It is a big move to jump into real estate, especially as a first-time home-buyer. You may be wondering if real estate is a good investment, or if you should continue to rent.
Owning a home is a significant commitment that takes work, including maintenance and good financial management. While decorating and making a home your own can be joyful, there are \ cooling, plumbing, roofing and electrical systems to maintain, just to name a few.
However, if you are realistic about your expectations, there are some pretty compelling reasons to become a homeowner, if it is the right time for you and your circumstances. Reviewing these seven points will help you determine if it is a good time to buy instead of rent.
- Good Timing
Mortgage rates are still relatively low. Even though inventory is scarce on Maui, there are many condo complex targeted at residents, and there are more affordable housing projects coming up. But there are personal considerations too. Are you ready to be a homeowner? Being ready to settle down in one place for a few years, having good credit and funds for a down payment are good signs you are ready to take the leap.
- Build Equity
Renting is good when starting out if you live within your means and are able to save money every month. However, once you own a home or condo, you build equity, which is a key component to your overall net worth. As you pay down your mortgage, the value of your home will typically go up. Markets do fluctuate, but generally keeping real estate well maintained over the long term, can mean a significant return on your investment.
If you are considering a home that has an additional rental unit or your first vacation home, then homes on Maui can be a good investment. With easy-care townhouses and condos, you can rent out the property when you are not using it, and have vacationers help pay your mortgage, just like you once did.
- Consistent Budgeting
Ever had a great rental, only to have the rent go up, up, up? With a mortgage, your bills are relatively consistent, allowing for better financial planning. For a vacation home, knowing your monthly expenses will help you target how many days per season you need to rent out the home to meet financial goals.
- Primary Residence Tax Exclusions
Capital gains are the difference between the price you paid for the home and what you sell it for later on. When it is your primary residence, this gain will be tax free. New tax laws took away the mortgage interest credit, but there are still plenty of deductions tied to home ownership, especially one with ohana rental income.
Hawaii also allows a homeowner exemption on property taxes, reducing your tax burden even further.
You may be subject to capital gains tax when you sell a vacation home, but you will be able to expense any costs related to the house each year, such as maintenance and cleaning.
Hopefully most landlords are great, but we know some can be dreadful. Issues like upgrading appliances and performing maintenance may be done on the landlord’s schedule, rather than when you would like. When you become a first-time homeowner, you set your own priorities on improvements and maintenance. When something goes wrong, you don’t have to wait for someone else to make necessary repairs.
- A sense of place
Not only is having a roof over your head meeting a basic need, when it is your own home you are in control. You decide where and how long you want to live there. If your needs change you can sell and move somewhere else. Owning your first home is an asset that can also provide a financial safety net and peace of mind for the future.
- Pride of Ownership
In a rental, you likely need permission just to paint a wall. In your own home, you can paint and decorate how you like. If you would like to take down a wall, put in flower beds or a Jacuzzi, you don’t need anyone’s permission.
Consider all of the factors– financial and tax benefits, having control over your own environment and decision making. Central, Upcountry and some parts of West Maui are great for first time homeowners.
When you are ready to make the leap into home ownership, Destination Maui Realty will be here to help and answer your questions every step of the way. Through our property management services, we know the rental market inside and out. When a renter is ready to buy, we will share our local knowledge of neighborhoods and real estate topics. Whether you’re a first time home buyer or moving up to a investment or vacation home, give us a call at 808-879-0080. We would love to help!.