One of the truest statements I hear people say is "I'm sick of throwing money away by renting." Renting certainly has its place in certain circumstances, such as those with very damaged credit or singles only interested in one bedroom apartments or even studio apartments. For the majority of people, however, home ownership has some incredible advantages over renting. 

Owning real estate offers three powerful and distinct advantages over renting (specifically in regards to mortgages vs. monthly rent). The first being that a portion of each monthly payment is principle, whereby homeowners are essentially putting money in savings by increasing their equity and decreasing their debt in their property. The second advantage of a mortgage is that all of the interest portion of the payment each month is tax deductible, unlike monthly rent which provides no tax advantage. The third and sometimes most powerful advantage of owning properties is the appreciation factor. Studies have proven (one study in particular looks at a 400 year time span in Europe) that over time, real estate increases in value an average of 4% per year, whereas inflation has historically increased at an average of less than 3% per year. If you owned a $200,000 house, you would essentially be building $2,000 per year in real dollar wealth. 

To really understand this, lets look at a beginning mortgage payment of $1,000 per month vs. a rent payment of $1,000 per month. Lets say that for a given month of the mortgage the principle portion of the payment is $100 and the interest is $900, that is like $100 each month is going directly into savings. The $900 portion of the payment can be deducted from your income taxes, so if you were in a 25% tax bracket, you would be saving $225 per month off your income taxes. For appreciation, if we use the $200,000 house example, our wealth will be increasing at $2,000 per year (with inflation factored in), that would be $166.70 per month. If you add all these up, you would basically be putting $491.70 in your pocket each time you made a $1,000 mortgage payment. You would be putting $0 in your pocket each time you made your $1,000 rent payment.

I was with some clients this morning as they began the process of collecting and evaluating contractors bids and I was reminded of the almost 30 year style and design consistency of homes built in Charlotte. Transcending neighborhoods and socio-economic lines, most all homes built between 1950-1980 in Charlotte are comprised of one story brick homes with hardwood flooring, and 3 bedrooms and 1 ½ bath. I think it is remarkable how many homes are similar. As with the style of the day, the homes also have rooms that are more enclosed, with a narrow hallway down the center of the house and usually only two small doorways into the kitchen.
The primary style of houses today is almost entirely opposite, with varying exterior colors, and materials, and interiors consisting of large, open living areas, flowing kitchen and dining rooms, and bedrooms surrounding the living spaces, as opposed from separate from them.
The clients this morning raised an interesting perspective. Should they really start knocking down walls and conforming the style of the old home to today’s modern feel, when in a couple years, styles and trends will again change? Will design and construction trends go back to more enclosed rooms and living spaces, or will today’s style remain - something to think about.