Golden Realty – The Answer to Buying or Selling Property
PART 1: Disadvantages of Renting a Home
Even if you’ve thought about making the big switch from renting a home to owning a home before, it’s time to think about it again. The start of a new year is always a good time to look back and re-evaluate where you are now, and where you want to be at the end of another year.
In this two part series, we’ll contrast the advantages of renting a home with the advantages of owning a home.
Disadvantages of Renting
On the other hand, there are some very definite disadvantages to continuing to rent vs. buying a home. Other than personal satisfaction of knowing that you have achieved what has long been known as the “American Dream” of home ownership, there are distinct advantages to owning a home. Advantages include:
1. Monthly Rent Payments Are Gone. When you rent, every single monthly rent payment is simply gone. You’ll never have a chance to see that money again. On the contrary, when you pay a monthly mortgage payment, that is an investment in a tangible asset that can, at least potentially, return to you someday when you sell your home. In other words, at least you have a shot at getting some of your money back someday.
2. Don’t Have It Your Way. Whatever your rental looks like when you move in, is likely what it should look like when you move out. Landlords do not generally allow renters to change anything – even a simple paint color, let alone anything else.
3. Improvements Belong to the Landlord. Let’s say you are allowed to improve the rental property you’re living in – at your own expense. You may enjoy the improvement while you live there, but you can’t take it with you. When you leave, you leave your improvement and the money you spent on it with the property.
PART 2: Advantages of Renting a Home
Advantages of Renting
There are no doubt advantages to renting – if you don’t mind being at the mercy of a landlord you probably don’t know and who probably doesn’t know you. Most landlords are good people who have simply chosen to own rental property as a way to earn income – just like you chose your own job or career or investments as a way to earn income. But, bottom line, landlords expect a monthly rental check and if you don’t pay the rent, most landlords want you out – now – no matter how good a renter you’ve been in the past. Worse yet, in most states, it’s much easier for a landlord to evict a person than it is for a bank to foreclose on a delinquent homeowner which leaves renters a lot less time to remedy life’s problems.
Nonetheless, most renters continue to rent for two main reasons:
1. Mobility. Simply put, a person who rents isn’t tied down to living in one place for longer than the term of a lease. As long as you can find another place to rent, that you can afford, you can move frequently for whatever reason you have at the time (new job, different school district, better location – whatever the reason).
2. Maintenance Responsibility. Usually, renters have little or no responsibility for major maintenance or repairs, provided of course, that you’ve negotiated a favorable lease in that regard. Renters are sometimes surprised when they don’t closely read or understand their own maintenance or repair obligations under a lease – and, in this instance, what you don’t know can hurt you. In general, however, renters are not responsible for major maintenance or repair problems such as roof repairs, or replacement of major appliances (such as air conditioners, furnaces, refrigerators, stoves), nor are renters responsible for dwelling insurance or real estate taxes. (Well, not exactly anyway – these all get paid by the landlord – using the rent payments received from renters!)
Other advantages of renting (vs. buying) a home include: liquidity (cash is not tied up in a big investment in real estate), no big down payment (even a deposit plus first month’s rent is usually less than a down payment on a mortgage), decreasing property values don’t diminish investment, and renter’s insurance is much less expensive than homeowner’s insurance, to name a few.
Check back soon for the next portion of this series NEW YEAR – NEW DECISION: RENTING VS. OWNING where we will cover the Advantages and Disadvantages of Owning a Home.