Why I Will Never Buy a Condo Again
11 Reasons Why I Never Want To Own A House Once more
This article is more than half dozen years old.
(Author's note: This article was originally posted on September 27, 2013. I am reposting information technology here today as part of the dialogue most renting and homeownership that inspired an e-book on the topic, launching today.)
When my telephone vibrated, I didn't even have to look. I knew what it meant: the house had finally sold.
I wasn't certain how I was going to feel when it was finally over. I wondered if I would experience sad or anxious or regretful. What I actually felt was relief.
Information technology was a great house. Information technology was where my children took their offset steps, where they learned to ride bikes and scooters. Information technology was the location for dinner parties and cocktail parties and birthday parties and our annual Halloween potluck. Merely it was time to go. We happened upon a great new house that was nearly perfect. And even better: it was a rental.
I know what you're thinking: didn't y'all want to buy some other firm? It was a question we were asked over and over as we approached our closing. But I didn't want to buy another house. Afterward fifteen years, I was tired of being a homeowner. Subsequently a few months of renting, I was sold - on not ownership again.
There'south a lot of hype well-nigh why yous need to own a house. But buying a house isn't the key to financial security for anybody - and those alleged taxation advantages? Likewise not quite what they're painted to be. I promise to never own a business firm again. Hither's a list of eleven reasons - many of them revenue enhancement-related - why:
- As investments get, it's not always a neat bargain. While it's true that some homes exercise capeesh, then do many other avails. If you bought a firm for, say, $200,000 thirty years ago, it would be worth $468,375.09 today. While that gain feels impressive, that appreciation is based solely on inflation - which means that, in theory, the same appreciation would take happened with whatever asset. While we did "make" money on the sale of our business firm, I suspect we would take had a like increase had we invested that money in the marketplace or in our concern.
- The mortgage interest deduction doesn't make up for the fact that yous're still paying a lot of interest. While I understand that information technology'due south possible to buy a house without a mortgage, the large percentage of homeowners (more than 70%) take out a loan. With average mortgage rates at 4.3% (as of this morning), y'all'll actually pay $356,307.44 for a $200,000 domicile: $156,307.44 in involvement alone. Averaged over thirty years, that works out to a little over $5,000 per year (even though in practice yous pay the most interest at the beginning). Assuming you're in a 25% subclass - and you itemize - that works out to a tax savings of only over $1,300 per year. But the give-and-take "savings" is somewhat of a misnomer because you lot're notwithstanding out of pocket more than you get dorsum in tax savings: in our example, y'all would "save" less than $40,000 while paying out more $150,000 in interest.
- Homes often tempt people infringe more than they can beget. As Congress tosses around the thought of taking away the home mortgage involvement deduction, homeowners are screaming that they won't be able to afford their homes without information technology. In fact, when you're looking to purchase, virtually lenders and realtors volition use the deduction every bit a selling bespeak to boost prices. But is that a great strategy? When buying a new dress or a new car, consumers tend to focus on the cost of the item alone when determining how much to spend. Simply when it comes to mortgages, that number edges upwards because of the potential for tax savings (once more, meet #2). With that temptation, combined with a sluggish economy, it's no wonder that more than x million homeowners are currently underwater on mortgages worth more than than actual house values. We were fortunately not one of them but non for lack of the banks trying. When we bought our habitation, we were actually approved for a mortgage which was hundreds of thousands of dollars more than the home we ultimately bought. Nosotros opted for a less expensive dwelling - and thankfully so.
- Owning a business firm subject to a mortgage drives upward debt to income ratios. Assuming that you borrow to buy your domicile - once again, a pretty reasonable assumption - that debt load tin be a drag on your credit and ability to borrow for other things (like a new motorcar). I've made no hugger-mugger about the fact that I owe a significant corporeality in student loans. That already affects my perceived ability to pay when figuring my credit. A mortgage dramatically increases that ratio. Interestingly, our monthly rental payment is really more our monthly mortgage payment - simply on paper, our rent is not a debt, information technology's an expense. The ii may be treated very differently, depending on the circumstances.
- A mortgage is typically 20 or 30 years while, at any given fourth dimension, the electric current administration has only four (or possibly eight). I can't stress this enough. The habitation mortgage interest deduction has been around for what seems like forever. Does that mean it that you can count on it to be around in x, 20 or 30 years? Don't exist so sure. The deduction has become increasingly vulnerable: it has been a talking point in practically every administration from Bush to Obama, despite Reagan's famous promise to the National Association of Realtors in a 1984 oral communication that he would "preserve the part of the American dream which the dwelling house mortgage interest deduction symbolizes." Just this twelvemonth, Eric J. Toder, the co-director of the Urban-Brookings Tax Policy Heart, advised Congress that "[a]chieving a acquirement-neutral tax reform that reduces marginal revenue enhancement rates significantly would exist hard or incommunicable to achieve without cutting back the mortgage interest deduction or some other as pop and widely used provisions."
- A mortgage is typically xx or 30 years. So aye, I said that already. But I have another signal: habitation ownership can limit your mobility. We were fortunate that we were able to write checks for our rent and our mortgage. While nosotros could beget to brand both payments, chances are that we would not take been able to obtain a mortgage for a 2nd house while continuing to comport the beginning. Frequently, in order to movement, you have to sell - or rent - your start home. I've been a landlord before and I'yard non inclined to do information technology once again. And selling our business firm in this economy was no small feat. That's part of the reason that nosotros stayed so long in i place: it was difficult to move. In add-on to our own missed opportunities, that may not exist good for the country'south economic system: economists Andrew Oswald and David Blanchflower found that rates of loftier homeownership atomic number 82 to higher rates of unemployment in both the U.S. and Europe because, among other issues, owning a habitation may keep people from moving to areas with good jobs and creates "negative externalities."
- Houses accept a lot of your money. At that place's a reason that many folks refer to their homes as money pits: you often put a lot of money that you'll never run across again into a home. Not all improvements are deductible. Deductible expenses are by and large limited to prey loss deductions. In virtually cases, meaning repairs to your abode just increase your footing for purposes of computing a proceeds at sale. Every bit most taxpayers aren't probable to experience the kind of proceeds that would bailiwick them to capital gains, basis isn't always an issue which means that those expenditures get lost. Thousands of dollars to replace the air conditioning unit? The new garbage disposal? Replacing the flooring in the kitchen? The new washer/dryer? Landscaping additions? You can't write them off and while you lot may recover some dollars at sale, rarely do you recover the unabridged corporeality. If you add together all of those expenditures up over a 30 year period, you might meet an explanation for some of that "gain" at auction. Frequently homeowners go fixated on two numbers: the purchase price of the house and the selling price of the house - but don't forget to account for all of the money y'all spent in between.
- If you practise hit the home appreciation jackpot, there can be significant taxes. Non all houses drain coin. Not all appreciation can exist attributed to inflation and/or a combination of dwelling improvements - sometimes, it turns out to be a expert investment. Just in that location is a price: if the gain on the sale of your home exceeds the $250,000 exclusion (or $500,000 for married taxpayers), the proceeds over that exclusion are discipline to capital gains. Additionally, under the new wellness care police force, a Medicare tax of 3.8% will be imposed on investment/unearned income, which includes gain from the sale of your home, for high income taxpayers. High income taxpayers means those individual taxpayers reporting income over $200,000 and married taxpayers filing jointly reporting income over $250,000.
- I similar for things to be predictable and real manor taxes tin vary. While mortgage payments can remain adequately flat, bold y'all take a fixed mortgage rate, y'all more or less know what you're paying each year. Y'all don't always have the aforementioned result with real estate taxes. Your tax pecker can change based on belongings assessments and reassessments (just ask Philadelphia) or a alter in tax rates - especially in today's climate as townships and counties search for revenue. Unlike most commercial leases, residential leases don't tend to be "triple internet" meaning that the expenses are not directly passed through merely tend to exist figured every bit part of the total rental payments. Real estate taxes are mostly accounted for in the cost of the rental; when they are not, they may be limited by statute or otherwise capped.
- You lot tin't deduct a loss on the sale of your habitation. If I lose coin on stocks, I can net those losses against other gains. If I lose coin in my business, I can deduct those losses or use them to offset other gains (fifty-fifty in other years). But it doesn't piece of work that way when it comes to housing. You can never claim a capital loss on the sale of a personal residence – no matter how much it hurts. In this market, many taxpayers are finding this to exist the example. That makes putting all of your investment eggs in the housing basket a risky suggestion.
- Information technology's getting more hard to claim the itemized deduction. Home mortgage involvement is just deductible if you catalog on your Schedule A, meaning that only nigh 1/3 of taxpayers even have the option of taking the deduction. You itemize if your deductions exceed the standard deduction: for 2013, the applicative standard deduction rates are $12,200 for married taxpayers filing jointly; $8,950 for head of household; $half-dozen,100 for private taxpayers and $vi,100 for married taxpayers filing separate. Those numbers are getting harder to go to for many taxpayers, including me. Mathematically, the longer you own your house, the less you owe in interest and the smaller the deduction. Add together that to the bump in the threshold for the medical expense deduction (which means that I'm not going to be able to claim those expenses in 2013), restrictions due to the Pease limitations and the bar for miscellaneous deductions, and taxpayers are increasingly finding that the deduction is actually quite elusive.
I'm not proverb that owning a abode is a bad thing. I liked being a homeowner. I simply happen to like renting more. I liked that when our oven died, it was replaced - at no additional cost to me - that aforementioned solar day. And I liked that every bit I wandered through Abode Depot, I happily gazed at cabinet pulls and meandered through the garden center rather than making a beeline for caulk, wood putty or other maintenance items. Maintenance is no longer my problem.
I'm also not advising folks to eschew real manor: it can be a skillful investment for some taxpayers. In addition to possessor occupied properties, rentals can be a good financial move. While I have no desire to be a landlord again, it has been a proficient bet for many taxpayers. My father-in-law has rented properties for years. He realized, like many other taxpayers, that rental existent estate is non only a good income stream just a forced retirement programme. But he, like other savvy real estate owners, also understands the rules and the economics, and makes decisions accordingly.
What I am proverb is that we shouldn't buy into the idea that owning a habitation is for everyone. And it's not simply me: at the stop of Baronial, the U.S. Census Bureau reported that the dwelling house buying charge per unit was 65.5%, the lowest charge per unit in the by 50 years (downloads as a pdf); adding borrowers in risk of default, the number is closer to 62%. In dissimilarity, ownership in 2010 was almost 69%: for purposes of context, a i-per centum change in the ownership represents well over a 1000000 homeowners. That dip doesn't spell disaster for our country. It would be a mistake to assume that countries with high incidents of home ownership are synonymous with a potent economic system: Russian federation, Italy, Greece and Spain - countries with struggling economies - have significantly higher home ownership rates than the U.S. Conversely, some countries with traditionally strong economies like Federal republic of germany, Switzerland and Nihon, take lower home ownership rates than in the U.South.
There are and then many considerations when deciding whether to buy a home. It'south not the 'platonic' scenario for all families. Don't be fooled past promises of tax savings and tax-gratuitous appreciation: that'southward not always the case. A home is a huge investment so exist sure to research what it might mean for yous before taking the spring - and don't exist afraid to say no. I did. And tonight, as I sit on my rented porch, staring out at my rented view while my kids happily play within a house that they've already made their home, I don't regret my conclusion one bit.
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Source: https://www.forbes.com/sites/kellyphillipserb/2015/05/13/11-reasons-why-i-never-want-to-own-a-house-again-2/
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