Los Angeles Real Estate Agency | Home Ownership = Financial Independence
I often hear people say they have no interest in buying a home. They might even quote the FIRE movement—Financial Independence, Retire Early—or their aversion to taking on a mortgage as debt. And here is where I feel responsible for imparting some real estate education.
As we gear up to celebrate the Fourth of July, homeowners everywhere have even more reason to celebrate: we like to call it Financial Independence Day.
Here’s why home ownership is still the winner in our quest for financial independence—direct from expert real estate agents in Los Angeles.
Home Ownership Outperforms Renting
Economists everywhere recognize the massive divide between buying and renting a home. On a lifetime financial achievement scale, such as that put out by the Federal Reserve each year, homeowners have a net worth almost 45 times higher than that of renters.
Homeowners steadily build wealth. Of course, the stock market may offer bigger returns on a case-by-case basis. There are also circumstances that can affect your real estate investment.
But in partnership with best practice and a premium real estate agent in Los Angeles—like yours truly—simple math can’t be ignored.
Let’s say we buy a home on a 30-year fixed rate mortgage with a 15% down payment. The down payment is applied to the asset, so—essentially—the money is still ours.
After 30 years, we are no longer making mortgage payments. That expense is removed from our monthly budget entirely.
We have the freedom to influence the value of our home through improvements and renovations, too.
Economists have long been advising that the exact timing of a home purchase will have very little impact financially. The key, according to the experts, is in knowing that homeowners will financially outperform renters in the long-term.
Home Ownership Outperforms Stocks and Bonds
Let’s talk brass tacks: the returns for homeowners are higher than the after-tax returns on both the S;P 500 and a bond index. Historically, too, the value of tax benefits to homeowners widens that margin.
Federal tax subsidies, too, continue to benefit homeowners across the U.S. Thanks to the zero-tax initiative for imputed rent—the return you get for living in your own home—homeowners benefit even further.
And just to double down on your real estate education for today, when your home increases in value, capital gains tax is minimal—if it even exists at all.
Conclusion
Homeowners everywhere have extra reason to celebrate this Fourth of July. Financial Independence Day comes from smart ownership, understanding our responsibilities as homeowners, and building our real estate education.
Use your financial literacy and real estate education to play the smart game and invest in your own home—with the real estate agents Los Angeles trusts most.
Pacific Playa Realty know your options. Proudly local, and hyper-focused on LA’s residential real estate market, our team can guarantee you’re in the best hands.
Thanks for building on your real estate education today! If you have questions, reach out to us. We are the real estate agents Los Angeles trusts.
