Why Real Estate is ESSENTIAL pt 2
Greetings.
If you missed Part 1 of this blog post, please read it here: Part 1
Today, we’re going to talk about more than the statistics of why Real Estate is Essential, but more about the intricacies, and how the value can affect all of us. We are going to do that while spelling out the huge and extreme ADVANTAGES of home ownership as well.
As discussed yesterday, close to $34 Trillion of Residential Real Estate is owned in the United States alone. That’s the size of about 27 Market Caps of Apple! That is, a lot of money! So how are we protecting it, and how are we working in a new environment to protect ourselves, and our clients.
As I mentioned yesterday, we are definitely working smarter (well most of us are). New rules are in place to better serve the client while keeping people protected. Locally, Open Houses are currently banned, as well as showing homes that are occupied by Tenants (Renters). Vacant homes, and homes inhabited by owners, continue to be showable, with protections in place to limit the number of people in and out of homes.
Open Houses have always been a great way for potential buyers, nosy neighbors, and the like to see homes. It’s also been the basis for many agents in their business models, and how they meet potential clients. But they are currently banned… so now what? With Technology, a smart agent that knows how to move through things, has started to install more “VIRTUAL OPEN HOUSES”. While it is not the same as someone going through the home in person, it definitely is helping the filter. People, from the comfort of their homes, are viewing properties like never before. With professional video, 3D walk throughs and digital floor plans, successful agents are providing multiple channels for a potential buyer to see a home in more than just the photos. We at Zahler Properties have been using these technologies for years, but are making sure EACH and every one of our listings has all the capabilities installed on each home to ensure we are getting as many eyeballs on our properties, all while maintaining safety standards for not only our clients, but other agents and buyers as well.
You may ask why Tenant Occupied properties specifically have been banned from being shown. The answer lies in their willingness to sell. A tenant does not own the property, and therefore does not benefit from having a home sold. In all States, and Nevada specifically, Tenants have rights as tenants. While before this downturn, a landlord could provide a Tenant a notice to enter, which usually coincided with many listings having a 24 hour notice to show; now there are simply too many potential issues. The tenant, as I said, does not benefit financially from opening their home to people, so this is why the ban on showings specifically was designed for Tenant Occupied homes. An owner occupant, at their discretion, can allow showings; again, they are the ones that have decided to list the home for sale, and stand to benefit from a sale financially. This does not mean tenant occupied homes cannot be listed for sale; quite the contrary. In fact, as of April 27, 2020, there are at least 900 units on the market, available for sale, that have tenants residing in the property. An investor can still purchase the home, they just do not have the luxury of having a showing before a contract is negotiated.
All this together hopefully shows you, as the general public, that Real Estate is about more than just sales. We are doing what we can to help ALL in need. The market is so enormous, without it, as much as we are hurting as an economy now, we would be in far worse shape with the closure of this aspect of the financial markets… so if it is time to sell, buy, or rent, know that we are here for you, and are doing things like never before, to help with the safety and wellbeing, of all involved people.
The other thing we are doing is keeping and helping the advantages of home ownership THRIVE. There are several AMZING benefits of home ownership, but I want to tackle a few of the biggest ones here:
Tax Deductions
Whether you own a property as your primary residence or own a property that is a rental investment, there are tax implications and benefits to property ownership. As always, seek tax advise directly from your TAX PROFESSIONAL, but there are a few things to note.
Mortgage Interest Deduction - On your primary residence, you are allowed to DEDUCT the MORTGAGE INTEREST you pay every year. And considering, especially in the first part of a mortgage, most of your monthly payment is INTEREST, this savings adds up as a HUGE benefit.
Rental Property Depreciation - If the property in question is NOT a primary residence, you can’t deduct the interest payments, but you CAN DEPRECIATE the asset, saving you as well. This is a huge benefit, especially for those that own property as an investment vehicle. The Depreciation costs also can save you thousands on your taxes. Best of course to consult your CPA!
$250,000 / $500,000 Capital Gain Waiver - One of the BEST parts of home ownership is this one. If you own a home, and use it as a primary residence, when you go to sell the home, as long as you have lived in that property for at least 2 of the last 5 years, you are entitled to a waiver of capital gains; $250,000 if you are single and file so, and $500,000 if you are married and file jointly. What does this all mean? Pretend for a minute that you bought a home for $500,000 and are married. Then, say, several (more than 2) years later, you sell the home, and after you pay closing costs, you net $1,000,000 (great job). That $500,000 GAIN would NORMALLY be taxed at a Capital Gain level (between 15-20%) - which would be between $75,000 and $100,000 payable in taxes. With this amazing tax law, you do NOT pay that money! Not bad right?
Capital Gains - Even if you don’t live in a home for 2 years, or if it IS an investment property, you may not get the $250/$500k advantage, but you’re not paying taxes as ordinary income on the gain; but the lower rate of capital gains! Again, a significant savings!
Ending up with NO payment
The other item to think about is this. If you are in it for the long term, and you pay down your mortgage, you will EVENTUALLY be living in a home without a payment! Think about that. Sure, you’ll have property taxes, utilities, and taxes of course, but your Mortgage will be $0. You have to live somewhere, right? So if you choose to continue to rent, you’ll never be at a 0 Mortgage. You’ll always be paying market rate rent or close to it, and won’t have put anything into equity. The idea of living with no mortgage definitely keeps people thinking about the benefits of Home Ownership.
More certainty about the future
Along the way, as another advantage, you should know what your housing situation looks like. You won’t be ‘forced’ to move (a landlord does not have to extend your lease, remember) and you will know what your payments will be for as long as you hold the mortgage. Talk about the ultimate budgeting tool… knowing what your payment will be 20 years from now. You can’t say that when renting a home.
In Closing, it’s clear that Real Estate, and especially Residential Real Estate, are ingrained in our society. “The American Dream” as first portrayed Decades ago, always included some sort of home; often with a white picket fence. Real Estate is home, and home is stability. At the end of all this, all we really want is someone to tell us things are going to be okay. We find comfort in our homes, and we want good news. Combine this with the pure value of real estate, topping both the S&P 500 and The Russell 3000, it shows that Real Estate is not going anywhere, and neither are we… not as humans… not as Realtors, and not as those dedicated to helping others.
-GZ