There are many benefits as well as a few disadvantages to owning real estate and many of these could be discussed more fully than they are here, but we will just state them simply with a brief description here.

The biggest advantage of owning real estate is that you have to live somewhere, and if you do not own the property in which you live, then you are merely paying for another person to own a property. In essence, you are paying the owner of the piece of real estate more than he is, in turn, paying for the mortgage simply for the benefit of living there. As long as you have to live somewhere, it is highly advantageous that you pay yourself for the privilege of living in your house. How does that work?

Owning real estate is somewhat like a forced bank account, called equity, which amounts to the worth of the house judged by a fair market evaluation minus any mortgages or liens that may be against the property. Every month you pay your mortgage, which amounts to payments on the principal, interest payments, insurance, and usually taxes, in the form of escrow. In the principal payment is where you find the benefit to yourself. In paying down the amount of principal originally borrowed against the property, you are investing money in a property which, when sold, will (or should) not only be returned to you, but will have increased in the form of capital appreciation.

When you rent, you simply put your rent check in the pocket of your landlord and have no hopes of ever realizing any kind of return at all. Even a flat return of exactly what you put into the house would be welcomed, but the reality of Capital Appreciation makes this deal even sweeter. Almost any house, and land will appreciate over time. Appreciation means that although you may have paid 100k for a house this year, in two years it may now be worth 115k. The rate of appreciation depends entirely on the local housing market. The exceptions to this appreciation rule would be manufactured housing, also known as mobile homes, whose value usually depreciates, and houses whose neighborhoods have deteriorated so that it is not a desirable place to live, but a little research and wisdom before purchase and activism against undesirable activities after purchase is complete should avoid these hindrances.

The return realized is done completely with the aid of borrowed money, which is otherwise known as leverage. Not only is the money you are investing making a good return, but the money you haven’t invested is making a return, as well. And you get all the benefit of this. Even minus the interest you pay to the lender, the return can be higher than any you would see in other markets.

In addition to the considerations of equity building up and appreciation increasing the worth of your investment return, there is also the tax benefits involved with real estate ownership. Most investment property in America produces a healthy return and a positive cash flow for its investors. Nevertheless, the way the tax laws are written, even such property with a positive cash flow turn into tax write off against the earned income of its owners. This occurs through depreciation and costing methods of accounting which are completely above board. In actuality, as an incentive to real estate investment, which again is the very foundation for all other enterprise, the government allows for attrition and obsolescence when there really may be none.

For those investing in properties to be expressly used as rentals, there is also the benefit of cash flow, which has already been mentioned from the perspective of the renter. While the renter is paying, monthly, for the use of a property that does not belong to them, they are in effect paying off the loan held by the owner of the property, paying a little extra that can either be used as cash flow for the owner or tucked away against any maintenance emergencies that may arise, and, while they are doing all this, the value of the house increases steadily.

One other serious advantage comes from investing in real estate as opposed to any other kinds of investments possible, and that is the security of the investment. There are a few examples where an investment in real estate has met a bad end, but for the most part, if invested wisely, the return will be good. It is usually just a question of how good the return will be, not if it will be good. Land will always be a shrinking resource. There is only so much of it to be had in any one area, and the more coveted the area, the higher the price.

The disadvantages of owning real estate pale in comparison to the benefits, but there are some, nevertheless. The “forced savings account” differs in one major area from a real savings account and that is the reality that your money is invested in the property, not in liquid form, and it can be a time-consuming hassle to pull your money out.

The burden maintenance is another disadvantage. When you are renting a property and the air conditioner goes bad, you simply need to call the landlord, and if your landlord is respectable, he will immediately set things in motion to either get it fixed or replace it. There is no cost to you. if you own the home, however, there is no one you can call except the repair man, and he is going to send the bill to you! So there is the biggest drawback to owning the home that you live in: you are responsible for it.

If you have property rented out, there is always the risk of damage inflicted by bad tenants. A rental agreement with a bad tenant is worse than a bad marriage, and it is also harder to get out of. The person with tenancy is always the one with more power, and in the time it can take for you to legally remove them from your house, there is almost no limit to the damage they can willfully inflict to your property. The advice that you NEVER rent without checking references should always be heeded! You may sue the ex-tenants, but if they have nothing, you will get nothing, and have the trouble and expense of the costly legal system to boot. If this situation happens, it is better to just lick your wounds, carry on and be more careful the next time. Some people refuse to have rental property for this reason. There is a risk.

Weighed against the huge advantages that comes with owning real estate, it is easy to see why so many people dream of owning their own home, because on top of the monetary considerations, it feels good to own a home and to be able to make improvements that will eventually benefit yourself. The Pride of Ownership should never be underrated!