To Rent or Buy?

To Rent or to buy? That is the question.

In recent years, the housing market has taken a significant and seemingly abrupt nosedive. While this is bad news for homeowners and home buyers, it is not such bad news for those who are looking to rent a home.

If homeowner loans are what you are seeking, be prepared to prove that you have impeccable credit, a steady and verifiable source of income and a lot of patience.  The aftermath of the mortgage and banking crisis has dramatically decreased the availability of homeowner loans. Mortgage loans and home equity loans (homeowner loans) are now all that much harder to secure.

The benefits of owning your own home are certainly good. Home ownership is a smart long-term investment. If you own your home, you can customize the interior and exterior in almost any way you like, painting, redesigning, etc. You can landscape, or not landscape, however you choose.

Some of the downsides of owning a home are the costs. The costs of unexpected repairs can quickly wipe out a savings account.  Annual property taxes are likely to go up every year based on the value of the home and the monetary penalty for not paying these on time can be quite steep.

Another downside of owning a home is that the real estate market can greatly affect the value of your home. If the amount you owe on your mortgage is greater than the market value of your home, then you’re upside down on your loan. When you own a home, you cannot just pick up and move somewhere else quickly. You have to be willing to stay put for a long period of time.

If you choose to rent a home, there are several benefits. You are not stuck in the same place for a long time; you have the freedom to move fairly quickly, should you desire to do so. You are not monetarily responsible for any repairs or upkeep costs, such as paint, appliances, etc. when you rent a home.  As a renter, you are not responsible for paying the property taxes on the home you rent. For these reasons, renting is generally less expensive, in the short term, than buying.

Renting is not all a bed of roses, however. You do not have the right, usually, to customize your living space. Meaning, you cannot paint, redo the flooring, or install permanent shelving.  Often when you rent, there are often restrictions on what kind of pets, if any, you are allowed to have in your home. The rules are all open to the homeowner’s discretion, giving you little control.

The homeowners of today, who have managed to hold on to their property, are often looking to obtain good tenants for their property. While this is not currently a seller’s market, it is most definitely a renter’s market.

There are so many great properties for rent all over the country. Be prepared to pay the first month’s rent and a security deposit at the time you apply to rent a home. This will increase your chances of getting the home and being able to move in right away.

This article was brought to you by Money Supermarket.

 

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9 thoughts on “To Rent or Buy?

  • The American dream is still home ownership. Once the economy gets better, the housing market will pick up. I think we pretty much bottomed out now so if you have any cash, it’s the time to buy. The site looks a lot cleaner after you removed some ads from the sidebar.

  • As RBF said above, buying is still the American Dream. However, I don’t think we have bottomed out. Therefore, if I were in a situation where I had to buy or rent right now, I would rent.

    There are still millions of foreclosures flooding on to the market. Everyone and their mother is trying to sell their homes. Prices don’t go up in buyers markets…by definition.

    The economy is weak and I don’t see it getting any stronger.

    I think the time to buy will be in two or three years when this housing mess is better sorted. Better to wait and buy into an uptick than to buy when the market is still dipping. There is no telling how low these prices are going to go, but I don’t think we are anywhere near the end of the falling market.

  • Before I say anything, there are risks in real estate, but those that are willing to deal with those risks usually make money. I would look for good solid neighborhoods that have fixer uppers in them and see if I could get one at the right price.

  • I am choosing to rent currently. However, I am also a bachelor and it wouldn’t be feasible to own considering I live in one of the most expensive states in the U.S. I would like to own a house eventually when I have kids, but when my girlfriend and I get married we’ll be renting for awhile. The housing market is just too risky to plunge into.

  • As much as I would like to buy, I am unsure if we will be living where we are long term since my husband knows he will not stay with his company indefinitely.

  • Home ownership is a culturally engrained aspiration whilst renting has been perceived as ‘throwing money down the drain’. There has now come a point where people are beginning to challenge these conceptions, which is very refreshing.

  • I’ve gone back and forth on this one for years. I did own a home in New York state. We’ve since moved to Silicon Valley where homes are 5x the price. My salary is 2x what it was in New York, but that doesn’t make up the difference. Out here, “starter homes” are literally a million dollars. It’s bonkers.

    While it’s expensive to purchase a home, it’s reasonable to rent.

    The major downside to renting is the looming spectre of moving. Moving is REALLY expensive and very disruptive and time consuming.

    I used to look at the rent vs. buy question as an issue of what’s the best way to spend the money. Now I realize that there’s a lot more to it than that. Being able to stay planted, where the kids, my wife and I can all build friendships with our neighbors holds a lot of value for my family.

    All that said, if I did have the funds to purchase a home, I’m not sure I would right now. The market still isn’t stable and there’s potential for another leg of recession in the economy. Should that happen, well, I think the housing market would take another hit.

    I have one friend who lost $500K on his home. He and his wife got lucky believe it or not. The value of their home dropped by $500K and the bank forgave the debt, allowing them to walk away from the house. I say they’re lucky because the got to walk away without owing the bank $500K. I have another friend who’s house has lost about $100K in value over the last two years, 25% of the value of the property. I have another friend who sold his house for $420K in Feb. Three months later a house directly across the street, with the same floor plan and in approximately the same condition sold for just $360K. It’s the wild west of real estate right now from what I can tell, at least in my area. It’s too volatile for me to consider putting in the amount of money we’d be talking about. I’m mostly happy renting.

    I expect the rents to increase in the coming years. I’m not looking forward to getting squeezed like that. But at worst it costs me between a couple hundred and a couple thousand extra for a year or two. The potential loss from buying a home that loses value is much higher.

    I will buy at some point in the future. But when I do it’ll be not necessarily because I will make a boatload of cash by selling the house in a few years. It’ll likely be because I really love the area and the house and also expect the house to at a minimum not lose value.

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