bcos u can take a house on rent many time but buy only a time.
Of course... EVERY REALTOR on Earth will tell you... BUY BUY BUY! But... let me give it to you honest as the day is long.
Renting has its place. If you are in a job that may move you around, or your income is not stable... renting may be a better option. You don't have to worry about the upkeep of a home or apartment, as the landlord will fix anything that is not working. If you are in a condo or apartment, you don't have to worry about taking care of a yard. It depends on what your short term goals are....
Now... if you look at this from a financial stand point. Renting is throwing money away and building equity for your landlord. My dad use to always say "Rich people charge rent.... Poor People pay it!"
If you buy a home - here are the perks:
Usually, you need LESS OUT OF POCKET - There are tons of zero down loans out there!
Usually, payments are lower than rent for the same home
You will build equity and have something to show for your money... kinda like a savings account
Homes appreciate in value - it will be worth more than you bought it for after a period of time
You get Tax Benefits... You can't write off rent, but you can write off interest paid on a home loan!
There plenty more reasons why buying is better... In this market... seller's are giving away the farm, prices are down, interest rates are at an all time low, the government is giving away all kinds of down payment assistance programs, sellers are more apt to pay your closing costs, etc. The market is awesome for buyers.
You have to decide what is better for you in your current place in life... Here's a thought. What happens if you buy a home, but need to move... well.. you can rent it out! Make positive cash flow on a home and earn extra money. There's another perk of owning vs renting.
Not too many benefits to renting, but sometimes it may fit your short term goals a little better. No one will know that one better than you!
Jason C Campbell
Realtor / Mortgage Loan Officer
Keller Williams Realty
Great question and I'm sure you'll find multiple answers to a question of this nature. Here are some thoughts:
Buying a home with cash (your own money) can have its rewards. Not having a mortgage to pay and having full equity of the home available can make life a bit easier in the liquidity sense. Of course, having to lay out that much cash does have its disadvantage - you're less liquid (although you sell or refi the house to gain liquidity, there are no guarantees that you can do it quickly or for the amount you need). Owning your home outright does provide a guarantee of having a roof over your head without the fear of things like foreclosure though.
Taking a loan and purchasing a home with someone else's money has advantages too. First, you're laying out less cash and keeping more of your net worth in a liquid state - therefore if you need cash immediately, it's available and ready to go. Although you will pay more for the home in the long run thanks to interest on your loan, rates are currently quite low, so you'd pay a lot less in the long term than you would have a few years ago. With the mortgage interest tax deduction, if you itemize your deductions you can save a few pennies heading to the tax man each year (this can be extra advantageous if you typically pay out each year on your returns - I saw a rather high tax return virtually disappear when I bought my first home). You're also helping your credit profile as you pay each bill on time. Of course you also have a large debt on your credit report, which could slow you down if you were looking to make other large purchase (ie your debt ratio becomes too high for someone to be wiling to loan you money).
I would sit with a financial adviser and talk about your short term and long term goals to help determine what is best for you. Personally, I like the idea of a hybrid plan if people can afford it. Take a 30 year loan, put down what you can, and work to pay it off early (15 years or so). You'll get the advantages of the tax deduction, but will own the home outright in a shorter amount of time and build equity faster. Of course, it really needs to be looked at with a focus on your plans and goals, which is why I recommend speaking to a financial planner you know and trust.
Hope that helps!
Matt Stigliano, Realtor®
"Your all access pass to San Antonio real estate."
I advise all my clients to think long term when they're judging their home as an investment. Much like going into your stock portfolio daily and having a heart attack with the rise and fall of many investments, you're better off looking at the long term picture with them. I'm also a big fan of getting clients to think of a house as a home first (as long as they're using it as a primary residence) and an investment second. Not to knock the investment potential of a home, but some people's views (especially in markets like CA, where I used to live) were leaning towards all investment. People were buying houses not for their comfort, but to make money. While there is nothing inherently wrong with this, it lead a some people to a bad place when the market swiftly declined. They were banking on an investment and when the positive returns didn't materialize, many were doomed to foreclosure.
Of course, having said all that, I do believe a home is a great investment and think that when buyers buy with the right desires and expectations, they will win in the long run, no matter where the market goes from day to day.
"There is never a bad time to buy real estate, only a bad time to sell."
Josh, I am not sure who this person was, but he was wrong. There is certainly a bad time to buy real estate, just like there is a bad time to buy stocks or any other investment. And I would argue that right now is a bad time to buy real estate. Every indicator is pointing to prices declining (disclosure - I bought a house in March, I do not want home prices to decline). The credit market is tightening, unemployment is rising, disposable incomes are decreasing (due to year over year increases in heating, food, and other costs). If you can wait for a year, I would recommend you do so. Also, inflation is becoming less of an issue as the $USD has been increasing in value, and that reduces the risk of the fed increasing interest rates.
If you wait a year to buy, there is very little risk and a lot of room for reward.
Scenario 1 - You buy now and the value of your home decreases over the next year. I think you could argue that you bought in a bad time to buy.
Scenario 2 - You buy in a year and prices decreased. You got more of a house for your money.
Scenario 3 - You wait a year to buy, but over that time the market bottomed out. Most people argue that the market is not going to have a "V" like recovery. More likely, it will find bottom and stay there for a while. So, you bought at the bottom of the market, still a good move.
Scenario 4 - You waited a year to buy and the market recovered, increasing prices by 2-3% (average historical increase). Ok, in this case you lost a little buying power. The question for you is whether or not you believe scenario 4 is the most likely scenario given the economic indicators.
"There is never a bad time to buy real estate, only a bad time to sell."
In the long run, you can always bet on real estate coming out on top. So, if everyone is running for the hills, that is the best time to get a deal in my opinion.
As someone who I guess has been watching the housing market here in San Antonio and mulling this over, I assume you're seeing what we're all seeing. There are a lot of homes on the market, they are staying on the market longer, and many are being reduced in price. Those indicators alone would suggest a good time to buy.
Rentals are up in our area (I know because I work closely with a property manager in my office) and because of that many rental rates are rising in popular areas.
The big question is the same thing I tell all my clients. If you think you're ready and able to buy and still live within your means, then its always a good time to buy. Trying to time the market is a delicate balance, but we're seeing great interest rates plus all the aforementioned indicators which makes for a favorable climate for buyers.
Somethings to consider when weighing your options are how long you plan on staying in a home (especially here in San Antonio where we do usually come out on top with appreciation, but its a constant, slow, steady growth as opposed to places like CA where they experience rocketing highs followed by devastating lows) as a few people mentioned. The other things to take a good look at are your own personal economic factors - your credit scores and your available funds (for downpayments, closing costs, and things such as inspections, appraisals, and surveys). If you're in a good place with both and know you can afford to pay a mortgage long-term, then its a good bet that buying is the better choice.
If you have a lender you trust, speak to them and have them run some numbers for you. They will take a good look at your financials and come back with what you can afford and let you know what it will cost you monthly. If you don't have a lender, us Realtors always have ones that we know and trust to help our clients, so feel free to ask someone for a referral. I personally avoid lenders who ask for any fees up front (some charge to run your credit) as I think its an antiquated practice that does the client no good (a credit check isn't expensive, but a good lender will do it in order to help get the loan).
One word of advice of that pre-approval from a lender, be prepared to look slightly above and well below that magic number. Why? Looking below never hurts your bottom line (if a lender approves you for $1000 a month and you wind up paying $900 a month - you can see the benefit) and looking slightly above in today's market doesn't hurt as long as you know what your "ceiling" is for your final offer (ie, you are approved for $100,000, so you look at $110,000 and offer $100,000 - you get the picture). I definitely don't advise you to go above your own personal ideas of a limit (some of this pressure is what helped homeowner's buy beyond their means and helped create some of the foreclosures we see today). You know what you can comfortably afford, don't go beyond it unless its justified (tax benefits outweigh the higher monthly payment for instance).
Hope that helps, any other questions, feel free to ask. You can find my contact info on my site (if you wish to speak one-on-one) or feel free to re-post here.
Have a great day!
He was a bit amazing to go library to check out books and learn how to finish his attic and rent out to a single girl who work on two jobs, seldom home, (and, interestingly, later became his wife!!!)
He himself doing two full time jobs and one part time job, and left home 6am and not home till after midnight... (and of course he got no time to date :-) If you want to hear more of his story, you would get lots of motivation ...
So, if you rent from individual investor, even may be $100 higher rent, you may be able to insist a clause, saying, you can break the lease with 60 days notice at the situation you got laid off. Many IT professionals from India often sign a 6 month lease with landlord because their Wall St computer contract often starts with only 6 months.
When a tenant lost job, s/he may get a 6 month unemployment and ride thru the rental lease, then what? Keep in mind, a person without job still need to have a place to call home, but without a job, no apartment I know would pass your credit check to rent apt to you.
When a condo owner lost job, s/he may also get 6 month unemployment and ride thru the condo ownership, paying monthly fee. But, if not able to find another job, the owner can rent out part of the condo to get rent to pay the mortgage to get by till find a job again ...
Yes, when you are a owner, you decide how to use the condo, but when you are a tenant, they may not let you sublet part of your apt or house to someone else.
It happens to my friend who owned a 1br 1ba condo with basement back in 1987 when he bought at market peak then for $110,000 and too bad, he lost job 6 months later. but then he decided to move to basement, and rent out the 1br at $350 to a student couple, and use that to pay most part of the mortgage. Later, the student couple moved out to a garage converted unit for $300, just $50 cheaper, and he moved up to 1br and rented out big basement for $400, even more... Then his wife went to do waitress job, so he and his wife did not need to spend money on meals, restaurants always cover lunch and dinner and bring home left over.
This won't happen if you are tenant of a 1br apartment, they won't let you sublet.
I also have another friend whose dad lost job and mom rented out rooms to students, and mom even cook for the graduate students with more income, and their 5br house was able to collect enough rent to pay the mortgage and tax till situation improved. When I visit them during those years in 1980's, you can't believe so many people living in a house at night (but during day time, students all gone, it is kind of empty, and they also go to libraries at night till sleep time...)
So, own and rent have such big difference.
You can use analysis matrices, and analize all kinds of data, but the bottom line is that when you can buy, you should. Buy low, take advantage of the Buyer's market, hold for at least two years to avoid capital gains, and enjoy your life!!
Let me know if I can help! I work with first time homebuyers and investors as well!
That is if you will be in one place for a while. If you move frequently you may not have appreciation to cover expenses in the short term.
Keep in mind that this week Congress is working hard on a bailout plan for the lending industry. There are home loans attached to this bailout, and those homes could be purchased very low and sold back to the general public at excellent deals. If they do this, the lending industry gets healthier, the government has made a great investment, and the general public will take over these homes at values below the market (but above what the government paid for them).
Of course, you also pay for the "vacancy" of the unit when you rent. say, it was vacant for two months after previous tenant moved out, and owner need to clean and pain and show before you come to rent, so all the cost on these two months will be passed to you, the tenant.
Also, depends on where you live, the rental market may be very tight if in your area people do not buy, so you will have more renters to compete. In that case, if you buy, you may have more choices and may be pay lower than you were supposed to...
And, of course, it also depends on your affordability. I would say I would buy, but I would buy a home based on I can pay down 20% to get lower home owner rate and no PMI insurance, and I would buy as small as I need. If I need just a 1br condo, I would NOT buy a 3 br townhouse. This will give me a good way to adjust.
For example, if two years from now, I lost job, or housing not yet jump again, I will rent out 1br condo (always remember, when people do not buy, they rent, they always need to live somewhere!) at good rent, and use it to buy a 2br condo to move up. Then continue the process if housing market not yet jump, I will then buy 3br townhouse and move up and rent out 2br condo... etc.
Eventually, I would live in a 5br house, and when real estate jump again, I would sell all 1br, 2br,3br, and 4br to realize the profit. This is pretty much what my friend Helen did, and now she lives in a big house that is paid off with all her gain on other condos she bought in 1990's and sold years ago at real estate boom. She also got some rentals and collecting great rent, and of course, she got millions cash in the bank.
If you are going to stay in the home for 7 years or more, now is a great time.
If you are looking new let me know if I can help.
Talk to you soon,