Should I buy or should I rent?

With decreasing U.S. home prices, this question is no doubt running through the minds of many. The decision to rent an apartment, condo or house, as opposed
to buying, is complex and one that should be taken into great consideration.

There are many misconceptions when weighing the option to rent or buy. One of the biggest may be the notion that renting is simpler. When the refrigerator in
a rental needs to be repaired, it’s usually the landlord’s responsibility. But when new homeowners sign the contract, the responsibility is theirs. Unfortunately,
stating that renting is the “simpler” choice takes a narrow view on the issues that go into the buy-versus-rent decision. Here are a few others:

• The tax benefits derived from purchasing a
home take too long to offset other costs
involved. Tax write-offs of mortgage interest
can be among the biggest financial benefits of
homeownership. But some question whether
this benefit is really great enough to offset the
“big picture” cost of ownership. Homes
typically appreciate in value over time. That’s
why you should evaluate carefully how long
you expect to stay in your new home. If you
anticipate staying for several years, the scales
should tip in your favor and the value of your
financial gain from homeownership is likely to
outweigh those initial costs to get in the door.

• Renting a home isn’t all that different from
owning. If you are renting a house, you may
already feel like a homeowner by making
routine repairs, gardening or cleaning the
gutters. There is one fundamental difference.
Unlike equity built with each monthly mortgage
payment, the rent you are paying is producing
zero future financial benefit. In fact, you are
essentially paying the landlord’s mortgage
and likely additional utility costs. Since
historically, most homes increase in value over
the long term, a home provides not only a
place to live but should ultimately provide
return on your original investment.

• It’s better to rent and wait for the market
to bottom out. By the time we recognize
the true bottom of the market has been
reached, prices may already be on their way
up. Buying a home should be approached
as a long term investment, providing equity
accumulation, cost appreciation and tax
benefits over time. The reason why many point
to now as a smart time to buy is because we
are seeing historically low interest rates,
coupled with the buyer’s market which exists
in most communities. When purchased with
the longer term in mind, housing is historically
one of the safest investments consumers
can make.

• It’s cheaper to rent. This may or may
not be so. Because of the current state
of the housing market, many are foregoing
homeownership and turning to rentals. This
influx of renters may be having an impact
on the supply and demand of rentals
and driving rents higher.

• By buying a home, I’ll become of victim
of the foreclosure mess. It’s important
to remember that foreclosures account
for just a small percentage of all homes
sold. Mortgage money is still available for
qualified borrowers and to help prevent
foreclosures in the future, lenders have
returned to upholding higher standards. These
may require you to demonstrate strong
basic borrowing “fundamentals” such as proof
of income, solid credit and ability to make
a 20 percent down payment. It’s also critical
to be well-educated in terms of various
mortgage options available and to know
what you can afford.

Contact Melissa Conrad, Professional Realtor (772) 240-2589