Buy Vs Rent

Buy Vs rent – which one should I chose? 

This is actually a frequently asked question that hits me from folks all over when I disclosure that I am real estate agent. Many of those folks become my clients to buy their very first home.

In a nut shell here are the many pros with some cons. Home buying offers many advantages like tax, create wealth organically.

Rent is better for those who will have to move in less than five years and you do not pay for major repairs. 

On the other hand, I used to be ‘a crusader for first time home buyers’ …I am no longer a ‘crusader’ because it pains me to explain in minute details the BIG advantages of being a homeowner over paying rent.

However I still enjoy explaining and making calculations of the many advantage of home ownership: The answer – the clear majority of times – is if you afford to rent, you are mostly, able to buy!

And with those folks in mind, I decided to put this page together – that eventually became series of pages because there is so much to look at.

Down Payment – The Biggest Hurdle

Pure and simple – the biggest hurdles people face are

•  (a) the psychological barrier of having a ‘huge’ debt to their names and 
• (b) the down payment amount – which actual can as little as 3 or 3.5% of the loan amount …for which, if you need some finance incentive, you will be able to find ‘down payment assistance’ [DPA] available in all 50 states as well as the US territories and Puerto Rico.

You can use your Roth IRA, a gift or your tax refund or a combination of those

TIP: Caution -  In most cases I would NOT recommend you use your 401K but I have seen some seem some rare cases that make sense, it will depend how your company sets up the retirement plan. Do consult your tax adviser or CPA on this one

However if you can afford to rent, there is no excuse to be on the fence …forget the buy Vs rent dilemma and jump into the ownership  

...unless:

You are going to move in less than 4 years:
Do Not Buy

The buying Vs renting considerations may require a closer look if you are likely to move away within the next 4 years.

I caution those whose job may uproot you without much time to sell the house – those in the military come to mind.

Each home buying transaction will incur some closing costs …when you buy, chances are that your real estate agent will negotiate for the seller to pay some [even most of] those closing costs

Now, as I have stated in other of my pages, it is the seller who pays the brokers to market the property and bring a suitable buyer …if you are to pay for some of the closing costs plus the brokers, it is possible that the home you are about to resale may have not appreciate enough to cover those expenses.

Do not buy if you are likely to move away in less than 4 years

…Staying in the home for five years is perhaps even a better idea.

Buy Vs Rent - Drawbacks

I firmly believe that there are ways more advantages in buying a home then in renting.

However buying a home also presents a few drawbacks. I was talking with my 13 years old daughter and she reminded me that I should present ‘both sides’ so visitors should make up their minds.

Please click to visit another page I published Buy Vs Rent – Pros and Cons where I line up all the major things I could think of to compare the drawbacks between the buy Vs rent and I point out when each makes more sense than the other.

Home value appreciation

Home value appreciation is another – very tangible - benefit of home ownership.

Historically home values have risen at or outpacing most any other form of assets …yes, there has been exception periods like the recently one that we have been through ...however, look around in whatever neighborhood you are in, home values have already recover to values before the crises.

Building Wealth Organically

It is so intuitive that you need to live some place.

The landlord to whom you pay rent every month could not do it at a loss.

Paying rent is, economically speaking, “paying somebody else’s mortgage” – pure and simple.

When you become an owner, you start ‘building wealth organically’ – each month you send a mortgage payment, a portion of that money goes towards your principal and, therefore, your equity grows steadily through the years

Buy Vs Rent: Tax advantages

Buying a home brings several tax advantages …Renting has none! 

Except for those who are self-employed that will be able to claim part of the rent on the companies tax return …however this also can be done if you are a homeowner.

Owning a home enhances your credit

Take good care of your credit before you buy a home because you will need it …but immediately after you become a homeowner, your credit scores will suddenly jump up

Rent goes up every year …Mortgage Is Fix

Rent goes up every year …Mortgage fix for 15 or even 30 years!

Buy Vs rent - There is no comparison here! If you have been renting for a while …or even if you are very young and fresh out of college dorm, you already have had the experience that your dorm price moved up during the years that you have been in college

…that was nothing else than ‘your rent going up while you studied!” …sorry to call your attention to it! 

I always joke with my clients asking: how much will your mortgage payment go up in the next 5 years on a 30 years ‘fix’ loan? Answer: zero! How about in ten years? Still zero!

The name says it all it is “fix’ – once that you close, the ‘mortgage’ part of it will never go up for the duration of the loan! Even if it is a 30 years loan. :- )

Yes, there are expenses related to ‘ownership’ but trust me, the advantages far outpace the ‘renting’

…if not, your landlord would not have become a landlord in the first place! ;- )

Pride Of Ownership

The final buy Vs rent thing that I like to point out within the many advantages and benefits buying a home, comes the intangible benefit of the ‘pride of ownership’ …to me it is only comparable of being a parent.

If you already are a parent, so you know what I am talking about …if you are not a parent yet, please go ahead and buy your home and you will also get  to know how does it feel to become a parent - LOL

Knowledge Base - This series dedicated to explore the Buy Vs Rent quest is comprised by 8 intertwined articles. I recommend that you further your knowledge by reading all of them - enjoy …AND learn!

JC Fagundes, Head Broker
EQUAL SERVICE TO ALL.
Residential. Commercial. Investments.
Ph: 404 801 4141

Return To The Top Of This Page