Read Our Blog Visit Green Living

HHHunt Rent vs Buy Blog

RSS -- Grab HHHunt RSS Feed

5 Legit Reasons Renting Apartments are Better than Buying

19 Aug 2016

Posted by Joseph Coupal

There are those who think the idea of owning a home is ridiculous. Many are slowly warming to the idea.

Houses have roofs that leak, and heaters that break.

Counter argument: But renting is so expensive.

Response: Yes, but you pay for the luxury of not having to worry about those things.

And you know what? It turns out that’s right.

Many people don’t regret purchasing their home, but there are little incidentals that will blindside you if you’re used to living in an apartment.

Aside from that, owning a home is also a big lifestyle change. There are times when it does makes sense to rent instead of buying too. It’s actually a big commitment you shouldn’t take lightly.

So here are five big reasons why you should rent, not buy.

1. You want flexibility.

This is the go-to argument for renting vs. buying.

Even a 12-month lease is more flexible than a 30 year mortgage. If you plan on relocating in the near future (for work, for family, or just because), renting is the way to go.

Have to move on short notice? Many landlords will allow you to buy out of your lease or sublet if you need to break your lease agreement. In experience, this is much easier than trying to sell your house.

2. You aren’t responsible for maintenance.

If you aren’t that handy with a wrench, you can rest easy knowing that your landlord should take care of any repairs your rental property needs.

When you own a home, it becomes your responsibility to fix, replace, and pay for those repairs yourself. And you can bet that any DIY mishaps you make will mean calling in (and paying) a professional.

Does renting cost more? Sure.

But, “you pay for the luxury of not having to worry about those things.”

3. You have an irregular income.

Irregular incomes can be a huge deterrent for home ownership.

Although mortgage payments are as consistent as monthly rent, and in certain cities owning can be more affordable than renting, you don’t have to worry about property taxes or escrow payments as a renter. Apartment complexes often bundle utilities for you or have discounts on services like cable or internet.

Since you’re not responsible for maintenance or other upkeep, you’re less likely to drain your emergency fund on your apartment. This makes renting a surprisingly helpful strategy for saving money for other expenses.

4. You want to skip your commute.

Some are super lucky to have the ability to work from home, but some of you are still braving traffic every day.

If you are spending hours each day trapped in the car commuting to work, you could potentially save big by renting.

But how? Consider how much money you spend on gas each month, not to mention the time or strain on your vehicle.

If you work in an area with an apartment complex or rental homes nearby, consider moving closer to your office. The flexibility of renting (see number 1) will allow you to do this!

Beyond the savings in gas, it’ll drastically reduce the amount of time from work to your bed at the end of the day. Although you may miss out on the charms of suburban living, renting can also give you the opportunity to live in places you wouldn’t typically consider. You may find that you love city life!

5. You aren’t financially ready to buy.

If you’re hesitant about buying a home, you probably should rent. Homes are a huge financial responsibility and can end up costing even more if you aren’t prepared or don’t do your research. Think about it this way: the upfront costs alone of buying a home are usually tens of thousands of dollars.

Compare that to the upfront costs of renting, which typically include security deposits, pet deposits, and any move-in fees.

Both are expensive, sure, but home ownership is much more so on the front end.

Before you buy a home you typically need to have plenty of savings as well as a stable job and good credit. While you work on achieving these goals, renting can be a great option for you.

For more information on renting apartments, contact HHHunt.

#HowYouLive
Elite Daily

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

11 Reasons Why I will Never Own a House Again

08 Oct 2013

Posted by Joseph Coupal

When my phone vibrated, I didn’t even have to look. I knew what it meant: the house had finally sold.

I wasn’t sure how I was going to feel when it was finally over. I wondered if I would feel sad or anxious or regretful. What I actually felt was relief.

It was a great house. It was where my children took their first steps, where they learned to ride bikes and scooters. It was the location for dinner parties and cocktail parties and birthday parties and our annual Halloween potluck. But it was time to go. We happened upon a great new house that was nearly perfect. And even better: it was a rental.

I know what you’re thinking: didn’t you want to buy another house? It was a question we were asked over and over as we approached our closing. But I didn’t want to buy another house. After fifteen years, I was tired of being a homeowner. After a few months of renting, I was sold – on not buying again.

There’s a lot of hype about why you need to own a house. But buying a house isn’t the key to financial security for everyone – and those alleged tax advantages? Also not quite what they’re painted to be. I hope to never own a house again. Here’s a list of eleven reasons – many of them tax-related – why:

  1. As investments go, it’s not always a great deal. While it’s true that some homes do appreciate, so do many other assets. If you bought a house for, say, $200,000 thirty years ago, it would be worth $468,375.09 today. While that gain feels impressive, that appreciation is based solely on inflation – which means that, in theory, the same appreciation would have happened with any asset. While we did “make” money on the sale of our house, I suspect we would have had a similar increase had we invested that money in the market or in our business.
  2. The mortgage interest deduction doesn’t make up for the fact that you’re still paying a lot of interest. While I understand that it’s possible to buy a house without a mortgage, the large percentage of homeowners (more than 70%) take out a loan. With average mortgage rates at 4.3% (as of this morning), you’ll actually pay $356,307.44 for a $200,000 home: $156,307.44 in interest alone. Averaged over 30 years, that works out to a little over $5,000 per year (even though in practice you pay the most interest at the beginning). Assuming you’re in a 25% bracket – and you itemize – that works out to a tax savings of just over $1,300 per year. But the word “savings” is somewhat of a misnomer because you’re still out of pocket more than you get back in tax savings: in our example, you would “save” less than $40,000 while paying out more than $150,000 in interest.
  3. Homes often tempt people borrow more than they can afford. As Congress tosses around the idea of taking away the home mortgage interest deduction, homeowners are screaming that they won’t be able to afford their homes without it. In fact, when you’re looking to buy, most lenders and realtors will use the deduction as a selling point to boost prices. But is that a great strategy? When buying a new dress or a new car, consumers tend to focus on the cost of the item alone when determining how much to spend. But when it comes to mortgages, that number edges up because of the potential for tax savings (again, see #2). With that temptation, combined with a sluggish economy, it’s no wonder that more than 10 million homeowners are currently underwater on mortgages worth more than actual house values. We were fortunately not one of them but not for lack of the banks trying. When we bought our home, we were actually approved for a mortgage which was hundreds of thousands of dollars more than the home we ultimately bought. We opted for a less expensive home – and thankfully so.
  4. Owning a house subject to a mortgage drives up debt to income ratios. Assuming that you borrow to buy your home – again, a pretty reasonable assumption – that debt load can be a drag on your credit and ability to borrow for other things (like a new car). I’ve made no secret about the fact that I owe a significant amount in student loans. That already affects my perceived ability to pay when figuring my credit. A mortgage dramatically increases that ratio. Interestingly, our monthly rental payment is actually more than our monthly mortgage payment – but on paper, our rent is not a debt, it’s an expense. The two may be treated very differently, depending on the circumstances.
  5. A mortgage is typically 20 or 30 years while, at any given time, the current administration has only four (or possibly eight). I can’t stress this enough. The home mortgage interest deduction has been around for what seems like forever. Does that mean it that you can count on it to be around in 10, 20 or 30 years? Don’t be so sure. The deduction has become increasingly vulnerable: it has been a talking point in practically every administration from Bush to Obama, despite Reagan’s famous promise to the National Association of Realtors in a 1984 speech that he would “preserve the part of the American dream which the home mortgage interest deduction symbolizes.” Just this year, Eric J. Toder, the co-director of the Urban-Brookings Tax Policy Center, advised Congress that “[a]chieving a revenue-neutral tax reform that reduces marginal tax rates significantly would be difficult or impossible to achieve without cutting back the mortgage interest deduction or some other equally popular and widely used provisions.”
  6. A mortgage is typically 20 or 30 years. So yeah, I said that already. But I have another point: home ownership can limit your mobility. We were fortunate that we were able to write checks for our rent and our mortgage. While we could afford to make both payments, chances are that we would not have been able to obtain a mortgage for a second house while continuing to carry the first. Often, in order to move, you have to sell – or rent – your first home. I’ve been a landlord before and I’m not inclined to do it again. And selling our house in this economy was no small feat. That’s part of the reason that we stayed so long in one place: it was hard to move. In addition to our own missed opportunities, that may not be good for the country’s economy: economists Andrew Oswald and David Blanchflower found that rates of high homeownership lead to higher rates of unemployment in both the U.S. and Europe because, among other issues, owning a home may keep people from moving to areas with good jobs and creates “negative externalities.”
  7. Houses take a lot of your money. There’s a reason that many folks refer to their homes as money pits: you often put a lot of money that you’ll never see again into a home. Not all improvements are deductible. Deductible expenses are generally limited to casualty loss deductions. In most cases, significant repairs to your home merely increase your basis for purposes of calculating a gain at sale. As most taxpayers aren’t likely to experience the kind of gain that would subject them to capital gains, basis isn’t always an issue which means that those expenditures get lost. Thousands of dollars to replace the air conditioning unit? The new garbage disposal? Replacing the flooring in the kitchen? The new washer/dryer? Landscaping additions? You can’t write them off and while you may recover some dollars at sale, rarely do you recover the entire amount. If you add all of those expenditures up over a 30 year period, you might see an explanation for some of that “gain” at sale. Often homeowners get fixated on two numbers: the purchase price of the house and the selling price of the house – but don’t forget to account for all of the money you spent in between.
  8. If you do hit the home appreciation jackpot, there can be significant taxes. Not all houses bleed money. Not all appreciation can be attributed to inflation and/or a combination of home improvements – sometimes, it turns out to be a good investment. But there is a price: if the gain on the sale of your home exceeds the $250,000 exclusion (or $500,000 for married taxpayers), the proceeds over that exclusion are subject to capital gains. Additionally, under the new health care law, a Medicare tax of 3.8% will be imposed on investment/unearned income, which includes gain from the sale of your home, for high income taxpayers. High income taxpayers means those individual taxpayers reporting income over $200,000 and married taxpayers filing jointly reporting income over $250,000.
  9. I like for things to be predictable and real estate taxes can vary. While mortgage payments can remain fairly flat, assuming you have a fixed mortgage rate, you more or less know what you’re paying each year. You don’t always have the same result with real estate taxes. Your tax bill can change based on property assessments and reassessments (just ask Philadelphia) or a change in tax rates – especially in today’s climate as townships and counties search for revenue. Unlike most commercial leases, residential leases don’t tend to be “triple net” meaning that the expenses are not directly passed through but tend to be figured as part of the total rental payments. Real estate taxes are generally accounted for in the cost of the rental; when they are not, they may be limited by statute or otherwise capped.
  10. You can’t deduct a loss on the sale of your home. If I lose money on stocks, I can net those losses against other gains. If I lose money in my business, I can deduct those losses or use them to offset other gains (even in other years). But it doesn’t work that way when it comes to housing. You can never claim a capital loss on the sale of a personal residence – no matter how much it hurts. In this market, many taxpayers are finding this to be the case. That makes putting all of your investment eggs in the housing basket a risky proposition.
  11. It’s getting more difficult to claim the itemized deduction. Home mortgage interest is only deductible if you itemize on your Schedule A, meaning that only about 1/3 of taxpayers even have the option of taking the deduction. You itemize if your deductions exceed the standard deduction: for 2013, the applicable standard deduction rates are $12,200 for married taxpayers filing jointly; $8,950 for head of household; $6,100 for individual taxpayers and $6,100 for married taxpayers filing separate. Those numbers are getting harder to get to for many taxpayers, including me. Mathematically, the longer you own your house, the less you owe in interest and the smaller the deduction. Add that to the bump in the threshold for the medical expense deduction (which means that I’m not going to be able to claim those expenses in 2013), restrictions due to the Pease limitations and the bar for miscellaneous deductions, and taxpayers are increasingly finding that the deduction is actually quite elusive.

I’m not saying that owning a home is a bad thing. I liked being a homeowner. I just happen to like renting more. I liked that when our oven died, it was replaced – at no additional cost to me – that same day. And I liked that as I wandered through Home Depot, I happily gazed at cabinet pulls and meandered through the garden center rather than making a beeline for caulk, wood putty or other maintenance items. Maintenance is no longer my problem.

I’m also not advising folks to eschew real estate: it can be a good investment for some taxpayers. In addition to owner occupied properties, rentals can be a good financial move. While I have no desire to be a landlord again, it has been a good bet for many taxpayers. My father-in-law has rented properties for years. He realized, like many other taxpayers, that rental real estate is not only a good income stream but a forced retirement plan. But he, like other savvy real estate owners, also understands the rules and the economics, and makes decisions accordingly.

What I am saying is that we shouldn’t buy into the idea that owning a home is for everyone. And it’s not just me: at the end of August, the U.S. Census Bureau reported that the home ownership rate was 65.5%, the lowest rate in the past 50 years (downloads as a pdf); adding borrowers in risk of default, the number is closer to 62%. In contrast, ownership in 2010 was nearly 69%: for purposes of context, a one-percent change in the ownership represents well over a million homeowners. That dip doesn’t spell disaster for our country. It would be a mistake to assume that countries with high incidents of home ownership are synonymous with a strong economy: Russia, Italy, Greece and Spain – countries with struggling economies – have significantly higher home ownership rates than the U.S. Conversely, some countries with traditionally strong economies like Germany, Switzerland and Japan, have lower home ownership rates than in the U.S.

There are so many considerations when deciding whether to buy a home. It’s not the ‘ideal’ scenario for all families. Don’t be fooled by promises of tax savings and tax-free appreciation: that’s not always the case. A home is a huge investment so be sure to research what it might mean for you before taking the leap – and don’t be afraid to say no. I did. And tonight, as I sit on my rented porch, staring out at my rented view while my kids happily play inside a house that they’ve already made their home, I don’t regret my decision one bit.

Forbes

Why More People are Renting

23 Sep 2013

Posted by Joseph Coupal

Rent vs. Buy

More Americans are forgoing the housing market and becoming perma-renters. Here’s why:

According the National Association of Realtors, 5 to 6 million families will become new renting households in the next 10 years.

It’s just one more piece of evidence that shows renting is on the rise — and the trend away from home ownership is here to stay.

But why? We explore some of the obvious — and not so obvious — reasons why Americans are choosing to forgo the housing market and become perma-renters.

Renting is the new buying

For many Americans, it seems that renting really is the new buying. In a post-recession economy, one might expect that renting has become popular because more people simply cannot obtain mortgages.

According to at least one real estate survey, that’s not necessarily true. Less than one third of renters cited an inability to get a mortgage as a reason to continue renting. 43 percent of renters said that they just don’t want to own homes. Another 39 percent reported that they plan to continue renting because they enjoy it.

For these Americans, a renting preference is likely driven by the flexibility and amenities that renting offers. It’s easier to move when you want, convenient to have a landlord who takes care of repairs, and nice to be able to afford living in the neighborhood you prefer.

For many renters in cities where the cost of living is high, renting allows them the option of choosing neighborhoods where they couldn’t afford to buy. Renting can be a realistic, reasonable long-term choice that allows for an enviable lifestyle.

Personal reasons to rent

There are also personal and philosophical reasons why it’s better to rent rather than buy a home. Freedom and flexibility are often cited by younger renters as reasons why they prefer a lease over a mortgage. While the idea of putting down roots and building a family nest through home ownership appeals to some, others see home ownership as a trap, a limiting life choice that locks them into a 30-year mortgage agreement and keeps them from moving around and exploring life.

For some, renting also means having more time to yourself. Have a broken dishwasher? Just call the apartment community maintenance department, and they’ll be up to fix it in a few hours — with no time or money spent on the renter’s behalf. Home maintenance is time-consuming and stressful, and renters enjoy knowing that the stress of tending to home maintenance doesn’t fall directly on them.

For these reasons and more, renting is becoming a very appealing lifestyle. The idea of home ownership as a rite of passage and a symbol that one has become an adult no longer holds true for everyone. While there are still many positive aspects to home ownership, there are just as many reasons to rent, instead!

Source: Apartment Guide

Rent or Buy? More Choosing to Rent

05 Aug 2013

Posted by Joseph Coupal

Homeownership has always been held up as the American Dream. But it took a major hit during the Recession, slamming home values. As a result, despite a rebound in much of the country, even some affluent homeowners are weighing whether it makes sense to become permanent renters - and are asking planners for guidance.

Many former owners have already joined the ranks of renters. According to a March report from the Federal Reserve, 16 million Americans became homeowners between 2000 and 2006, while 700,000 became renters. However, in the five following years, 1.2 million left the ranks of homeowners, while 4.2 million new renters emerged.

The report also found that an apartment building boom followed. Remarkably, the report added, this happened "even with housing affordability near historic highs."

The fact that people flooded the rental market during a period when one might have expected a rise in ownership, due to a combination of depressed home prices and historically low interest rates, indicates that other factors are at play.

CHANGING THE MATH

Homeownership still makes sense for many affluent clients. Yet given the economic and political climate, "the prospect for increased taxes, decreased deductions and slow growth in housing is driving many people to consider the rental alternative.

While buying has many advantages,  homeownership requires a substantial down payment, typically 10% to 20% of a home's purchase price, and will generate an annual property tax bill as well as hefty annual maintenance costs - anywhere from 1% to 4% of a home's total value, according to HSH.com, a real estate publisher.

That changes the math for some. Because the cost of buying and selling a home can be close to 10% of its value, ownership makes sense only if a client plans to live there five to 10 years. You need enough time to ride out a market cycle if necessary to cover these costs.

Of course, it's not always possible to coordinate market cycles with the need to move - so there's no guarantee that homeowners who stay put will recoup their costs or do better financially than if they had rented.

GENERATIONAL SPLIT

Renting is more common among younger adults - 43% of people younger than 30 rent, compared with 22% of those 45 to 64, and 16% of those older than 65. But while young adults in the past might have stretched to become homeowners as soon as they were able, they are now more cautious.

Some consider renting to be a long-term lifestyle choice that gives them more mobility and freedom from maintenance chores. Having reached adulthood during the Recession, they saw home prices plunge and carry no illusions that appreciation is guaranteed.

Younger affluent clients tended to concentrate on the relative difference in net after-tax payment between buying and renting.  Now, many are more pessimistic, and are "factoring in either zero or negative short-term growth."

For clients 45 and older, the primary concerns may be different. At midlife and beyond, people often make the decision to buy or rent based on lifestyle preferences or health issues rather than financial concerns, particularly if they already have substantial assets.

For older clients in particular, renting may also offer estate-planning benefits. "Trustees and estate executors are alleviated from having to sell a property, which can require improvements in preparation for sale, selecting an agent, negotiations and differences in opinion among estate beneficiaries.” "Renting also alleviates a potential liquidity drain if the house doesn't quickly sell."

Excerpts – Financial Planning

Think Before you Buy

29 Jul 2013

Posted by Joseph Coupal

Have you heard this before: Renting is like throwing your money away. Buy a house now because home prices are rising. A house is the best investment you can make. Owning a home is the American dream.

Sound familiar? Like marriage and parenthood, buying a house means you can shed the label “recent college grad” and call yourself grown-up.

But a home is not necessarily the best investment you can make. And even if you can afford it, it may not make you happy.

Peel back the packaging on those reportedly low interest rates. Those are reserved for people with stratospheric credit scores, 20% for a down payment and minimal student loans.

Also, have you met the zombie homeowners? They still walk this land. Between the peak of the market in June 2007 and May 2013, loads of homes were foreclosed on.

The foreclosure crisis disproportionately affected young people and other groups. Plenty of college-educated, employed people whose mortgages fell underwater and, credit rating be damned, they opted to abandon their homes.

Home prices are rising now, and Zillow estimates they will go up 7% in the next 12 months. But from peak to trough, most homes lost a large percentage of their value.

Recent studies show that high rates of homeownership can actually dog a region’s economic growth. A May study showed that when a state doubles its homeownership rate, a doubling of unemployment later follows. An increase in homeownership led to lower levels of labor mobility, longer commute times and fewer new businesses.

If you plan to stay in a home for less than 7 years, it’s better to rent than buy.

“Many say you shouldn’t use a house as an investment. Investing in the stock market or some other vehicle is a better choice,” said Svenja Gudell, senior economist at Zillow.

Seattle Times

Rent or Buy Your Next Home?

10 Apr 2013

Posted by Joseph Coupal

Many people consider owning your own home the American dream, but no dream is one-size-fits-all.
 
While owning a home can increase your net worth, there are potential downsides as well -- additional labor, hassle and cost, to name a few. In many cases, renting an apartment makes sense.

How can you know which is best? Here's what you need to consider:
 
The minuses of homeownership: Owning a home is a huge time commitment. When you rent, maintenance is someone else's problem and repairs are solved with a phone call. When you own a home, you take on the rolls of maintenance and gardener. When something breaks, you need to fix it.
 
Homeownership also limits flexibility. When you buy, you should plan to keep the house at least five years, because transaction costs -- agent commissions and other sales expenses -- are high. Sell too soon and you won't recoup those costs.
 
The pluses: One of the joys of homeownership is investing time to make it yours and make it worth more. What you can do to customize a home you own is limited only by your imagination, budget and local zoning restrictions.
 
The bottom line: If you want to stay mobile, if you don't enjoy home improvement projects, rent. If you're staying put and watch a lot of HGTV, buy.

Money
The minuses: If you rent, you'll pay the first month's rent, a security deposit, and maybe a pet deposit. Buying means a down payment, closing costs, and other major expenses, not to mention the additional expense of repairs and maintenance when you own a home.

In 2010 the average annual homeowners’ insurance premium was $909. Property taxes vary widely depending on where you live, but run from hundreds a year to thousands.

The bottom line: If you don't have the money and/or credit score necessary to buy a home, the question is moot. But if you can afford to own a home in a desirable area with an expanding population, you'll probably be rewarded financially.
 
One way to run the numbers is to use buy vs. rent calculators. But, while those are certainly helpful, the answer you get from a calculator will depend on the information you provide -- some of which you can't possibly know.
 
For example, among other variables, most calculators will ask how much the house you're buying will appreciate annually, as well as how much equivalent rent will increase over time. These are questions you cannot answer.
 
Buying a home? Don't get in over your head, keep these thoughts in mind:

  • To lower the risk of homeownership, buy only what you need, not the most expensive house you qualify for. The average house in 1950 was less than 1,000 square feet. Today it's more than twice that. Remember that whatever you buy, you're going to have to furnish, heat, cool, insure, clean and maintain it.
  • If you have bad credit and only qualify for a high-interest mortgage, it will cost you tens of thousands of extra dollars over the life of your loan.
  • The more you put down, the less you borrow and the less risk you take.
  • Finally, if you decide it's time to buy, hope for appreciation, but don't count on it. However, if the community you're living in has both expanding employment opportunities and population, prices are likely to rise over time.  


MSN Money

Should You Rent or Buy?

14 Sep 2012

Posted by Joseph Coupal

Considering all of the volatility in the housing market in recent years, does it make sense to own a home? Or is it better to rent an apartment?

It used to be that the American dream included owning a home. Now the pendulum seems to have swung dramatically in the other direction. Since the housing bubble burst, some are beginning to rethink the conventional wisdom that owning a home is a good investment, even though declines in home prices have made purchasing and owning one somewhat more affordable.

Home prices and interest rates are only one consideration, as many found out during the housing market bust. Home ownership is great if are going to settle in the same place for around 10 years and can continue to afford the payments. Unfortunately, these circumstances can be unpredictable.

When deciding to buy or rent a home, financial considerations are important, but lifestyle issues should also be taken into account.

Be sure to consider everything when it comes to homeownership; benefits should be tempered by other considerations. Taking on a mortgage obligates you to live up to the terms of the loan for years, and homes typically require a significant investment in maintenance and occasional improvements. And as far as an investment, there's no guarantee you will be able to sell your property for more than what you paid for it.

Renting is a realistic starting point for most. As your savings grow and your credit score rises, you might be in a position to qualify for a mortgage and make the leap to home ownership. But choosing the right time to buy is important -- you need to feel secure that your sources of income will be there for the long run.

Lifestyle considerations. Personal traits and current life circumstances are other considerations as you assess whether to buy or rent.

Homeowners should be up to the task of maintaining their own property; from lawn work to minor home repairs. It also means being able to pay for professionals to do occasional work, including plumbers, electricians and carpenters. Renters enjoy a more maintenance-free lifestyle.

Another issue is the need for mobility. Those who are quite certain they can count on their job being in the same area can feel more comfortable making the jump to home ownership, provided they can afford it. Those who expect to be on the move for a job change or educational opportunities in the next three to five years might appreciate the relative mobility they have as a renter.

What's right for you?

There is no "one-size-fits-all" answer to the question of whether you should own or rent your home. A good starting point is to honestly answer questions such as:

Are you comfortable with your current life circumstances and income stability?

Are you disciplined in managing your expenses and paying off debts on a timely basis?

Are you fairly confident you won't be required to move to another city or area in the next five years for personal, work or education purposes?

For more information on renting or buying, visit HHHunt Rent vs Buy.

NOLA.com

The Hidden Costs of Owning a Home

23 May 2012

Posted by Joseph Coupal

Low mortgage rates and more affordable home prices are creating an interest in homeownership by those who live in apartments. However, potential buyers who are unprepared for the true cost of owning a home may be shocked by the bite homeownership can take out of their wallet in addition to their mortgage payments.

Inspection and Appraisal Fees
Before you purchase a home, you need to pay for a home inspection, and an appraisal, possible even inspections for pests or radon. The costs of these inspections are borne by buyers and are a necessary protection to avoid buying a flawed property or paying too much.

Closing Costs
Buyers need to be prepared with the cash for anywhere from 2% to 4% of the mortgage balance depending on your area.

Taxes
As a homeowner, you'll need to pay property taxes, which are generally part of the escrow you pay into each month. Remember, even if you have a fixed-rate home loan, your property taxes could go up and increase your monthly housing costs.

Insurance
Your lender will require home insurance, the cost of which depends on factors including the construction materials of your home and the location. Even if you have renter's insurance, you'll find that home insurance costs more because you are paying for the ability to rebuild your home in addition to replacing your personal possessions. Insurance costs will rise over time, and you will need supplemental insurance if you live in a flood zone.

HOA and Condo Fees
If you buy a home within a homeowners' association or a condominium association, you'll be required to pay a monthly or quarterly fee. These fees can rise, or your association may need to charge a special assessment for projects such as repaving the parking lot or repairing a roof.

Utility Bills
Depending on where you live, your costs for electricity, gas and water could be higher when you move into your own home than when you live in an apartment. You may also need to pay for garbage collection along with your Internet, cable and phone bill.

Furniture
While this is essentially a discretionary expense, most people who move from an apartment to a larger home need to buy at least some new furniture.

Lawn Care
Whether you handle your yard work yourself or hire a professional, you will have to pay something to keep your landscaping in check. Lawn equipment can be costly and you may need a snow blower or a leaf blower, too.

Maintenance
Home maintenance costs time and money. While you may be able to change your furnace filters, clean your gutters and keep your appliances running smoothly yourself, you may also need to hire a contractor to clean and inspect your chimney and to keep your heating and air conditioning system in top shape.

Repairs
While maintenance tasks can be predictable, the most costly part of homeownership typically comes with unexpected repairs such as replacing or repairing the roof, removing a tree, or paying for mold mitigation in a damp basement. The list of possibilities is endless, so homeowners should set aside savings for an emergency. Experts suggest budgeting for 1% or 2% of your mortgage balance as a yearly maintenance and repair fund.

The Bottom Line
Buying a home costs more than you think. If you don’t expect to stay in your home for at least seven to 10 years, for more information visit HHHunt Rent vs. Buy.

SF Gate

The New American Dream Through Renting

16 May 2012

Posted by Joseph Coupal

In the American mind, renting has long symbolized striving rather than achieving. But as we climb our way out of the Great Recession, it seems something has changed. Americans are getting over the idea of owning the American dream; increasingly, they're OK with renting it.

Homeownership is on the decline, and renting is on the rise. But the trend isn't limited to the housing market. Across the board, Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to a Rentership Society.

The unsentimental fact about the American dream is that Americans never really owned it in the first place. For the past three decades, especially, consumers haven't so much bought their quality of life as they've borrowed it from banks and credit card companies.

Now consumers are following the example of corporations, becoming more efficient. And it starts at home.

Housing is the biggest single component of consumption in the U.S. economy and the source of much of our present misery. The typical consumer spends about 32% of his or her budget on shelter. In the last decade, that generally meant borrowing a lot of money to take "ownership" of a home.

During the boom, the home ownership rate grew steadily, peaking at a record 69% in 2006.

Ownership-boosters failed to note that homes purchased in 2005 and 2006 with no-money-down, interest-only mortgages weren't really bought. They were simply rented until the "owner" flipped them or walked away from the mortgage.

In the post-bust climate, renting has emerged as a much more economically efficient way to pay for housing. A one-year lease represents a far less onerous financial obligation than a 30-year mortgage. It's difficult to get into too much financial trouble as a renter. The home ownership rate has fallen from its peak in 2006 to 65.4% today.

For an increasing number of Americans it makes more sense to rent. According to Moody's, by late 2011 it was cheaper to rent than to own in 72% of American metropolitan areas, up from 54% a decade ago. And the more people who do it, the more socially acceptable and desirable it becomes. The decline in the ownership rate means that about three million more households rent today than did at the height of the bubble.

It's tempting to view the rise of renting as an economic step backward. But many would argue the rise of renting is a sign of a system adapting to new realities.

The U.S. economy needs the dynamism that renting enables as much as, or more than, it needs the stability that ownership engenders.

And the rising popularity of renting is hardly contained to the housing market.

Finally, perhaps, Americans are absorbing a piece of wisdom from Thoreau: "And when the farmer has got his house, he may not be the richer but the poorer for it, and it be the house that has got him."

Read more information on Rent Vs Buy, visit our website by clicking HHHunt.

Wall Street Journal


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


Delivered by FeedBurner