Yes, you can be a
RENT-BUSTER!
Buy a home this week, and move in before New Year’s Eve. You can do it! You have a lease ‘til Spring, you say… okay, we will simply adjust our words of encouragement to accommodate that: Buy a home this week, and fire your landlord instead of renewing your lease! 'Doesn't matter if he's a villain or a nice guy - he's not your friend. He's taking your money and building his wealth, not helping you build your own wealth and security.
I found surprisingly little about the benefits of renting vs. owning a home on Google. A search for “why rent” lead me to articles about automobiles, trade show exhibits, musical instruments, furniture, computers and many other items besides houses. Another search for the “benefits of renting” lead to similar results. A “benefits of home ownership” search lead me to hundreds of marketing websites for both mortgage brokers and real estate agents, but very little genuine content. So I’m going to rely upon my own 33 years of experience in real estate to help you become a
RENT-BUSTER. I want to help you FIRE YOUR LANDLORD before the month is over!
I’ve found that there are three primary reasons why people choose to rent a home rather than buy:
* Can’t afford to buy a home
* Don’t plan to stay long in the area
* Don’t want to be responsible for home maintenance
Dan Aiuto, an Alaska appraiser and real estate agent as well as author of
Magic Bullets in Real Estate, says that "The large numbers attached to a real estate purchase can often overwhelm first-time home buyers, so they continue to rent as a result," Yet I’ve found that these “large numbers” are more fiction than fact. There are plenty of loan programs available that enable first-time buyers to get into a home with less cash than it takes to move into a rental property. And it’s not unusual for a mortgage payment to be equal to or less than the monthly rent for a similar property. The biggest obstacle to affordability may be the fact that many renters simply don’t investigate to find out if they can buy a home, and that’s the real reason they continue to rent. Let me ask, have you spoken to an experienced loan officer or real estate agent about buying a home? This is the first place to start.
It’s understandable that you might want to rent if your residency in an area is relatively short-term. But consider this: Military families often buy a home at each duty station, even if they expect to be there only a year or two, and then keep it as an investment property when they get transferred. By the time they retire, they have accumulated equity in real estate all over the country – a nice little nest egg. With their investments spread out geographically, they’re following the real estate version of wise advice “Don’t put all your eggs in one basket.” If BRAC closes down one military base and nearby real estate values suffer, chances are they expand another base and real estate values increase dramatically. With little or no down payment, and rental income to offset mortgage payments, home ownership is worth considering – even if you plan to be in an area for a limited time.
Convenience appears to be a “plus” for renting – if something breaks or a tree falls on your home during a storm, all you have to do is call the landlord. Is this what you’re thinking? Of course, your landlord always returns your calls. Your landlord always makes repairs promptly. Your landlord always makes quality repairs. Sure. Well, here’s a news flash: When you own a home, you call a repairman instead of your landlord. The repairman works FOR you; if he doesn’t respond promptly, you fire him. The quality of workmanship is subject to YOUR standards. Really, the convenience of having a landlord handle property maintenance is highly over rated.
Melissa M. Ezarik wrote for bankrate.com that there are six top benefits to owning a home:
1)
DEDUCTIONS: Although they're the stuff that bill-paying grumbles are made of, mortgage interest and property tax obligations are a homeowner's best friend come April 15. For both federal and state income taxes, these payments are usually fully deductible. And in the first years after a home purchase, most of the money paid toward those mortgage payments represents interest. Think of it as a government subsidy on the purchase. In addition, many closing costs, such as points paid and fees for your loan application and appraisal, may be deductible, either immediately or down the line when you plant that "For Sale" sign in your lawn.
2.
APPRECIATION: We're talking about the financial kind. Homes are considered a safe, steady investment, with values that rise while debt amount drops. The national median home price has risen every year --even during recessions and periods of sales declines -- since 1968, when the NAR began tracking it. Typically, the values appreciate at the rate of inflation, plus 1 or 2 percentage points. Sometimes it's a greater increase. In 2004, for instance, the median price went up by 9.4 percent. A long-term investment? Yes. Harvard University's
Joint Center for Housing Studies found a dramatic increase in the rate of return on housing the longer it's held. For example, a buyer who makes a 10 percent cash down payment with an annual home appreciation rate of 5 percent could expect a 94 percent return on the cash after three years of home ownership . After five years, the return increases to 225 percent, and after 10 years, a whopping 623 percent
3.
EQUITY: The portion of property that's actually owned, or equity, also rises over time. "Owning a home allows you to build the equity that accompanies appreciation," explains Timothy Spangler, CEO of a real estate investment company and author of "From the Rat Race to Real Estate." He adds, "You can't build equity if you are a renter." Moira Cotlier of New Haven, Conn., is a good example. "We paid rent to landlords for nine years before buying our house. Nine years," she says. "Do you know how many tens of thousands of dollars that was for places we had no stake in? What a waste!" Since 2001, she and her husband, Keith, have been paying themselves instead. Mary and Rich Hallahan, who own a Madison, N.J., home, think of the investment this way: "You are forcing yourself to save by investing in an asset over time," she says. Their home, purchased in 2002, has appreciated by about 10 percent since then. What's more, a first home often leads to a better second home. Equity buildup and appreciation in a first home help in the transition to a second. According to the NAR, first-time homebuyers' median down payment is 3 percent; repeat buyers, meanwhile, put down 22 percent.
4.
BORROWING POWER: For owners who opt to stay put, equity still comes in handy. It can be used to secure a loan or obtain a line of credit, meaning "more buying power to fund home improvements or to assist with the purchasing of investment property," Spangler says. Cash for emergencies or big-ticket items is also an option.
5.
STABILITY: Renters generally have no idea what they'll be paying a few years down the line. Home owners with fixed-rate mortgages, however, essentially have the same payment for up to 30 years. Even those with adjustable rates have a cap and can figure out their maximum potential mortgage payment. The stability also comes from the sense homeowners get of being anchored to their community. "It gives you a little more leverage when it comes to community issues and activism," Cotlier says. "When you own your home, and you're paying taxes on it, you might have your voice a little better heard when it comes time to speak up about neighborhood or community issues."
6.
FREEDOM: Speaking up within your home is also much easier when you own it. No need to worry about "the downstairs neighbors complaining you're too loud, or the upstairs neighbor stomping around at 1 a.m.," says Sandy O'Keefe, who rented for about eight years before purchasing a Mansfield, Mass., home with her husband, Rob, in 2004. O'Keefe also appreciates the decision-making autonomy. "You ... pick every paint color [and] won't get fined for scratches on the wall," she says. The decision-making extends to the yard as well. Cotlier sums up the homeownership benefits in one word: roots. "You can plant perennials and enjoy them forever. You can plant a tree and watch it grow and grow. You can plant a family and watch it blossom."
Let me wrap this up for now by saying that it’s time for you to stop renting and start owning, while rates are still low and there are bargains available in the housing market. At least promise yourself that you’ll contact me this week to find out who in your area can give you the help you need to get honest answers about home ownership. If you act now, you can be in your own home to celebrate New Year’s Eve!
If you are located in the Anne Arundel, Howard, or Prince George's County areas of Maryland, you might want to attend the next
RENT-BUSTERS WORKSHOP in November, featuring
loansumlou of WBIS 1190 AM radio.
Related Links and Articles:Personal Finance: Owning a Home is Good for You – and Society by Emily Brandon for USNews.com
The Benefits of Buying a Home In a Cooling Real Estate Market by Amy Hoak from Marketwatch for the Real Estate Journal of the Wall Street Journal Rent vs. Buy Calculator The Tax Benefits of Owning Your Own Home by Deborah Rankin for the New York Times (a 1983 article that still applies today)Feedback or more information:
Be a RENT-BUSTER!
Crofton Maryland Real Estate
Copyright 2006. All rights reserved. Margaret Woda
