A Note From Joe Neel:
We live in an economic cycle today, where many are uncertain about our country’s economic future. McKinney Real Estate is like the rest of our country. One result of that sense of uncertainty is that many couples, being somewhat unsettled about the future, have opted to rent rather than buy. While leasing may be a short term solution, the question arises “Why are you paying off your Landlord’s mortgage?”
Our Collin County Real Estate investor clients love a good tenant; one with a good credit rating and a good job where the money to pay rent is not the question. As an investor owning McKinney Real Estate, nothing is as nice as to have a great tenant, one who could easily own a home, rent their rental property year after year , and in time pay off the mortgage. Right now, I am working with a prospective buyer who has been renting the same property for fifteen years. How wonderful for an owner of rental property, the tenant paying the rent each month and paying the principal, interest, taxes and insurance on the owner’s property.
I personally met an Air Force coronal, who owned four homes in his 25 year career as an officer. In that period, his tenants paid off all four properties. From rather small beginnings, his four homes were worth about $1,200,000 when I met this man. That was years ago and they are probably worth $10,000,000 now. Much of Collin County Real Estate has increased in value by a factor of four or eight in that time period.
Now, let’s consider the benefits of home ownership, rather than renting McKinney Real Estate.
Specifically, let’s consider a couple who are thinking to purchase a home in McKinney, TX, valued at $225,000. They qualify for an FHA down payment of 3.5% (rounded to a down payment of $8,000). They obtain a new first lien mortgage for $217,000. The principal and interest on their new mortgage, at 4.125% interest rate and a thirty year amortization is exactly $1,052. The taxes on this home are $400 per month and the insurance is $125 per month. So, the principal, interest, taxes and insurance total $1,577 per month. They could rent the home for about $1,450 at this time.
But the comparison is not yet over. The taxes and interest paid each year total $13,700. According to their accountant, they can take a tax deduction against their federal income tax, for the first year of home ownership in the amount of $13,700. They don’t get the income tax benefit each month, but only once per year. On April 15 of the first full year of ownership, their CPA explains that for their 20% marginal tax bracket, they saved $2,740 in Federal Income Taxes.
More Good News.
Even though we have experienced now some four years of economic downturn in our country, there has been no area of the country that has better weathered the storm than the Collin County Real Estate Area. Mark my word, home values in McKinney Real Estate and Collin County Real Estate will recover. Assuming that over the first five years of home ownership, the above couple experience a net positive average appreciation rate of 3.0% per annum, their home may well go up in value by 15%, or approximately $34,000. Hope that I am right. That small appreciation rate would equate to an offset against the cost of of owning a home by about $566 per month. The annual federal tax benefits of home ownership save this couple about $217 per month, so the total monthly cost of home ownership has dropped to about $794 per month.