Buy Instead of Rent
What a tangle we face trying to decide whether we buy instead of rent the place we call home and the place where we lay your heads. There are many benefits to owning a home as you’ll see. If you are planning on moving in the next 12 months, however, renting may be the better option. Today in the U.S. we have the lowest percentage of homeowners since the 1970s and we have a high percentage of potentially huge home buyers, the millennials, renting or living at home.
Should you buy instead of rent?
A Renter has:
- Flexibility – if you don’t know how long you will stay in a particular area, rent instead of buy works well
- Career stability – many young people seem to change jobs frequently, renting works well
- Credit – is either poor or not well established. The good news here for renters is that on-time rental payments can establish credit.
- Income instability – It is hard to make a long-term commitment on a house when you have worries about a stable income
- No maintenance expenses – when something breaks, you just call the landlord. Maintenance can add significantly to the cost of home ownership.
- No down payment – sure you may have first and last monthly rent due when you move in plus a security deposit, however it’s nothing compared to 3% to 20% down payment required when you buy a house.
- You may be closer to work in an apartment than with a house you can afford.
- Amenities – many apartment complexes offer a pool, gym, meeting and rec rooms. Like college dorms for adults and you are surrounded by a circle of friends your age.
- Fear – they are afraid of another housing collapse that could send them down the river financially.
Should you buy instead of rent?
- The biggest reason to buy is equity build. Mortgage payments go to the bank and you gradually pay down the mortgage.
- Landlords generally raise rents, especially if the market for rentals is tight as it is now. With a 15 or 30-year mortgage your payment is fixed.
- A symptom of inflation is housing going up in price over time. Many cities, before the recent housing downturn, experienced 7% increases each year, which doubles the house price in 10 years and increases your equity.
- Should you buy instead of rent? Rental payments are not tax deductible. The interest paid on a mortgage is deductible on your tax return, as is property taxes. You can look at it as Uncle Sam helping you buy your house.
- Creative control – you want to paint a wall purple, tear out a wall, hang every picture you have, no problem. You don’t have to get permission. You also don’t hear foot traffic from a tenant up above you or a stereo blasting.
- A house is your castle, your rock. You could write a poem about ownership. A house is private property and for the most part, we still protect private property rights.
- The government is working hard to make home ownership affordable. The rates on mortgage insurance have been reduced and banks are being encouraged to make mortgage loans.
- Should you buy instead of rent? Interest rates are the lowest they have been since the 1970s.
Compound interest – one way to get rich in real estate.
Suppose you buy a house for $300,000 and put down $30,000. At 7% appreciation per year for example, the house doubles to $600,000. Assuming you didn’t take out a bunch of home equity loans to buy toys, your equity in your home would be $330,000, an eleven-fold increase not counting any reduction in your mortgage.
The buy instead of rent argument has good reasons on both sides. As you age and have families, your needs change and some points become more or less important.
Harmony Property Solutions, LLC is proud to be a part of the Cedar Rapids community.
We help homeowners out of distressed situations. While our goal as investors is to make a modest profit on any deal, we help homeowners out of most any situation, no matter what! Harmony Property Solutions doesn’t charge any fees, upfront costs, commissions, or anything else. We give you the simple honest truth about your home and help you sell it fast to resolve any situation.
Give us a call today at 319-343-6773 and let us know how we can help you!