Building equity is key to achieving long-term wealth goals, and condo ownership can pave the way to accumulate assets and equity for greater financial success. Of course, deciding to invest in real estate can be a daunting task - so this guide is here to help you navigate through this important decision-making process.
Building wealth by purchasing property may seem like a contradictory statement, but it’s actually a great way to achieve such relevant asset growth. Renting, on the other hand, may not serve your needs if you’re looking to achieve lifelong financial success.
Understand the implications of both real estate options when you check out this guide by DMCI Homes. Read up on the financial and personal benefits of buying versus renting, and discover the importance of equity in achieving your much-desired financial stability.
Understanding equity and its role in wealth-building
To understand equity and its role in wealth-building, you need to understand its relevance to property ownership and real estate as well.
In real estate, your property’s equity is the amount that you fully own in said property. Specifically, it refers to the property’s current market value minus any liens attached to it, such as its mortgage.
You can build such value in your real estate by paying off its down payment with a large amount, paying off its principal cost as regularly as once a month, paying off its mortgage quickly, or by making improvements to the home to increase or appreciate its value.
You can also lose this kind of value in your real estate by depreciating it through damage or neglect, increasing the rate of your housing loans, or by being exposed to unfavorable market fluctuations.
Building equity is important in long-term wealth-building, as it allows you to increase the return on your investment (ROI) on your property when you decide to resell your home in the future.
Benefits of building Equity in a Condo Investment
As mentioned in the previous section, there can be a great number of benefits to owning a home and subsequently building equity in your condo investment. Here are some of the specific perks of such an endeavor for your real estate:
- Benefits as an owner - As a homeowner, you’ll be able to build equity in your home with every mortgage payment. As you conduct improvements on your home, you’ll also appreciate its potential real estate market value. These will lead to long-term asset accumulation, or more simply put, the gradual growth of your financial stability.
- Benefits as a taxpayer - Another benefit to being a homeowner is that you can be eligible for mortgage interest deductions. Depending on where your home is located, you’ll be allowed to subtract mortgage interest from your taxable income, lowering the amount of taxes you owe overall.
- Benefits for your lifestyle - When you’re a homeowner, you can anticipate a greater sense of stability and control over your property. You can do whatever you want to your unit, whether you want tocustomize and renovate it or not. Homeownership offers a greater sense of certainty as compared to renting, where you have no control over the place you live in.
By buying your condo real estate, you gain opportunities for greater financial benefits and lifestyle perks. Continue on to the next section to see what happens when you don’t own your home, and can’t build this kind of value with the property you live on.
A lack of equity for renters in real estate investment
When you don’t buy and subsequently own your home, you lose out on the opportunity to build equity as a homeowner. There are other opportunities you miss as well - so check out this quick rundown on the cons of choosing apartment rentals over condo ownership:
- Serving as a short-term solution - Renting can be good if you need flexibility as you start out your independent living journey. But once you need more commitment and stability, you’ll find that renting serves as a short-term solution with fewer financial returns than buying or pursuingrent-to-own (RTO) options.
- Little to no control - As a renter, you don’t own your home. You’re subject to the rules and regulations of your landlord, and you can’t make any changes or do any renovations to make your unit your own. You have no control over the place you call home, which can be troublesome when you’re looking for long-term stability.
- Opportunity cost of renting on your wealth - If you only choose to rent, and you avoid the idea ofgetting started with an investment, you build up more expenses over time without the benefits of asset growth. You lose out on the opportunity to improve your personal finances and build wealth in the long run.
It’s up to you if you want to choose renting over buying your home, but you should at least consider the options available to you so that you can make the informed choice. Besides, with great pathways such as DMCI Homes’ own RTO program, it’s a lot easier nowadays to work your way up to owning your own property and building your equity and wealth.
There are even more long-term implications for the finances of both renters and owners alike - take a look at the next section to discover them for yourself.
Long-term financial implications for condo living
There are important financial implications to both renting and buying for your lifestyle. Whichever way you choose to live in your unit, know that these implications can have lasting effects on your wealth-building goals.
When it comes to condo ownership, you have to understand that it is truly a long-term investment. While it allows you to build wealth over time through equity, you have to be ready to accept the risks associated with ownership as well, such as market fluctuations and maintenance costs. But of course, at the end of the day you own your home - and that can be a huge thing for people who seek stability and control over their own property.
Renting can be an incredibly flexible solution for people who just need a great place to live. With regards to wealth-building though, it’s the less favorable option. While you get short-term savings from the lack of maintenance costs or property taxes, the reality of renting is that you won’t have the same tangible asset growth as owning property. Plus, renting offers less permanence, which may be a thing you need in life right now.
If you’re beginning to find yourself drawn to homeownership, then you might be interested in surveying the various pre-selling and RFO options available on the market. As you inch closer to the reality of condo ownership, make sure to understand the market you’ll be entering by checking out the next section of this guide.
How market conditions affect owners vs. renters
Real estate market conditions heavily influence all forms of condo living. From affecting the rates of prices for buyers and sellers to impacting rent price trends, you can be easily affected by the market - so it’s important to keep track of it constantly when pursuing property rental or ownership.
One question you might be asking yourself as a buyer is if you should invest in real estate during an economic downturn or during heavy market fluctuations. Renting can be an option at such a time, but such fluctuations can also affect rental prices, impacting the delicate balance of your savings. As such, it’s important to assess all potential considerations for your investment - which you’ll find in the next section.
More considerations for each condo type
Here are a few more considerations that you should keep in mind when assessing your ability to rent a unit or purchase your own property:
- Personal financial situation - If you’re in a place in life where you can afford to finance the costs of a property purchase, and you have the monthly income and credit score to back up those expenses, then you should definitely consider buying your home - even amidst unpredictable market conditions.
- Lifestyle preferences - You may be on the lookout for places that offer long-term stability and consistency if your current lifestyle calls for it. If you’re planning to raise a family, for example, you’ll want to live in a home property that you can truly call your own.
- Generational wealth for your loved ones - When you own a unit and keep it in good shape, you increase its value over time and create more wealth-building opportunities for yourself and your family. Your loved ones can inherit the home and choose to live in it, or even resell it at a higher value in the future.
With all these important considerations in tow, you can better assess the value of a property purchase in your life. Keep on reading if you feel that such an investment could be worthwhile for all your financial needs.
Condo ownership: a wealth-building strategy?
If it’s within your current means to pursue real estate ownership, then you should definitely consider doing so instead of renting your home. This wealth-building strategy will allow you to build equity over time, resulting in an equivalent level of property value increase, mortgage debt decrease, and improvement in the overall quality of your condo living experience.
Remember to constantly assess your financial planning goals to see if you can pursue this wealth-building path. By taking the time to properly plan out your long-term investment in real estate, you can expect to gain great returns that’ll serve you and your needs well into the future.
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