  Actually, you get to add several home improvement costs to the purchase price to make a higher "cost basis," which will help lower your tax bill.

House Depreciation: The physical structure of your home will be "less new" over time.  IRS Tax Code allows home owners to deduct depreciation of the building on your property (not the land).  This is another opportunity for home owners to build a bigger income tax return (that you do not get as a renter).

Reason #4: Creditors Give Lower Rates to Home Owners

Check your auto insurance rates?  Compare the cost of your auto insurance when you are renting a home versus buying a similar home in the same neighborhood.  It's cheaper!

In general, many creditors consider home owners to be more stable--less of a credit risk--than renters.  Therefore, as a home owner, you will be more likely to be granted credit, and you are likely to pay less for that credit than you would as a renter.


Reason #5: Price Appreciation: Home prices are really low now

While house prices are not quite as low as they were in 2008 or 2009, in many neighborhoods they still are at levels similar to the 1990s...in some areas even as low as they were in the 1970s.  It's no secret that they were too high in the mid-2000s, but home prices will eventually return to those levels in most areas.

There are some areas that are decayed enough that the home price is not likely to rebound soon.  However, even in those cases, often these neighborhoods are targets for revitalization.  Because land prices in those areas tend to be cheap for wealthy investors, they become attractive investment opportunities.

Detroit's Midtown neighborhood has seen a recent resurgence.  There is even a Whole Foods grocery store there now.

It's possible that the often-maligned Brightmoor neighborhood will be one of the next Detroit neighborhood revitalization targets.

Regardless of where you live, most likely, house prices are at the lowest level you will see in your lifetimes.  (Hopefully, we will avoid the same habits that led us to this most recent housing bubble...at least within OUR lifetimes.)


Honestly, there are probably other reasons, but you probably have read more than enough about reasons to buy a home at this point.