Taking the plunge into home ownership can be a rewarding step for many first-time home buyers. Before you take the plunge, look before you leap. Homeownership is not for everyone.
304 Take into consideration the pluses for renting versus owning: -Monthly costs: renting can be more cost-efficient than owning if utilities are included. The monthly cost of owning is usually more than renting after you total the cost of mortgage, maintenance, taxes, and utilities.
-Features: some rental apartments offer amenities that are not found in smaller condo/co-op buildings or single-family houses such as 24-hour door attendant, dry cleaners, or a grocery store. Unless you purchase in a full-amenity building you will most likely have to go off-site for some services you are accustomed to having only an elevator ride away.
-Maintenance and Repairs: Renting allows you the luxury of repairing or maintaining nothing; if the air-conditioner breaks you call the mananger. With owning you either repair the air-conditioner or locate, meet, and pay a repair-person.
-Mobility: Renting offers you the convenience of leaving your home when your lease expires. When owning you are tied to other persons’ timeline of moving when a buyer or tenant agrees to a date, which might not fit your timeline.
305 Take into consideration the pluses for owning versus renting: -Equity: Renting has no equity benefits. Owning provides a forced savings because typically each monthly payment is part principal, which builds your equity. Potential property appreciation can also increase your equity. Note: If property values decrease in your market you could owe money when you sell.
-Control over your environment: A lease may not allow you to have pets, paint your walls red, or have a roommate. With owning you can choose a building or home that allows you to have pets, decorate to your taste, have roommates, or add a washer and dryer.
-Stability: Your landlord can increase your rent, sell the property, or convert your rental to condos and force you to move on short notice. With a fixed-rate mortgage, you can control your monthly housing expense and have peace of mind that you can stay as long as you want.
-Tax benefits: Renting offers none. Owning allows you to deduct mortgage interest and home equity interest from your taxable income. Consult a tax professional for more information.
306 Recognize that renting might be a better option for you in the following situations: -If you are in a life transition. such as recently widowed or divorced, it will offer you flexibilty.
-You do not wish to have repairs or maintenance responsibility.
-You have alternative investments for your down payment funds.
-If you frequently travel for business or pleasure, renting gives you the freedom to lock up and go away, worry and responsibility free.
-Your company is considering relocating you in the next 20 months.
-Your company is considering downsizing its employees, merging with another company, or selling to new ownership.
-The real estate market you want to buy in is a seller's market, major employers are leaving town, or uncertainty about proposed development could effect housing prices in a negative way.
Read the above excerpts from my latest book, “1001 Tips for Buying and Selling a Home" Thomson/ South-Western, 2005.
Mark Nash is the author of his fourth real estate book “1001 Tips for Buying and Selling a Home" and a real estate broker in Chicago. Mr. Nash's consumer-centric real estate perspective has been featured on CBS The Early Show, Bloomberg TV, Fidelity Investor’s Weekly, Dow Jones Market Watch, The New York Times, Universal Press Syndicate and USA Today.