What are the advantages of owning your own home versus renting?

The principle advantage of homeownership that most people miss out on is the tax savings when you sell.

When you sell your primary residence or “homestead“ property after living in it for two years or more, you do not have tax liability on the sales proceeds.

That means a few things:

  1. You pocket all the appreciation upswing

  2. You are building equity while you enjoy the house on your own terms

  3. You can customize your house as you see fit without having to answer to a landlord

  4. You aren’t at the mercy of a landlord if they decide to not renew the lease

I love stocks and I have funds in stocks. The problem is, you can’t write off any expenses and your earnings get decimated by taxes when you liquidate.

Other Benefits of Homeownership:

  1. The “Gateway” to other forms of real estate investing. Once you’ve built enough equity in your home, you can use that equity to take out a HELOC loan, invest it in other rental properties/real estate at a much cheaper rate than you’d find going through a hard money lender or private money lender. Then refinance those rentals, pay off the HELOC, and repeat. This is just one avenue many investors use to accumulate cash-cow rental properties without having to take out expensive loans.

  2. Asset Protection of Homestead Residence - Most states have asset protection laws that protect your primary residence against judgements, lawsuits, and creditors. Some states have a “Cap” to which your house is protected. In Florida there is no cap and ALL the equity in your primary residence is protected. Contrarily, one successful judgement from slip and fall claim and a creditor can easily take the equity out of any rental properties you have, stocks, etc. They can’t do that with your primary residence.

These benefits make homeownership - living in, enjoying, then later re-selling your personal house - far more advantageous than renting.

Look, I get it. Maintaining a house can be a pain in the … it IS much easier to call in every repair and have the landlord foot the bill.

Typically the (most logically sound) arguments against homeownership state that with the costs of mortgage, interest, taxes, maintenance, etc along with the ONLY 3% AVERAGE ANNUAL INCREASE in house values per year* (which is not true), you are actually losing money on the investment after accounting for inflation.

They further argue you would be much better off not putting any money down on a mortgage or any of the payments, fees, and maintenance expenses and just invest that money in the stock market.

The problem with this premise: I’m all for investing in the ETFs and the S&P 500. They both generate good returns with little required work but let’s be real. From the majority of people I know — and it probably wouldn’t be much of a stretch to say the majority of people living in this country — they would be very tempted to spend rather than invest that freed up money if they didn’t have it invested in their personal residence. It is human nature. Delayed gratification takes discipline and is neither fun nor easy to do. That’s one of the reasons why many don’t have savings to last longer than 6 months without a regular paycheck.

Now let’s tackle the “housing only rises on average 3–5% per year, that’s less than inflation!” premise.

I bought my house for $192,000 in 2015. Realize that the market was taking effects of recovery from the recession and even then people said it was unwise to buy a house and told me I should rent somewhere till the next market meltdown. I put around $30,000 in updates and upgrades to my property, which I was able to enjoy while living there.

Today, that same property is worth upwards of $365,000.

That’s a far cry from the supposed 3–5% year-by-year increase.

  • Now, to be fair, prices have gone up quite a ways since 2015, but you can still find good deals in the market we’re in.

  • Further N does not equal 1 and my case/situation may not be replicable to yours

But the point still stands.

I love owning my own home. Not only has it given me a lot of personal enjoyment but it’s also opened up financial opportunities and security.