Table of Contents
Four Common Home Ownership Myths Debunked 4
6 Reasons Why Millennials Rent Instead of Buy 6
10 Tips for Buying Your Ideal Home 8
8 Tips for Renting a Home 10
Advantages of Buying a Home 13
Advantages of Renting a Home 14
Costs of Renting a Home 16
Questions to Ask Before you Rent 19
The Cost of Buying a Home 21
When to Rent and When to Buy 22
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Advantages of Buying a Home
There are many arguments on either side of the fence about buying a home ver-sus renting. Buying a home, for many, can be a symbol of stability and solidity. Buying means being able to customize the house, tear out a wall, change cup-boards, and otherwise adapt the living space to suit your needs. After all, you’re the owner, who would object?
But there are many other, intrinsic reasons to purchase a home as well.
• Equity: When you make a mortgage payment, most of the payment goes to paying off the interest on the loan. The rest goes to paying off the principle (the sale price of the house). When enough of the principle is paid off, usually 20%, this amount becomes available for a second mortgage or to refinance for lower interest rates. Refinancing then can be put back into the investment by adding improvements to the home, such as paving a dirt driveway, adding a garage, or adding onto the house. These things will improve the value of the property itself and in-crease what’s called “curb appeal” – the desirability of the house from the road.
• Taxes: Homeowners get tax breaks and lots of them. While not everyone qual-ifies for every tax benefit, the savings at the end of the year are substantial. Yes, a homeowner pays property tax, but there are also partial exemptions for occupied houses up to a certain amount (depending on the state that you live in). More common is the federal benefit of being able to deduct the interest paid on your mortgage for that year along with your state property taxes.
• Becoming a landlord: Depending on the laws and zoning in your area, you can rent all or part of your house for extra income. This might include renting a fur-nished basement or room to a college student, dividing the house into a du-plex and renting the other half, or using the entire property as a rental prop-erty. Also, the internet opens up new options, such as becoming an Air BNB, Vaca-tion Rental by Owners (VRBO) and other sharing possibilities.
• Roots: There’s no question that owning your home makes you a part of the community. It gives a sense of permanence and opens you up to possibilities that renting does not. Home ownership can mean being allowed to join the homeowner’s association, and taking part in block parties, committees, school groups and more.
You can see why the advantages to owning a home has long been the American dream – and with good reason. After all, there is a firm foundation under the house and under the family that owns one.
Advantages of Renting a Home
Homeownership isn’t for everyone. There are advantages of renting. Owning one’s own home may be the American dream, but for some, that dream could easily become a nightmare.
Where some people see solidity and dependability in homeownership, others see a trap without escape. Owning a home means predicting where you will be ten
years from now, or fifteen. It means predicting the market, your career, and your future needs.
If you feel homeownership may not be for you, but you are concerned that rent-ing doesn’t offer as many advantages, you can rest easy. Below you’ll find a list of important advantages that renting has over owning your own home.
• Low financial risk: The real estate bubble and crash of 2008 proved that homes were not immune to loss as we had once believed. In some of the hard-est hit areas, homeowners, through no fault of their own, lost thousands, or even tens of thousands of dollars. Renting doesn’t give you equity, but you’re not risking everything when the market shifts either.
• Maintenance: When you own, every issue from a dripping faucet to a com-plete roof replacement ends up being your expense. There is no landlord to do repairs or maintenance on the building; you have to do it all. When you rent, you don’t have to worry about the responsibility of coming up with big chunks of cash to fix the problem.
• Lots of cash needed before moving in: True, rental properties, apartments, and houses usually require the first month, last month and a security deposit of one month’s rent. But renting is a relatively low initial cost compared to purchasing. To purchase a home, typically, you need to provide a down pay-ment of 5 – 20% of the purchase price of the home. Plus there are other fees that really add up. Think of it this way: for a rental property that costs $2,000 per month, move in would be about $6,000. To buy a home worth $200,000 the down payment
could be as much as $20,000. Add points, transfers, and a number of small, hidden charges and that initial investment goes up even higher.
• Credit issues: Credit requirements for renting are less strict than getting a home loan. As there is less money involved, the requirements are much sim-pler.
• Fluctuation in the market: The real estate market is only now regaining its feet after a crash a decade ago. Will the value of the house increase or decrease? When you rent, this doesn’t matter. It’s simply not your problem. That’s for your landlord to deal with.
• Extras: Some rentals include one or more utility included in the rent, such as water or garbage collection, or landscaping services. And depending on where you rent, you may also have gym facilities and other amenities at your dis-posal.
Costs of Renting a Home
Compared to purchasing a home, renting has very few initial expenses. But there are still some things to prepare for when renting a home.
This is money given to the landlord to help protect him/her from damage to the property, late payment or no payment, broken rental agreements and miscellane-ous expenses. Often this is the same as a single month’s rent. Many states have limits as to the amount that can be charged for a security deposit.
First Month’s Rent
This will be required before moving in. If the house or apartment is rented in the middle of the month, some landlords are willing to prorate. Also be prepared to pay the last month’s rent also, as many landlords and rental agencies require both first and last month’s rent to be paid upfront.
These are securities in addition to the security deposit and most commonly asso-ciated with pets. Deposits for a dog or cat can range from $100 to $500 but are al-most always a one-time fee, though often non-refundable.
You’ll have moving costs whether you rent or buy, so remember to factor the cost of moving into the equation. Even if you do the labor and can use your own truck or get friends to help, there are expenses involved in moving. In addition to these upfront costs, there may monthly costs involved as well, such as storage facility fees.Other Details
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