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Philly Urban Living

Philly Urban Living - Local | Real Estate | News | Development

By Timothy M. Garrity | Broker in Philadelphia, PA
  • Common myths about "Buying" vs "Renting"

    Posted Under: Home Buying in Philadelphia, Rental Basics in Philadelphia, Rent vs Buy in Philadelphia  |  October 11, 2013 1:42 PM  |  770 views  |  No comments

    As you all know by now, I'm a huge fan of Trulia.com. IMHO, it offers the best real estate tools, allows you to dive deep when researching real estate agents, and is more user-friendly than most other sites that advertise the same features.

    Again, totally my own opinion and nothing more.

    If you would like to try out one of Trulia's new tools, here is their awesome "Rent vs Buy Calculator"; this tool is unbelievably helpful, and simple too. Talk about user-friendly, the RVB tool not only breaks down your current cost to rent vs your current cost to own, but it even accounts for your tax bracket; which helps paint a better picture of one vs the other.

    I have written a few posts in the past about Buying vs Renting (feel free to check out Example 1 and Example 2). And no matter how many things you read online or hear on TV, it will always be a case-by-case decision for you as an individual. There is no correct answer, but if you break it down based on your own needs as a single person or family, you will find yourself with a better plan to make that decision.

    Aside from a side-by-side cost comparison, and reviewing the most common myths in this article, the most important, general question I ask all of my clients upfront is, "How long are you planning to stay?" Not only is this a hard question to answer for anyone, but it's something that can change with each passing day.

    What if I change jobs?

    What if my family grows?

    What if I don't get that raise?

    What if we have to relocate?

    What if there is a tragic personal event?

    What if ... What if ... and so on, and so forth.

    These are all very good questions, and normal concerns at that. The more answers you have, the better off you will be. But the truth is that most people don't have those answers, which is why buying real estate is considered a risky endeavor. But so is investing in gold, picking stocks, buying antiques, and even putting money into your 401K.

    They are all "Risk vs Reward" propositions, where typically the brave and well-prepared perform the best. You have probably heard the expression, "If it was easy, everyone would do it." It's true, which is why there is risk. If everyone did it, the risk would be low as well as the return.

    If you want to be in the best position possible to decide whether you should buy or rent, run your numbers and learn what works best for you and your current short/long-term goals.

    As always, I'm here to help if you have questions about it.
  • "Rent vs. Own" - Another Real Life Example

    Posted Under: Home Buying in Philadelphia, Rent vs Buy in Philadelphia, For Rent in Philadelphia  |  September 1, 2011 8:17 AM  |  2,141 views  |  No comments

    Just last week, I had the privilege of listing another beautifully rehabbed property in South Philadelphia: 1915 Fernon St (shown above). Please feel free to click here to view this property's website, pictures, and video.

    I had written a similar article back in February, where I analyzed a listed property for sale against settled/pending rentals in the area. The purpose of the analysis was to compare and contrast the "Pros & Cons" of renting versus owning; from both a financial and a preferential perspective.

    Let's look at a "Rent vs Own" comparison for 1915 Fernon St and the surrounding area:

    Option #1 - Rent (Similar homes around 1915 Fernon St)
    • Average Rent: $750
    • Upfront Costs: $2,250 (First, Last, & Security)
    • Monthly Payment: $750 (Rent) and $25 (Renter's Insurance) = $775
    • Is this considered an investment? No
    • Are there any tax benefits? No
    Option #2 - Own (1915 Fernon St)
    • Sale Price: $100,000
    • Upfront Costs: $3,500 (Down Payment, FHA), $5,100 (Closing Costs, Estimate) = $8,600
    • Monthly Payment: $489 (Principal/Interest), $93 (Mortgage Insurance), $14 (Taxes), and $50 (Homeowner's Insurance) = $646
    • Is this considered an investment? Yes
    • Are there any tax benefits? Yes
    Just like last time, I also went over some non-financial factors that can also either persuade or dissuade someone from buying a home when they have always rented.

    Here are some Pros/Cons of "Renting vs Owning":

    Option #1 - Rent
    • Pros: It has cheaper upfront costs, you are not responsible for repairs (unless you break it), and you can usually decide to leave after staying for about 1 year.
    • Cons: It's not your own home, you can't make changes/upgrades, you're subject to a landlord/landlady, your money is not invested in anything, you do not get any tax benefits, your rent can increase, and you're not really interested in what happens to this property in the long run.
    Option #2 -Own
    • Pros: You are investing in a neighborhood/community, you own a tangible asset, you have the ability to hold/sell/rent, you can make changes/upgrades, you get tax benefits, you can fix your principal/interest payment, and you could potentially gain appreciation.
    • Cons: You're not sure what price is fair, you cannot predict the future, and you may not want to stay for a few years.
    Again, based on the numbers above, it's cheaper to buy than it is to rent for this scenario. But as you can see, there is more that goes into it than just stating the obvious. It's really a matter of wanting to make an investment and a commitment, or not. There are those out there that feel like renting is a complete waste of money, time, and resources. But there are also those who feel the same way about owning.

    If you have any questions about renting versus owning, please feel free to give me a call or send me an email; I handle both kinds of situations. So for me, it really comes down to what's best for you.
  • Exit Condos, Enter Apartments

    Posted Under: Rent vs Buy in Philadelphia  |  July 1, 2011 6:28 AM  |  941 views  |  No comments

    The title says it all.

    Click here to see why new apartment projects are still popping up all over Philadelphia; especially in the strong Center City market.

    Happy 4th, everyone!
  • Should I "Rent", or should I "Buy"? Here's a real example...

    Posted Under: Home Buying in Philadelphia, Rental Basics in Philadelphia, Rent vs Buy in Philadelphia  |  February 28, 2011 2:37 PM  |  1,882 views  |  4 comments

    For those of you who read this blog regularly, you've probably seen me discuss this subject before. The reason this subject is so popular today, is because there really is no clear cut answer to the question: "Should I rent, or should I buy?" It depends where you work, where you live, how much money you have, how much money you're willing to spend, and so on and so forth...

    To make this a little more concrete, let me use a real world example. I currently have a listing in South Philly that's for sale; let's say this is where you want to live. The list price is $92,900 and the address is 2432 S Beulah St. It's a rehabbed property (floor to ceiling), it has 2 Beds/1 Bath, and is in a dense, urban neighborhood. You can walk to almost everything, and can use public transportation for the rest. This is the sort of lifestyle that most young, aspiring, urban-minded singles and couples strive for today.

    The only problem is, you're not sure whether or not it makes more sense for you to rent or buy. What you do know is that you need a place to live and this is where you want to be. So, how do you make the right decision? Well, there is no right decision per se, but you can compare and contrast the two options. Option #1 would be to rent a place just like this (in the same neighborhood), and Option #2 would be to buy this home.

    Let's look at a "Rent vs Buy" comparison for 2432 S Beulah St:

    Option #1 - Rent

    • Average Rent: $750
    • Upfront Costs: $2,250 (First, Last, & Security)
    • Monthly Payment: $750 (Rent) and $25 (Renter's Insurance) = $775
    • Is this considered an investment? No
    • Are there any tax benefits? No

    Option #2 - Buy

    • Sale Price: $92,900
    • Upfront Costs: $3,252 (Down Payment, FHA), $4,180 (Closing Costs, Estimate) = $7,432
    • Monthly Payment: $481 (Principal/Interest), $67 (Mortgage Insurance), $45 (Taxes), and $35 (Homeowner's Insurance) = $628
    • Is this considered an investment? Yes
    • Are there any tax benefits? Yes

    Okay. Now I know there are more factors involved when looking at renting vs buying, but these are how they compare financially. Still not enough for you to make a decision? No problem.

    Here are some Pros/Cons:

    Option #1 - Rent

    • Pros: It has cheaper upfront costs, you are not responsible for repairs (unless you break it), and you can usually decide to leave after staying for about 1 year.
    • Cons: It's not your own home, you can't make changes/upgrades, you're subject to a landlord/landlady, your money is not invested in anything, your rent can increase, and you're not really interested in what happens to this property in the long run.

    Option #2 - Buy

    • Pros: You are investing in a neighborhood/community, you own a tangible asset, you have the ability to hold/sell/rent, you can make changes/upgrades, you get tax benefits, and you could potentially gain appreciation.
    • Cons: You're not sure what price is fair, you cannot predict the future, and you may not want to stay.

    So as you can see, there are differences from a financial perspective as well as pros/cons. Again, everything I have just written is not how everyone perceives "renting vs buying." It was meant to look at both sides of the coin so you can see why one way might be a better fit for you than the other. I work with both renters and buyers, so I get to see both on a daily basis. Some rent when it's clear they want to buy, and some buy when it's clear they want to rent.

    There is no right or wrong answer. The only true answer is that everyone needs a place to live, so you will have to choose one of these options. Your best bet is to sit down and put pencil to paper; then compare and contrast. I hope this example helped.

  • Trulia's "Rent vs. Buy" Index - 1st Quarter, 2011

    Posted Under: Home Buying in Philadelphia, In My Neighborhood in Philadelphia, Rent vs Buy in Philadelphia  |  February 23, 2011 2:27 PM  |  1,239 views  |  No comments

    As far as big US cities go, Philadelphia is ranked around 5th on Trulia's "Rent vs. Buy" ratio list.

    To give you an example, our current ratio is listed at 12. According to the data any ratio that's listed between 16 - 20, they state that "renting is less expensive, but buying might be better." Which basically means that renting may be cheaper in most instances, but buying is the smarter move. If the ratio lies between 6 - 10, it's actually "more affordable to buy"; pretty self explanatory.

    With Philadelphia's ratio at 12, it makes it a good place to buy. Learn more here.

  • National Bureau of Economic Research (NBER) - The Great Recession...Over?

    Posted Under: Market Conditions in Philadelphia, Home Buying in Philadelphia, Rent vs Buy in Philadelphia  |  September 27, 2010 3:30 PM  |  998 views  |  No comments


    I found this article about the economy to be particularly interesting, from a media perspective. After all, the media is the one who lets everyone know if "things are good" or if "things are bad."

    The NBER, a group of economists that determines when recessions begin/end, went on record as saying that The Great Recession (the biggest US economic decline since WWII) lasted from December 2007 to June 2009. Really? To me it seems like we are still in a bit of a slump, but that's just one person's opinion.

    Let's start off by defining the term "recession." According to businessdictionary.com, the term recession has been defined as "a period of general economic decline, defined usually as a contraction in GDP for 6 months (2 consecutive quarters) or longer. Marked by high unemployment, stagnant wages, and a fall in retail sales, a recession generally does not last longer than one year and is much milder than a depression. Although recessions are considered a normal part of a capitalist economy, there is no unanimity of economists on its causes."

    Hmmm.

    If you'd like to look at "recession" from a non-textbook perspective, Warren Buffet recently went on record as saying that "most people and businesses still aren't doing as well as they were before the financial crisis." To me, that answer seems a little more down-to-earth. But who's right? The economists with the fancy title, or WB who has more business experience and expertise than almost any living person. The answer is, they are both right. The term recession may have a definition and an official economic meaning, but every individual in this country defines it differently.

    What I will say, from a Realtor's perspective, is that this is as good a time as ever to be a real estate buyer. Sellers are still very motivated, mortgage rates are unbelievably low (the 30 Year Fixed was at 4.50% today, according to bankrate.com), and the job market is slowly starting to recover. Before you know it, sellers will have the upper hand, interest rates will have increased drastically, and the job market will be back to normal.

    As my co-workers and I start to see buyers coming back into the market, it will only be a matter of time until the "biggest-of-big" real estate sales is officially over.

  • Now’s the Time to Buy, Part II

    Posted Under: Home Buying in Philadelphia, Rent vs Buy in Philadelphia, Property Q&A in Philadelphia  |  September 10, 2010 5:58 AM  |  1,281 views  |  No comments


    As you may have noticed already, I am a big fan of blog posts titled "Part II." The reason this seems to be common on my blog is because I try to keep my posts short and sweet, and sometimes I find two separate articles that focus on the same subject. Welcome to Part II of "Now's the Time to Buy."

    In my last post, I focused on educating my readers on why there is no time like the present to buy a home. Although I made some very good points, I'm sure there are many people out there who disagree with my advice; we're in America people, there's always someone with another opinion. Part II focuses on Owning vs. Renting. As someone who has done both before, I can say with confidence that there are some people who think renting is a waste of money and there are others who feel that buying is a bad decision. There is truth to both sides of the argument, but it depends on the individual who is making the decision. Here's a good article to read on the subject.

    On another note, Trulia recently did a survey to ask how Americans are feeling these days regarding Owning vs. Renting. Here are some of the findings:

    • Is home ownership still part of the American dream? Yes = 72% | No = 28%
    • How has the overall attitude toward home ownership changed over the last 6 months? More Positive = 23% | More Negative = 19%
    • Is the McMansion era over? What's the ideal home size for buyers today?
      • +3,200 Sq Ft = 9% | 2,600 - 3,200 Sq Ft = 13% | 2,000 - 2,600 Sq Ft = 27% |  1,400 - 2,000 Sq Ft = 28% | 800 - 1,400 Sq Ft = 9%

    So as you can see, even though the economy is still in slow motion people are still positive about buying a home today (although, it may be smaller than average homes in the past 10 years). Have a great weekend, everyone!

 
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