In my opinion, real estate is the best investment for building wealth and reducing taxes. That said, there are two scenarios when you should not own your own home:
1. You should not purchase real estate as a principal residence when you relocate to a new city for at least six to twelve months, because where you think you may want to reside almost always proves to be where you don’t want to live once you get your bearings. When we first relocated to Houston, Bellaire, a city within Houston city limits with its own police and fire departments, seemed perfect. Ultimately, because we do not have children and spend most of our time in town, neighborhoods like Montrose, Upper Kirby, Rice Military and the Heights (all well inside the 610 Loop), proved to be a better fit.
2. You should not purchase real estate as a principal residence when you know or are reasonably certain, you will not remain in the area for more than two years. Rarely will such investments prove useful for building wealth, although transaction costs will generally help you meet tax reduction goals.
However, there are exceptions to every rule - the occasional purchase from a distressed seller which can include estates where the survivors simply have no interest in owning the decedent’s property, being just one example However, if you are an experienced real estate investor, you probably already know the secret to reducing transaction costs, i.e. real estate sales commissions. This fact, alone, can greatly reduce your holding period.
So, now that you know you should purchase real estate as a principal residence only after you have resided in an area for six to twelve months and have concluded you really want to live in the area for more than two years, your goals of building wealth and tax reduction can commence. Do not continue to rent unless you don’t mind building wealth for a landlord, while sacrificing the tax reduction benefits of real estate ownership.
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