Renters are often in a quandary as to whether it makes sense to continue
renting or buy a home. Buying a home makes more sense, particularly when
taking a long-term view. Yes, even in the current hot real estate market.
Renting – Advantages
Renting can have a few advantages depending on the part of the country you
live in. The primary advantage is your monthly rent payment may be less than
an equivalent mortgage. A secondary advantage is the fact that maintenance
and improvements to the property are the responsibility of the landlord.
Still, these advantages pale in comparison to the disadvantages of
renting.
Renting – Disadvantages
The disadvantages of renting are significant. If you have any opportunity
to purchase a home or condominium, it almost always makes sense to do so.
The biggest disadvantage of renting is the loss of value. Assume you rent
a residence for $1,000 a month and you live in the residence for two years.
You will have paid a total of $24,000 in rent, a pure expenditure. The $24,000
is simply gone and you will have nothing to show for it other than the time
you spent in the home. Compare this to what your landlord has gained.
Rent payments are closely aligned with a landlord’s mortgage payment.
Using the above example, lets assume your $1,000 rent exactly equals the
mortgage payment. For two years, you have indirectly paid the landlord’s
mortgage, helping them build equity in the house by paying down the loan.
In addition, the landlord has benefited from the appreciation of the
property.
By appreciation, I simply mean the amount of increase in the value of the
house. If the rental appreciated $20,000 in two years, the landlord has received
a windfall. They may have seen a gain of $24,000 in appreciation and payments
lowering the mortgage. As a renter, you have made this all possible. The
landlord no doubt would like to thank you.
Now, what would have happened if you had purchased a similar home with similar
financial figures? You would have seen an increase in YOUR wealth of $24,000,
not the landlord’s wealth. If you renting, these figures should make
your teeth grind.
If you are renting, you should be out shopping for your own property. After
all, isn’t it time to make your money work for you, not a landlord?
Raynor James is with http://www.fsboamerica.org - providing homes for sale
by owner, "FSBO", properties. Are you thinking, "Should I sell my home?"
Visit http://www.fsboamerica.org/seller.cfm to sell your home sale for free
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