1. Past credit issues that keep you from qualifying for a loan.
2. Won’t be in the area long enough to recover my investment.
3. Already own a house in another city and can’t buy until that one is sold.
4. Need time to save up enough money for a downpayment.
5. Just don’t want the responsibility of home-ownership.
If you aren’t included in the group above, you are simply paying the owner’s payment and have nothing to show for it. The owner gets the interest deduction on his taxes. He gets the credit for any improvements made to the house. When the house appreciates in value, it’s still his house and the appreciation benefits are the owner’s. Under current tax laws, he can also deduct the property taxes from his IRS bill.
In the Clarksville, TN – Ft. Campbell, KY market there are no guarantees as far as re-sale is concerned. The normal benchmark we look at is 3 years. If you are planning to occupy a home for at least 3 years, there’s a pretty decent chance that you’ll be able to break even or maybe make a dollar or two when you sell it. Nothing is guaranteed. It all depends on the market at the time, not to mention how well the house has been cared for.
A lot of landlords won’t allow pets. If you own the house you can have your animals without having to ask anyone. You can smoke if you like, plant the flowers you choose in the yard, paint your own colors, and do whatever you choose with the garage. In short, it will be your house. You get the benefit of the equity you build with each payment and you get the opportunity to deduct the interest paid on your income tax return. And you get the deduction for the city and county property taxes.
An important fact to consider is this. Your first (or next) house doesn’t necessarily have to be your “dream home”. If you can’t afford the house you want right now, you may have to settle for something smaller and more affordable. Consider it an alternative to paying rent. Plan to keep it 3-5 years. Build up some equity. Hopefully your income will increase over this period so that when you sell this house, you’ll have more income, you’ll have some cash from the sale of your house and you’ll be one step closer to getting that dream home.