June is National Homeownership Month, making it a great time to explore the benefits of owning property. Real estate holds great investment potential and can be a rewarding long-term strategy for building wealth. Owning property offers a range of advantages, which can be extremely beneficial to your financial security. Here we’ll delve into these benefits, highlighting why owning property can often be a smart financial move.
Owning property allows the owner to build equity over time. Equity is the portion of your property that you own, calculated by subtracting your remaining mortgage balance from the property’s current market value. As you make mortgage payments and property values appreciate, your equity grows. Building equity means you are more likely to make a profit when selling the home, even with an outstanding balance. With higher equity, you have a better chance of selling the property for more than you still owe on the mortgage, even if the market changes. Homes are one of the few types of assets with the potential to appreciate in value, giving you the opportunity to build long-term wealth.
Increases Your Net Worth
Net worth is the value of your assets minus your liabilities. Any property you own is an addition to your portfolio of assets and over time, as property values rise, your net worth will also increase. Historically, real estate has shown long-term appreciation, making it a valuable component of a diversified investment portfolio and a significant contribution to increasing net worth. Appreciation will vary by market.
Opportunity for Tax Deductions
Mortgage interest payments are tax-deductible. Additionally, in most countries, property taxes paid on the property you own are eligible for deductions. If you use a portion of your property for business purposes or rental income, further expense and depreciation-related deductions may also be possible. With all of these deductions, owning property can reduce your overall tax burden.
Passive Income Source
Investing in rental or other income-generating properties offers one of the biggest benefits of owning property – passive income. This means that the property can provide a steady and reliable cash flow with little maintenance involved. This recurring income can help cover mortgage payments, any other property expenses, and even additional income. This is a great option for those looking to diversify their income streams, make some money on the side, and/or increase financial security during retirement.
Before investing in income-generating property, work out the cash flows to ensure that it is profitable for you. You will want to assess whether your income from the property will be consistent before purchasing. Consider all your expenses and that this new rental income may be taxed differently than employment income.
Owning property offers a sense of security and stability in case of emergencies. It provides the assurance of having a place to call home without the risk of sudden changes in terms or potential eviction. Additionally, owning can act as hedge against inflation as property values tend to appreciate over time. Real estate owned becomes a tangible and valuable asset serving as a foundation for long-term financial security,
Owning property reaps a range of benefits to enhance your long-term financial health and build your wealth. When developing your investment strategy, consider the advantages of property ownership as it can be a powerful asset in building a strong financial future. Consulting a financial advisor can be helpful when making decisions regarding the purchase of property. Remember to consistently evaluate your financial situation to ensure your plan aligns with your goals. Contact Blakely Financial today to get started on your property ownership journey.