There are advantages and disadvantages to everything in life. However, unless you have some special circumstances that preclude you from the benefits of homeownership, the advantages of owning a home are far greater than that of renting.
Last year, a client was referred to me who wanted to buy a home. She and her husband had been renting the same place for the last 19 years. They made the decision to buy a home because their landlord had decided to raise the rent more than 30 percent. This couple made an assumption that they would always live in this same rental property and never really thought of the possibility of buying. Luckily the real estate market was on their side and I found them a fantastic home, on a canyon and in their price range.
This couple had a happy ending to their landlord raising the rent on them. However, many do not. If you analyze their situation you will learn that over the 19 year period that they rented from this one landlord, they paid approximately $421,800 in rent. If you analyze their situation further, you will learn that the $421,800 is money they netted, which means that they really had to earn and gross well over a half of a million dollars just to pay for their rent.
It is safe to say that when you are renting you will never see a return on your money. Therefore, your money is not being wisely invested. You are simply giving your money away to temporarily stay in someone else’s home.
As in the case of my clients, when you are renting you have the risk of your monthly rent being increased. Typically people who rent will experience rent increases either annually or every other year. Renters who do not get regular increases are in the minority and very fortunate. When you are buying a home and you have a fixed mortgage rate, your monthly payment will be set and will not increase.
Also when you rent, you can be evicted and be required to move out. The only time you are protected is when you have a lease agreement in writing that specifies a time period. But even with a specified time period in a lease, the lease will usually revert to a month to month agreement at the end of the time period. I know someone who had to move recently after renting the same place for 17 years. In this case, the landlord sold the property and the new owners evicted the tenant to develop it.
Another challenge to renting is that you are not able to update the property. This can be frustrating to the renter because usually landlords are not wanting or able to put money into their rental properties, and therefore, not granting the requests of their renters. When you are renting you cannot really make a house your own.
Another consideration when you rent is that you will not get the tax break that homebuyers receive. Mortgage tax right offs are usually considerable and are a huge benefit to home ownership. To get more information on tax benefits, you should contact your accountant or tax person.
Many people are not aware that they can afford to purchase a home. Often times, a mortgage for the purchase of a property can be around the same amount as your monthly rent. In some cases, a monthly mortgage payment can even be less than renting.
If you are renting, then you owe it to yourself to speak to a bank or mortgage broker to find out what you can qualify for and what your monthly payments would be. Because interest rates are currently low, you may be surprised at what you can qualify for and how low your monthly mortgage payments can be.
Although real estate markets do go up and down, historically property has been one of the best investments in the world. Even with the cycling of housing prices, consistently prices rise over time. From an investment point of view, you always want your money and investments to grow.
When you have money sitting in a savings account at a bank or credit union it is receiving little to no interest. If you take that money and invest it in property, your money can start working for you. Taking everything into consideration, real estate continues to be a good investment.
Home ownership continues to be the American dream. Now that it is a buyer’s market and that mortgage interest rates are remaining historically low, it is a fantastic time to buy. This is truly a great time of opportunity for homebuyers and investors.
Trent St. Louis is a licensed Real Estate Agent and a member of the National, California and San Diego Association of Realtors. He can be reached at trent@tns.net or at his office in Hillcrest, The Metropolitan Group. DRE#01273643.
