Buy or Rent
Lots of talk locally about the lack of affordable housing, high on the list of priorities of the new mayor. The trend nationwide, according to FIU, “Demand for homeownership is still trending downward in major markets, the new Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index reveals.” Bottom line: should you buy or rent?
The current index scores suggest that housing prices have far
outpaced the cost of renting, providing an opportunity for families to rent and
reinvest in a portfolio of stocks and bonds in order to create wealth.
Buy or Rent
What a conundrum
we face trying to decide whether to buy vs. of rent the place we call home and
the place where we lay your heads. There are many benefits to owning a home as
you’ll see. If you are planning on moving in the next 12 months, however,
renting may be the better option. Today in the U.S. we have the lowest
percentage of homeowners since the 1970s and we have a high percentage of
potentially huge home buyers, the millennials, renting or living at home.
Should you rent or buy?
– if you don’t know how long you will stay in a particular area, rent instead
of buy works well
stability – many young people, seem to change jobs frequently, renting works
– is either poor or not well established. The good news here for renters is
that on-time rental payments can
instability – It is hard to make a long-term
commitment to a house when you have worries about a stable income
maintenance expenses – when something breaks, you just call the landlord.
Maintenance can add significantly to the cost of home ownership.
down payment – sure you may have first and last monthly rent due when you move
in plus a security deposit, however it’s nothing compared to 3% to 20% down
payment required when you buy a house.
may be closer to work in an apartment than with a house you can afford.
– many apartment complexes offer a pool, gym, meeting, and rec rooms. Like
college dorms for adults and you are surrounded by a circle of friends your
– they are afraid of another housing collapse that could send them down the
Should you buy or rent?
- The biggest reason to buy is equity build. Mortgage payments go to the bank, as you gradually pay down the mortgage.
- Landlords generally raise rents, especially if the market for rentals is tight as it is now. With a 15 or 30-year mortgage, your payment is fixed.
- A symptom of inflation is housing going up in price over time. Many cities, before the recent housing downturn, experienced 7% increases each year, which doubles the house price in 10 years and increases your equity.
- Should you buy or rent? Rental payments are not tax deductible. The interest paid on a mortgage is deductible on your tax return, as are property taxes. You can look at it as Uncle Sam helping you buy your house.
- Creative control – you want to paint a wall purple, tear out a wall, hang every picture you have, no problem. There is no permission required. You also don’t hear foot traffic from a tenant up above you or a stereo blasting.
- A house is your castle, your rock. You could write a poem about ownership. A house is private property, and for the most part, we still protect private property rights.
- The government is working hard to make home ownership affordable. The rates on mortgage insurance have been reduced, and banks are being encouraged to make mortgage loans.
- Should you buy or rent? Interest rates are the lowest they have been since the 1970s.
interest – one way to get rich in real estate
Suppose you buy a house for
$300,000 and put down $30,000. At 7% appreciation per year, for example, the
house doubles to $600,000. Assuming you didn’t take out a bunch of home equity
loans to buy toys, your equity in your home would be $330,000, an eleven-fold
increase, not counting any reduction in your mortgage.
The buy instead of rent
argument has good reasons on both sides. As you age and have families, your
needs change, and some points become more or less important.
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