Read Our Blog Visit Green Living

HHHunt Rent vs Buy Blog

RSS -- Grab HHHunt RSS Feed

Why Buying a Home is Not an Investment

21 Nov 2016

Posted by Joseph Coupal

Should you keep renting, or buy a home?

It's an age-old dilemma nearly every American adult wrestles with at some point. They wonder about paying rent when they could be investing in a home that will grow in value and potentially provide a nice return one day.

If that line of thinking sounds familiar, stop right there.

A number of crucial factors go into the rent-versus-buy equation — myriad calculators exist for just this purpose — but a house's potential return on investment shouldn't be your focus. In fact, you shouldn't think of it as an investment at all.

People get caught up in this notion of 'Oh, if I buy a house it's an investment, so I can do it at any time,' but it's not.

Housing is a consumption decision, not an investment decision. The amount you pay for housing should comport with your needs, goals, and budget, regardless of housing market trends and potential growth in home value.

If what you're spending each month on housing jumps when you move from renting to owning, that's not necessarily a wise financial move just because you're getting equity. You need to make sure the additional space and amenities you're consuming are worthwhile expenditures on their own merits, not for the theoretical payout they might afford later.

If you spend twice as much on a house, you're not making twice as big an investment, you're spending twice as much on housing. That's a mistaken way to approach it.

Let's say you time your local market correctly and home prices rise after you buy. If you decide to sell that home, you'll still need a place to live, and you're buying in that same market with expensive home prices unless you go back to renting.

Moreover, the process of buying and selling a house is expensive. The taxes, fees, and closing costs you'll pay when you buy and sell that home eat into any profits you reap.

Buying that house cheap and selling it once it's gotten expensive is an expensive way to make money, because the round trip cost to you is about 10%, so you take a huge hit.

If you want to make an investment in housing, you're better off doing it in the markets — such as buying shares in a real estate investment trust or an exchange-traded fund.

For buying your own home, just ensure it will match your needs for many years to come, independent of what happens in the markets.

For more information on apartments, contact HHHunt.

#HowYouLive
Business Insider

Renting is Better than Buying for Many Reasons

11 May 2016

Posted by Joseph Coupal

A lifelong goal that many people strive to achieve is homeownership. While both renting and buying have their own sets of financial advantages, renting does appear to have an edge when the economy is poor. There are tremendous financial benefits to renting as opposed to buying a house of your own. Here is a look at some reasons why renters have the better financial deal over homeowners.

No Maintenance Costs or Repair Bills
A definite advantage that renters have over homeowners is that they have no maintenance costs or repair bills to pay off. When you rent a property, your landlord is responsible for all maintenance and repair costs. If an appliance stops working or your roof starts to leak, you do not have any financial responsibility to have these things fixed. Homeowners, on the other hand, are responsible for all of their own repair, maintenance and renovation costs. Depending on what the repair is, these costs can be quite extensive.

Access to Amenities
Another financial benefit to renting over buying is having access to amenities that would otherwise be a huge expense. Luxuries such as an in-ground pool or a fitness center come standard at many apartment complexes with no additional charge to tenants.

No Real Estate Taxes
An obvious benefit that renters have over homeowners is that they do not have to pay real estate taxes. Real estate taxes can be a hefty burden for homeowners and vary by county.

No Big Down Payment
Another area where renters have the better financial deal is upon signing. You do not have to have a down payment to move into a rental property. While the exact amount you need to move in varies from case to case, the total amount is significantly less than you would need to buy a house.

Shaky Market
While many experts claim the U.S. Housing market is making a full recovery, others aren't so sure. A recent article claims that the market is just now stabilizing and the word 'recovery' is unwarranted. As foreclosures continue, many people are scared of buying altogether. By renting, you are avoiding potentially owing a mortgage that is more than the house's worth.

Decreasing Property Value
Property values go up and down, and while this may affect homeowners in a big way, it does not affect renters. Home value determines the amount of property taxes you pay, the amount of your mortgage and more. In a rocky housing market, renters are not as adversely affected.

Flexibility to Move
In today's economy, many people struggle to make ends meet. By renting, you have the option to move at the end of the lease. When you are a homeowner, it is much more difficult to break free of an expensive house because of the fees involved with buying and selling a home.

Fixed Rent Amount
Rent amounts are fixed for the span of the lease agreement. While landlords can raise the rent with notice, you are able to budget more efficiently since you know the amount of rent you are required to pay. Meanwhile, mortgages and the amount of the property tax can fluctuate.

Lower Insurance Costs
While homeowners need to maintain a homeowner's insurance policy, renters would be wise to invest in a renter's insurance policy. Luckily for renters, renter's insurance is much cheaper and it covers quite a lot. The average cost of renter's insurance is just $12 per month. Meanwhile, the average homeowner's insurance policy cost ranges between $25 to $80 per month.

Lower Utility Costs
With homes getting larger and larger, it is often much more affordable to heat and power an apartment or small rental home as opposed to a larger home. Rental properties typically have a more compact floor plan, and renters can expect lower utility costs.

The Bottom Line

While owning a home may be beneficial over a long period of time, for many people renting is the better option. There are plenty of examples that show how renting can save consumers a considerable amount of money. The choice of whether to rent or buy your own home is a personal one. Before making a hasty move, review the details and make the financial decision that is right for you and your family.

For more information on renting an apartment, contact HHHunt.

#HowYouLive
investopedia.com


Get e-mail notifications of new blog posts!
Enter email address below:


Delivered by FeedBurner