1. Build Wealth
First of all, your home will appreciate in value and I believe real estate is one of the best investments you will ever make. For example, if you buy a home or condo for $200,000 and it appreciates 5% per year, you will have built up approximately $50,000 equity in 5 years. Also, you need to consider your monetary return on the money you actually invest in the property. Let’s say you put zero money down and closing costs are approximately $3,000, you would have made $47,000 on a $3,000 investment-what a return! Obviously, there are other costs such as repairs and upkeep that you must subtract from the equation but you get the picture.
2. Tax Deduction
Secondly, the interest and real estate tax portion of your mortgage payment will be tax deductible which will give you a lower after-tax payment. Consult your accountant to determine your tax benefits.
If you plan on renting a 1 bedroom condo for $1,200 month you could buy a $200,000 condo with zero down payment and pay a monthy payment of $1,375, but you will save $329 per month on taxes and interest, so your payment will be $1,046 on an after-tax basis. Don’t you figure out your budget with net pay not gross pay..right? Get the idea! Try some first home buy calculations on your own to see if home ownership is right for you. Finally, don’t forget you will be building up wealth through appreciation in value.
3. No place like home
Finally, there is nothing like owning your own home. I started out as a renter, and the thought came to me one day “why am I paying thousands of dollars in rent?” I bought a condo in Chicago and lived there for five years, built up some equity, and then moved to a 3-unit building and I became a landlord and collected rents from other people. Today, I live in a beautiful single family home and have my own backyard and garage and nobody tells me what to do (except my wife). Is this what you want? You need to start somewhere, and buying a moderately priced condo or starter home might be your best bet, but please stop paying your landlord!