Monday, March 31, 2014

Playing chess with Rental property leads to much wiser investements

Why playing chess with Rental Property is great way to invest elsewhere

Why playing chess with Rental property leads to much wiser investements

Many people of Gen-Y are finally finding their sea legs after the recession; jobs have become less stagnant and as such incomes haven’t risen. A percentage of these young adults are trying to catch up to the playing field expected of them by their Baby Boomer parents by securing jobs, housing and starting families. However, these days the dream of owning a house with a white picket fence is nearly inconceivable to the college grad struggling to find footing. The trends are skewing towards a future population that will perceivably rent their homes for a much longer period of time before deciding to take the home owners plunge. (If at all)
                One advantage to renting a home is that there are no payments that have zero return on interest, for example: closing fees, mortgage interest, property taxes, home owner’s insurance and maintenance. All of these can stack up and make owning a home a financially laborious task. Fidelity investments indicated that stock investments over the last 45 years netted 4.6% higher returns on investments than real estate. Ideally Gen-Y renters stand to make more money over the long run by leasing homes and investing their saved income in stocks.
                Another common myth is that home ownership is prudent because mortgage interest is tax –deductable. According to the advocacy group the National Multi Housing Council, this only true for half of home owners. Unfortunately for the other half of home owners, even with mortgage interest and property taxes their total deductions do not exceed the standard federal tax deduction which is $10,900 for couples and $5,450 for singles.

                With the job market in flux, the flexibility afforded with renting over owning is immense. Typically property must appreciate by 10% to recoup sales costs and on average that takes 5 years. However, jobs and markets are ebbing and flowing, potential buyers may need to relocate and in doing so find themselves in a precarious situation. Also, new condos and multi-family homes in many cities heavy with construction have found a vacancy rate of 2.5%. Many Investors in these areas have slashed apartment rates in order to generate interest. Some of these places are offering up to 3 months rent free and also provide amenities otherwise un-affordable to new home buyers.

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