In the last year, wealth and investment fads have taken the internet by storm. Between fad-stocks and talk of the impending Metaverse, it can be tempting to look for the next big get-rich-quick scheme to build wealth, but the secret to building wealth in 2022 may not be found in cryptocurrencies and NFTs, but rather in one of the oldest wealth strategies in history— property ownership. Homeownership is still one of the best ways to grow your wealth and establish a solid financial foundation. Here are a few ways that housing can play a key part in your wealth strategy this year.
Think of Homeownership as a Forced Saving Plan
In today’s economy, having control over your housing situation is one of the primary ways that people build wealth through equity, more cash liquidity, and smarter tax strategies. The first example of how homeownership can translate into building wealth can be seen in the differences between renting and owning a property.
When you rent a property, whether it be a home or apartment, the money that you pay in rent each month is not contributing to your ownership stake in the property. Instead, you are likely paying off the mortgage for another individual or company. And while there is nothing wrong with renting if that is what your situation calls for, if you were to own your property you would be making monthly payments into an asset that you will one day own outright.
This can be thought of as a forced savings plan that will help you build wealth in the long run.
Your Equity Increases as Your Home Increase In Value
One of the reasons why homeownership is such a key piece in any wealth strategy is because your home doubles as a shelter and as an investment with the potential to grow exponentially throughout your lifetime. This has been especially true in recent years as some housing markets have soared thanks to high demand and low supply.
Smarter Tax Strategies
Not only is owning a home a great way to grow your wealth by owning an appreciating asset, but homeownership can also have some appealing tax benefits as well. Generally speaking, a homeowner can receive a tax deduction for interest paid on their mortgage which will reduce their annual income by the amount of interest they paid on the loan. This deduction is can be applied up to the first $1 million of mortgage debt.