renting a home

Renting vs. Owning a Home

In this real estate market are you better off owning a home or renting? Kiplinger has the answer in this short video…

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Homes: Rent or Buy?

Before the bubble burst, buying a house was almost always smarter than renting. Is that still the right choice?

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Rent or Buy: What Works Best for You?

Rent or Buy: What Works Best for You?Millions of Americans have received foreclosure notices over the past few years, forcing many former homeowners into the rental market. The increase of renters (many of whom used to be owners) has driven up rental rates in many areas, making the once easy to calculate formula of renting versus buying a little more difficult.

When deciding if renting is a better option than buying it’s best to compare the numbers on a long-term scale. First list the expenses you will have to pay when buying a home.

Costs buyers have to pay include:

  • Down payment
  • Closing costs
  • Monthly mortgage payment (principal/interest)
  • Property taxes
  • Homeowner’s Insurance
  • Association fees
  • Utilities
  • Renovations
  • Maintenance

Fees associated with renting include:

  • Initial rent deposit
  • Rent
  • Utilities (some utilities may be paid by property owner)

Renting v. Buying: Benefits

The list of yearly and monthly fees associated with renting may lead many to believe that renting is significantly cheaper than buying. However, while renting may serve as a good temporary option, buying a home is a better financial decision because the cumulative amount of money spent over the years could pay off your principal instead of adding equity for your landlord. You will also build equity in your home and earn the option to refinance to make home improvements or simply have extra cash in your pocket.

In today’s current economic climate, your long-term and short-term goals most likely include saving money. By renting, you have a roof over your head but you are prolonging the financial freedom and benefits of owning a home that many Americans enjoy everyday.

Some of the benefits of owning a home include:

  • Tax Deductions – mortgage interest and property tax obligations are fully deductible for both federal and state income taxes. Additionally, many closing cost and fees for your loan application and appraisal may be deductible immediately or when you decide to sell your home. Also if you have a home office, your cable and phone bill can also be deducted.
  • Equity – Equity is the portion of property you actually own. Needless to say, you can’t build equity as a renter. Moreover, there is a new trend in home owning called equity builders. This group of innovative homeowners picks a short-term home loan (usually a 5- or 7-year ARM) and adds money to their monthly payment to decrease the principal balance at a faster pace. Equity builders shorten the length of their home loan, lock in low-interest rates, and own their home faster.
  • Option to Borrow – Equity can be used to secure a loan or obtain a line of credit. Your increased buying power can lead to home improvements or even the purchase of an investment property, expanding your portfolio of assets.
  • Appreciation – While it’s hard to imagine right now, current record low home prices means you’re likely to sell your home in the future for more than what you paid for it today. For example, Harvard University’s Joint Center for Housing Studies suggests that a buyer who makes a 10 percent cash down payment with an annual home appreciation rate of 5 percent could expect a 225 percent return on the cash after five years and a 623 percent return on the cash after 10 years.
  • Freedom – Renters typically renew their lease every year. This gives landlords the freedom to increase rent from year to year if they want to. Buyers have exponentially more freedom to do everything from permanent décor decisions to locking in on low mortgage and interest rate prices.

The decision to rent or buy a home should be made with long-term goals in mind. If you’re considering renting because of a foreclosure on your credit record, understand that renting is a temporary option that should be used as you repair your credit. Renting offers an alternative for people who are not yet in a position to buy. If you use this alternative as a time to save, repair your credit, and position yourself for the future, the American dream of homeownership will be an attainable goal for you.

Everyone’s financial situation is different, and whether to buy a home or rent a home is not a one size fits all equation. If you’re still not sure whether buying a home or renting a home is best for you, talk to us. We’ll help you draw out comparisons that will include your specific financial situation.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Buying is Cheaper Than Renting in Most U.S. Cities

Home prices have taken such a beating and demand for rental units has increased so much that it’s now cheaper to buy a two-bedroom home than to rent one in most major U.S. cities.

According to real estate web site Trulia, buying was cheaper than renting in 74% of the country’s 50 largest cities in July. In just 12% of the cities, renting was cheaper. In the remaining 14% of cities, renting was less expensive but close to the cost of buying.

Factor in rock bottom interest rates and the tax perks of owning a home, and for those who can afford it, it certainly is a buyer’s market.

Should you rent or buy?

The buy-rent calculation is just one part of the decision-making process. Other factors include:

  • How long you plan to stay. If you’re not keeping the home for several years, transactional costs of buying and selling (e.g; commissions, closing costs) can wipe out any buying edge.
  • Whether you have cash for closing. It’s not easy to find banks willing to lend more than 80% of the cost of a home. That means buyers have to come up with 20% down, plus closing costs. On a $200,000 home, that’s $40,000.
  • Whether you can cover all the homeownership costs. It’s not just the mortgage: There are property taxes, insurance, heat, utilities and regular maintenance.
  • Whether you can claim the tax advantages of homeownership. Mortgage interest is deductible and can shave a lot off tax bills but this benefit accrues mostly to high income earners with substantial mortgage payments. Many borrowers claim the standard deduction on their taxes and so derive no savings from the deduction.

Even where it’s cheaper to rent, it doesn’t necessarily mean renters will come out ahead. Depending on where they live, renters may save on monthly expenses but, unlike the forced savings of mortgage payments, they won’t have anything to show for their monthly payments in the way of savings.

Ultimately, however, the decision whether to buy or rent depends on each person’s situation and their plans for the future.

Talk to us about the rent vs. buy calculations for your particular situation. We’ll help you determine which is right for you.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Owning Versus Renting a Home

Owning versus renting is both a financial decision and an individual one. Arguably, renting provides more flexibility and freedom, the freedom to move when one wishes (depending upon lease terms of course) and where one wishes. As a renter, one has little or no real responsibility for repairs, maintenance, and other costly and time-consuming aspects that home ownership can bring. Ownership offers it’s own advantages, including tax benefits and growth of equity.

A renter has little control over the property. While home ownership has its costs, it has its advantages as well. Owning a home provides the opportunity to gain equity in the property, which historically has contributed the largest portion of a families net worth. Consider that as a renter, one is essentially paying the landlord’s mortgage without the benefit of increased equity. Costs of ownership are potentially countered by tax benefits, depending on an individuals financial situation. While home ownership typically requires a large initial investment, significant responsibilities, and ongoing maintenance costs, for some people it can provide a feeling of stability and can help to strengthen one’s credit profile.

In a rational market, mortgage interest plus property taxes plus maintenance costs will roughly equal rent. However, with the impact to housing markets over the past few years, many experts cite that housing has dropped so much that the debate of owning versus renting is currently leaning toward home ownership. When housing prices are suppressed and interest rates low, it bears mentioning that while rents can typically increase year after year, the mortgage costs of a fixed-rate mortgage will remain unchanged over the term of the loan. The financial considerations are simply an analysis of the related cost of owning versus renting. One of the considerations that needs to be factored into the decision is the value of alternate investments that a renter may be able to put any excess funds into. If money spent on maintenance and paying down equity is invested wisely, can an alternative equity be created, and if so is it greater than the equity gained via the real estate market and home ownership?

To determine a preferred scenario, one should evaluate the local rental market to establish current rental rates, and also compile the estimates to consider the complete cost of ownership. Far too often, people neglect to include all the cost associated with a house and just focus on the mortgage. Remember that ownership costs can be any expenditure associated with possession and maintenance of the property.

Once the data is in hand, it is more likely that an informed decision can take place. Remember the financial and emotional magnitude of the decision to rent or own is a highly personal one. It is important to analyze the costs and financial benefits of both renting and owning to determine which is best for one’s own situation. The emotional benefits of either, be it the flexibility of renting or the stability of owning also need to be weighed, and in fact, may be the more critical factor for many.

If you have questions about how to best determine whether owning or renting is best for your individual situation, contact us. We’ll be happy to sit down with you and go over the pros and cons of both to see which scenario would work best for you.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.