The Pros and Cons of Homeownership

Are you certain that you want to be a “homeowner”? Are you aware of the responsibilities that come along with homeownership? 

 Here are some Advantages of Homeownership:

  •  Homeownership Builds Wealth over Time
    - Every month when you make a mortgage payment, a portion of it goes toward paying down the loan thereby increasing your equity (as opposed to renting where it fully benefits the owner of the property instead of you).
    - Over the long term, housing has an undeniable record of solid appreciation.
    - In the past 15 years, the net worth of the typical homeowner has ranged between 31 and 46 times that of the net worth of the typical renter.

    Here's some data regarding Colorado Real Estate Housing Appreciation Rates:
    Q1 2000 - Q3 2019  Total Appreciation: +129.54%  Average Annual Rate: +4.35%

    Q3 2009 - Q3 2019  Total Appreciation: +73.21%  Average Annual Rate: +5.65%

    Q3 2014 - Q3 2019  Total Appreciation: +53.13%  Average Annual Rate: +8.90%

  • Housing is a hedge against inflation.
    - If you own a home, it will go up with, or at least influenced by, the rate of inflation.
    - Real Estate is one of the only investment vehicles in which you can leverage your money for gains. Think about it- you are partnering with a lender and the lender is typically investing the majority of the money needed to purchase your future home. You may be coming up with a down payment of 3, 5,10, 20 or 25% and the lender comes up with the rest.
    - Housing appreciation of 5% creates a greater return on your actual money invested than stocks going up 5%. This is because housing appreciation is on the value of the house, not on the down payment of the house.
    For example, if you invest $40,000 as a down payment on a $400,000 house and its market value appreciates 5%, you would gain $20,000 in equity.  If you invest the same $40,000 in stocks and they go up in value by 5%, you would gain $2,000 in value.

  • Stable monthly mortgage payment.
    - Having a consistent monthly mortgage payment is unlike renting, where a landlord can choose to raise the rent on you when it comes time to renew your lease, or worse, tell you to move out at the end of the lease.
  • Pride of Ownership.
    - There are psychological benefits to owning your own home.
    - Home-owners can personalize their home to their heart's content (there may be some restrictions of course if you are within an HOA community).

  • Tax benefits. Some mortgage-related expenses are tax-deductible (talk to your tax advisor for more details and qualifications)
    - Write off the cost of the interest that you pay on the loan each year
    - Write off the cost of the PMI (PMI is the mortgage insurance that you’ll likely need to pay if your down-payment is less than 20%) that you pay each year, if applicable.
    - Avoid paying capital gains taxes when you sell (currently this applies if you’ve lived in the home for 2 of the past 5 years prior to the sale).
    - Deduct points paid at closing
    - Deduct property taxes
    - Deduct moving expenses if you move because of a new job or job transfer
    - Home offices can be another source of tax deductions

  • The potential for positive cash-flow. 
    - Over time, you may decide to move. You may be interested in renting your home rather than selling it. If your mortgage payment is $1800 and you can rent your home out for $2,600, you may want to rent it out and keep that extra money in your pocket every month and also get the added benefit of long term appreciation. This option is certainly not for everyone but is an option nonetheless. 

  • The opportunity for pulling cash out of the equity you have in the home.
    - In the long term, you will likely have quite a bit of equity in your home. It may be possible to do what we call a “cash-out refinance” or HELOC (Home Equity Line Of Credit). This would essentially free up a sum of cash by borrowing more money from the equity in your home. Often times, this would result in a higher monthly mortgage payment in exchange for getting a lump of cash. An added benefit is that this cash would be tax-free.

Here are some Disadvantages of Homeownership:

  • You Could Lose Money.
    - If you only plan to live in a house a few years before selling, you could lose money. Unless you either buy a house at a discount (compared to other recent sales in the area) OR the housing market is going through a strong appreciation cycle, you may want to consider renting instead.

  • Potential to cost more monthly.
    -Your monthly mortgage payment together with the cost of utilities may be more than what you would spend when renting.

  • Repairs and Maintenance
    - Homeownership is a long term commitment. It is your responsibility to keep up with maintenance and repairs on a house over the course of time. This could mean things such as painting the exterior, trimming trees, replacement of the roof, furnace, water heater, garbage disposal, etc. If you buy a condo or townhome, the exterior responsibilities may be reduced or eliminated as a result of an HOA fee that you and other owners of the neighborhood pay which theoretically creates a pool of money that goes toward the exterior repairs and maintenance. If the pool of money isn’t large enough to cover the exterior expenses (such as replacement of roofing, siding, painting, etc.), the HOA will have the ability to charge you a special assessment to increase the pool of money so that the critical expenses can be paid. The special assessment could be a few hundred dollars or tens of thousands of dollars and the HOA may tell you that you have one year (or less) to pay it. Therefore, it’s critical to assess the financial stability of the HOA in relation to the deferred maintenance of the complex when buying a condo or townhome.

  • Decreased mobility
    - You may not be ready to settle down in one place.

We're Here to Serve You

If you are a first time home buyer and want to understand the entire process of buying a home before writing an offer, we can certainly help. We are very much into details and are happy to share our knowledge and experience with you so that you can make informed decisions throughout one of the most important purchases of your life. For a free, no-obligation consultation, please contact us. 

Here's what a few of our past clients took the time to write:

We worked with Kirk Wittig of Boulder County Realty. He was AMAZING! He made the selling and buying process as stress-free as it could possibly be! He is incredibly knowledgeable, never annoying and we always felt like he was putting us first and working hard for us! I hope we don't need to use him again in the very near future (because I hate moving!), but I give my highest recommendation to anyone looking to buy or sell. I know you will be as impressed as we were!! Thanks, Kirk!
Andrina S.
I recently relocated to Boulder and worked with Kirk to buy my condo. Kirk was recommended to me by a colleague. He was every bit the expert and skilled negotiator throughout the entire process. I found my condo in record time thanks to the fact that Kirk listened to my  gotta-haves  and  never evers . He was truly my advocate during the offer and inspection phases. One thing is for sure, he won't let you go hungry while house searching! He introduced me to an adorable local restaurant over lunch and the best ice cream on the planet! Hmmm..Glacier Homemade.
Caty M.
Kirk was great to work with. He had asked us several questions in the beginning of our search for a home in Louisville and clearly listened to what we had been seeking. He had suggested a few homes in addition to the ones we wanted to see. Somewhat shockingly, we fell in love with one that he had picked out. He even got us a great deal on financing a brand new kitchen and two new bathrooms wrapped into our mortgage. We have a great interest rate and he also got us a moving truck when we moved (we just lived 20 minutes away). What more could we have asked for!? It's as if he anticipated everything we would need before we even knew we needed it. 
The best part of all? He didn't cost us one penny! The sellers paid him a commission. This was our first home purchase so we weren't initially aware of who pays what.
We asked lots of questions and he answered all of them. Some of them he didn't know right away but he quickly reached out to one of his seemingly numerous contacts and had our questions answered. Super happy that we found him! Thanks again, Kirk!
Deb K
Kirk was professional and a pleasure to work with. He clearly understood our particular needs and only showed us properties that fit our criteria. He was well prepared when he took us to look at properties and is quite in touch with the local market conditions. The entire process went quickly and smoothly, thanks to his knowledge, forethought and experience. If/when we need a realtor in the future, we absolutely will call Kirk.
Gary J.
Kirk is a fantastic realtor who always keeps the best interest of his client's in mind. He is readily available to answer questions and attends to the needs of his clients. Kirk's approach is very professional but also personable, which makes the process of house hunting enjoyable!
Jeanne C.
I was out of town on a work assignment the entire month of my home purchase. Kirk was my buyer's agent and did an amazing job of making me feel like I wasn't 1800 miles away from a huge investment. He is extremely responsive and knowledgable, but most importantly he has great integrity. He was honest and straightforward with me at all times and went out of his way on many occasions to correct other peoples shortcomings. One example of this was when the home inspector did not complete an attic inspection and refused to go back without additional payment. Kirk took it upon himself to make sure that the inspection was completed satisfactorily.
Jim D.
As long as we're living in CO, Kirk will be our go-to Realtor. He helped us sell our home in Boulder and from our first meeting all the way through until we sold, Kirk was proactive, straight forward and responsive to our needs. We're still working with him as I write this. While it took us a while to find a house in Louisville with the amenities we were searching for, he patiently hung in there with us and we're now about a week away from buying our dream home. Something else that has stood out about Kirk is his ability to negotiate. He mentioned that he had been through some negotiations classes back when we had first met him and my wife and I hadn't thought much of it at the time. Kirk is a bit of a chess player when it comes to negotiations. He's pointed out things that we would have never thought of when buying or selling and has proven to us just how valuable he is! Hands down, Kirk Wittig is the best Realtor we've ever worked with.
Ken S.
We had a wonderful experience working with Kirk Wittig in selling our home in Fort Collins. Our neighborhood was actually going down in value and new homes were about to be built near our house adding even more urgency to sell before it dipped more. We had our place on the market for 9 months and had to fire our real estate agent since she was getting zero results. This is when we met Kirk who was referred by another friend of ours as a great agent. Kirk came out, took his time explaining why our house didn't sell and how some minor improvements, professional photo's and exceptional marketing (which he really did well) would get our home sold quickly. After making the improvements that he recommended, our house was back on the market in two weeks and we sold our place in just over a month! Not only that, but we got a fair price even though the buyer was trying to play hard ball (because we had another buyer who also wanted it). Thank you Kirk! I highly recommend him, not all agents are the same, there is no doubt about that.
Nick K.
I've got to say that I have never cared for Realtors! I've had so many horrible experiences with incompetent Realtors over the years. That and several friends have had less than competent agents too! 
I got Kirk's info from a colleague of mine that said  just try him . I had him over and of course, everything sounded great but I was resistant to sign up (not because of him, but with any real estate agent). He got me to do so when he showed me a service guarantee which would allow me to FIRE him at any point if he wasn't doing what he said he would. OK- game on! I wish I had been handed those in the past!! 
You can probably tell where this is headed- that's right, I never did fire him and honestly, had a great time working with him. He helped me sell my house just as he said he would and helped me buy another. I'm now exactly where I had envisioned being and he even got me one heck of a great deal. Take it from me, this guy is great at his job. He's not all slick and polished like the others I've dealt with and I like that. He's a straight shooter, and that goes a long way in my book. All Realtors aren't the same after all.
Paul H.
Kirk Wittig is a great Realtor. He really knows what he is doing and is an excellent negotiator, you can be sure you are getting the best deal possible. He is also incredibly professional and well organized. I have worked with many Realtors and Kirk is one of the best. He will take care of everything to make your transaction as seamless as possible. I had a very difficult financing situation and Kirk was there to help me jump through the many hoops associated with the transaction. Everyone said it would be a miracle if we got the deal done, but Kirk found a way to get it done. Hire Kirk as your Realtor and you can trust you will have a someone who will really work for you.
Russell L.