Many people have different opinions about buying or renting a home, in my eyes buying a home, to build equity and financial freedom, is one of the smartest financial reasons buyers enter into the market place. Many people have a dream of home ownership, to own a part of the American dream. You ask what is the American dream? “The American Dream, is the national ethos of the United States, a set of ideals in which freedom includes the opportunity for prosperity and success, and an upward social mobility achieved through hard work. Home ownership creates opportunities if done right”. ( referenced from web page )
There are definitely some positive aspects of renting. Perhaps if you are new to the area, or just looking to move across town, and not sure about the location, renting will give you the flexibility to scope out the area before committing 100%. When living in a rental property, painting your walls lime green or some other trendy color may get you in trouble with the Landlord and put your security deposit in jeopardy. But taking that same sense of color style and applying it to a boring room in an old house you just purchased is called "sweet equity."
If you have uncertainties in your career and think that you are looking at a job transfer in the near future, you might want to rent. Also, if you are expecting a pay cut, it will impact your ability to borrow money from the bank to purchase a home. Renting is also more convenient when it come to unexpected repairs. For instance ,when you have a leaky sink, you don't have to run to Home Depot or your local hardware store, you just make a phone call to the landlord and they will send the handyman out to fix it, it could take a few days before they show up, but it gets fixed.
A big reason for people to rent vs to buy is bad credit, or no credit at all. A bad credit score or lack of credit can hold you back from obtaining financing to purchase a new home. A great solution for a lack of credit is to establish a good rental payment history for more than 12 months. During this time you can also clean up your credit by paying down debt and removing items on your credit that are being reported incorrectly.
But there is also a downside to renting. You may have no control over the fluctuation of your rent; on average, rents increase by 3% in Maricopa County. Long-term budgeting becomes more difficult, where when you have a fixed rate, and have a mortgage, you know what your payment is for the next 15 to 30 years.
There are both pros and cons to buying. Now here are some good reasons to buy a home. The biggest one in my eyes is Equity. When you pay rent, you don't own anything, but when you pay on a mortgage, you increase your net worth of ownership in your home with every payment. You can also borrow against your ownership / equity from your home, to pay for major purchases, or once you've paid the entire mortgage off, borrow to fund major purchases like a second home or your child's education. You can also reduce your payment by refinancing your home at a lower interest rate, which lowers your monthly bills. You can’t do this when renting a home. Have you ever had a Landlord offer you to reduce your rent? I don’t think so.
Another great benefit of owning a home is the tax deduction of interest paid on the mortgage. You can deduct mortgage interest as well as your property taxes. According to the IRS statues, if you meet certain requirements the IRS won't apply a "capital gains" tax on your profits from the sale of your home. You can keep the first $250,000 in profit you make when selling the home if you're single, or the first $500,000 if married. The Government does not give renters this bonus.
When owning your own house, no one can tell you how to decorate your home or what wall you can knock down. If you like tons of pictures on the wall, go ahead, hammer away. They are your walls now. If you love lime green, feel free to paint the whole house lime green! Wish you had another bedroom? Go ahead and add one or turn a den into a bedroom. Get the point? Freedom of choice applies here.
While a home can be a great investment, and let's face it, you do have to live somewhere; there are many financial experts that caution against purchasing a home simply as an investment.
According to MLS records, historically, the real estate market increases have been slow and steady, at a rate of 2-3% annually. In 2005/2006 we experienced a huge increase of nearly 30-40 % in a matter of months, what then lead to the huge real estate bust in 2007 what nearly lasted till the end of 2011, with depreciation as high as 55%. This was all driven by supply and demand, what created a buying frenzy and an artificial appreciation, which then lead to the big bust.
Make smart decisions when purchasing a house because this house becomes your home, and then becomes your net worth and future retirement.
Whether renting is better than buying depends on many factors, particularly how fast prices and rents rise and how long you stay in your house. On average renting increases by 3% per year looking at this over 30 years at around 1200.00 per month with a 3% increase of rent annually this could be a little over 1.2 Million, after which you own nothing and have no equity.
The moral of this story is, that if you plan on staying in an area for a long time, owning a home will help you build wealth for your family, and by renting a home you will not achieve this. If this doesn’t make you think, “why am I still renting?”, then I really don’t know what else to say. Let’s go get you qualified and prepared to buy you your new home.
With a warm smile,
Debra Allen
YPN Top 40 under 40 - 2013
SEVRAR Realtor of the Year 2010
Real Estate Special Commissioner appointed by the court
CIPS- Certified International Property Specialist
Global Business Alliance Chair 2014/2015
Director of International Business Development
ABR, GRI, e-PRO,CIPS, AHWD, TRC, ASP, REOS, SFR, GREEN,CRMS
REALTOR / Mentor Trusted Advisor
National REO & Short Sale Instructor
Transnational Referral Certified
Military Relocation Specialist- Certified Military Residential Specialist
Military Affairs Chair 2010/2012
Certified REO & SHORT SALE Resource Specialist
MRE Society since 2005-2016
