Hank Cardello
New Island Realty, Inc.
Hank Cardello
BA, GRI
Owner - Broker
Certified NYS Instructor
Phone (631) 957-0500
Cell (631) 671-9172
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Homes Are A Good Investment
 
Homes generally increase steadily in value, unlike riskier investments that can become worthless virtually overnight. A home may not earn spectacular returns like some other investments, but owning a home is less likely to show dramatic declines often associated with stocks and other investments.

Owning a home also provides unique income tax benefits. Mortgage interest and property taxes are deductible. When owners sell their principal residence, the profits of up to $500,000 are excluded from tax on capital gains. Stock dividends are subject to income tax, and profits on the sale of stocks, bonds and other investments are subject to a 20 percent federal tax rate for most investors.

Another benefit to homeownership is leveraging. A buyer can purchase a home with a cash down payment that is only a small fraction - as little as 10 percent or less- of the total purchase price, but the return is based on the total value of the property. This is called leveraging an investment, and it makes the rate of return on a home much greater than on an equivalent investment where the buyer must put up the entire purchase price. Here's how it works. If a buyer makes a down payment of $10,000 on a $100,000 home and the home's value increases to $105,000 during the first year of ownership, the home owner's equity (the value of the home minus any mortgage debt) has increased from $10,000 to $15,000. That's a 50 percent increase in just one year.

 

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