WHY BUY BUILDINGS THAT APPRECIATE?
By Valerie Lunden, MA

The American ideal is to own property, and in the long run this is a smart, practical solution for amassing efficient savings. However, paying a mortgage may on the outset seem like a financial burden, but the advantages far outweigh the negatives. In a nutshell here are 3 potential pluses. 1) A return on mortgage taxes, 2) Appreciation based on owning property for at least 5 years (that’s the secret rule). 3) Income from legitimate tax deductions.

One might not be aware, but the federal government is a proponent of homeownership. In fact the government wants people to own homes. Why? Because homeowners pay taxes. More taxes paid, equal more revenue and more revenue equals a more vibrant economy. This also allows for an increase in public services, which creates jobs and over the long run, helps reduce government debt. The government also collects interest on tax, which can be quite a substantial amount if the economy plods along at an efficient pace.

Over the years the government has tried to stimulate homeownership by creating special organizations like HUD, Fannie Mae and Freddie Mac. These three help regulate the housing and mortgage markets. Local state and city governments also have designed special programs that enable low-income families to achieve their home ownership dreams. For more information check local city websites.

In an “up” economy, where money is considered liquid or available (prompted mostly by low interest rates), property prices become high when the housing supply becomes low. During these unusual times (like years 2004/2005), homeowners who wish to lower their personal expenses often opt to refinance their existing mortgage, rather than selling their homes. This keeps the available housing supply low, encourages more building and causes home prices to go up.

Attempting to find a ‘bargain’ home in this type of economy is relatively impossible, there just aren’t enough houses on the market, and those that are for sale can be very expensive or overpriced.

For those wanting to buy a home, don’t give up hope. If you have a sufficient down payment (sometimes as low as 5%) Investment properties in other states or less inhabited areas may provide an alternative solution. This is a great time to do research and learn about other markets. It's also a good time to consider making alternative investment purchases like land and income property.

If this option is available, the rewards can be tri-fold. Investment properties yield the same mortgage tax benefits as do owner occupied loans, and they can help lower the tax bracket, creating that end of year benefit described earlier. Also, let’s not forget appreciation. Buying low will eventually lead to appreciation; just don’t plan on selling in a hurry. The goal is to keep your investment for at least five years.

The last, not so obvious benefit is “cash flow,” money left over after expenses. An example of this is rent from income property (or commercial office space), which may be in excess of expenses. Having left over cash can create an opportunity to reinvest in other opportunities.
Remember! Be open to investment opportunities, do your homework, and above all things, be 100% comfortable with your decision!