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You are Better Off Renting If…

23 Jan 2018

Posted by Joseph Coupal

HHHunt Apartments

1. You are indecisive. Buying a home is a big decision. It will likely be the biggest purchase you ever make. And before you spend that kind of money, it's good to know what you want. But if you find yourself singing the praises of hardwood floors one week and then talking up the benefits of wall-to-wall carpet the next, you might not be ready. Is a dishwasher a must? What about a second bathroom? Before you hand over a large down payment, you should be able to prioritize and have a good idea of what will make you happy.

2. You want to phone it in. Repairs and maintenance of any kind. Sometimes it's nice to be able to phone a landlord. Of course, when you own a home, you can phone an expert to fix a problem, but you have to pay them. When you rent, the majority of that responsibility falls to your landlord.

3. You like to keep your options open. Whether you want to be able to move down the block or across the country, it's nice to know you can. Living through the recent recession, I saw many people who weren't able to find buyers for their homes when they were transferred to new locations or when they simply couldn't afford to pay the mortgage after being downsized. If you want the flexibility to switch careers and/or coasts, renting may be the better option for you.

4. You want your cash elsewhere. Maybe you want to invest in the stock market, start a business or have some cash on hand for an emergency. You may not feel like tying up your money in a home. Buying a home usually requires a large sum upfront and then a percentage of your money for the life of your mortgage. If you want the flexibility to choose where your money goes, buying a home might not be right for you.

5. You don't understand (or you don't want to). Owning a home can feel like it has its own language. Between mortgages and taxes, there's lots to learn. There are resources to help it all make sense. But if you want to remain blissfully ignorant, you can keep renting. You might even be a renter for life.tion on apartments, contact HHHunt.

Source: AOL Real Estate

Think Before You Buy a House

06 Jan 2014

Posted by Joseph Coupal

It is considered a known fact that home ownership is a part of the American dream. But don't for one second think that home ownership is all sunshine, rainbows, and ice cream sandwiches. There are serious trade-offs that you should know, understand, and accept before signing on the dotted line.

1. Mortgage debt -- a marriage you can't divorce

According to the Census Bureau, the average home price in 2010 was $272,900. A traditional mortgage will finance 80% of that, or just over $218,000. The Census Bureau also reported that median household income in the U.S. was just over $51,000.

Are you comfortable owing over four times your total gross income (before taxes)?

You may be thinking, "But if I don't buy a house, I'm throwing away my money to a landlord with rent!"

Would you rather be "throwing away" your money to a landlord, or to a bank? Because if you bought that $272,000 average American house with a $218,000 loan at 5% for 30 years, you'd pay over $52,000 in interest to your bank of choice over the first five years alone!

Before the house was paid in full, you will have paid that bank over $203,000 dollars -- in interest alone!

2. When you own the house, you pay for the maintenance and repairs

Landlords get a bad rap. A respectable, professional landlord can make life orders of magnitude easier. They are your on-call repairman, plumber, hardware store, and lawn maintenance company.

Air conditioner compressor breaks on the hottest summer day? Landlord will take care of it. Snow storm knocks a large branch into the yard? Landlord will take care of it. Bathroom drain cloggs? Landloard will take care of it.

Nothing like a surprise $5,000 expense (with interest) to ruin those summer barbecue plans.

3. How long did it take to save up that down payment?

In our "average American" example, our potential homebuyer would have to put down a payment of $54,000 to qualify for the traditional mortgage. After closing costs and miscellaneous expenses, let’s call this a round $60,000 just to purchase the home and get a loan approval.

That means that in truth, this buyer needs a decent bit more than $60,000, though. The bank will not make a loan for a borrower who is putting 100% of their liquid assets into the home. Banks like back-up plans, and without some cash cushion, there is no real back-up plan.

So now, our typical American, must save somewhere in the neighborhood of 150% of their annual income to comfortably afford the down payment.

It may make more sense to take that $60k to $75k savings and invest in a target date fund, or an index fund. Those investments are liquid, they can be rebalanced, they don't require property taxes, and their toilets won't overflow, forcing you to pay a plumber to come out on a holiday.

4. Buying a home is not an investment

This final point will be hard to swallow. Buying a home is not buying an investment. It's buying a highly leveraged forced-savings account.

According to data from Freddie Mac, the inflation adjusted return for an investment in a home bought in 1970 is just over 27% through the second quarter of this year. That's a 27% return over a 43-year holding period!

If buying a home isn't an investment, then what is it?

It's a forced savings account. Along with that healthy dose of interest that goes to the bank every month is also a sliver of principal pay-down. Over 10 to 20 years, those principal payments can add up to a good bit of equity. So for those individuals who have trouble putting money aside in savings every month, this is an attractive feature.

But the point is, don't buy a house thinking it is a panacea for financial woe. If you want to maximize your investments, look elsewhere. If you want real estate exposure, consider a REIT. Don't be fooled into thinking that buying a home is a one-way ticket to the good life.

If you are still sure you want to join the ranks of homeowners, go for it. Your decision is thoughtfully considered, you've done the research into the upsides and the downsides, and you're making your own decision.

Personal finance and managing money is as much or more art than it is science. There is never a single right answer that applies across the board. We must all consider the risks, the rewards, and our own personal situations, and then act thoughtfully.

Daily Finance

Gen Y is Not Buying Homes

30 Dec 2013

Posted by Joseph Coupal

As the one generation looks to retire while the other is soon to be at its peak earning potential, the opinions and approaches to the property market differ markedly between Gen Y and Baby Boomers.

The two generations prefer different types of property and have different reasons for entering the property market.

Baby Boomers, unlike their Gen X and Y proponents, tend to have married in their early 20s and subsequently became home owners early.

Born between 1946 and 1965, boomers are the richest generation, having cashed in on several property booms. They hold over half Australia’s housing and financial assets.

Gen Y, which encompasses those born between 1981 and 1995, are nowhere near as asset rich.

As travel is now more affordable and desirable, this demographic is often choosing to spend their money on seeing the world rather than being tied down to a mortgage.

While this generation is often referred to as ‘Generation Rent’, this isn’t necessarily to do with affordability… they like the flexibility of renting.

Gen Y’s favor apartments.

Many Gen Y’s who choose to buy into property are using it as an investment vehicle. Data shows that 52% of Gen Y buyers surveyed are planning to buy an investment property instead of a home to live in during the next 12 months.

In contrast, Baby Boomers are generally looking for a home. They may also be increasingly trending towards apartments, but want larger units with quality fittings and finishes.

With more disposable income due to their children having moved out of home, Baby Boomers are looking to rent apartments within close proximity of entertainment and dining precincts.

They want the three A’s – action, accessibility and amenity – rather than the three traditional P’s – product, price and position.

Your Investment Property

Renting a Home is Good for Job Security

19 Nov 2013

Posted by Joseph Coupal

Many nations encourage home ownership, and it is something that most young people still aspire to, but a new study has pointed out this might not be such a good thing. It has found that encouraging people to purchase homes could lead to higher unemployment levels in the future.

The research was carried out in the UK and at Dartmouth College in New Hampshire, and the study found that when the rates of homeownership increase in countries then unemployment can begin to rise a few years later. Settling down in a home that you own makes many people reluctant to move just for the sake of the job.

In addition researchers found that homeownership could lead to longer commutes to work, wasting money and time. Neighborhoods with high levels of homeownership are also more likely to be opposed to new businesses opening up locally, something that can stifle entrepreneurship.

Researchers based their study on data collected in developed nations including the US. The study does acknowledge that high levels of unemployment are connected to other factors, but in spite of this it feels there is a clear link with homeownership and that the effects can be considerable. According to the report in CNN Money.com, doubling the rate of homeownership in an area could lead to the unemployment rate doubling as well. Apparently this trend has been particularly apparent since the 1980s, and researchers in the study are calling for people to become less obsessed with homeownership. They feel it makes the labor market much less flexible, and over time could cause jobs to gradually disappear. As an example, researchers compared Spain and Switzerland, as both homeownership and unemployment rates are particularly high in Spain, while levels are particularly low in Switzerland.

It’s easy to think from the tone of the report that the authors are against homeownership, but apparently this isn’t the case. They point out that older workers often want to own their own home in preparation for retirement, and in this case it would have little effect on the employment rates. In countries such as Switzerland and Germany people tend to purchase homes towards the end of their working life, something the researchers feel is efficient. However when people are young it makes more sense for them to be mobile and rent a home.

Realty Biz News


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