A Home to Own or to Borrow?

Mary Caraccioli — Wed, 29 Apr 2009 19:47:16 +0000

The Housing boom-bust cycle we’ve just experienced in the U.S. gives us the opportunity to re-think our strategy for paying for a roof over our head. Each day there are fewer people clamoring for universal homeownership. The reality is for many people renting is not such a bad option. If you don’t itemize your taxes, if you aren’t sure how long you will stay in an area, if you want to remain untethered, renting could be a a better choice. For others, they know where they want to be, they plan on staying in their home many years and they have access to incentives like first time homebuyer credits. In a buyers market, their decision seems pretty clear. Pull the trigger.

The rest of us are somewhere in the middle. The answer isn’t as cut and dry. Deciding whether now is the time to buy a home is both a financial decision and a lifestyle decision. If you are thinking about buying or renting, let me know. I would love to hear your strategy for making the decision. Here is a chart that has some helpful reminders. -Mary Caraccioli

YOUR HOME

RENT

OWN

Lifestyle Choices

Landlord may place restrictions on pets, guests, and children. There also may be restrictions on how you may redecorate your rental unit.

For condos and co-ops, similar restrictions may exist in the bylaws. The single-family home provides the most freedom in choice of lifestyle. You need only abide by city zoning ordinances.

Privacy

Both other tenants and the landlord may bother you. The landlord will have rights to inspect the premises and to show the unit to prospective tenants.

You can have as much or as little privacy as you want, depending on the type of home ownership you choose.

Maintenance

Maintenance costs will be included in your rental payments. With a responsible landlord you will be free of maintenance concerns. With an irresponsible landlord your only remedy may be to move.

You alone are responsible. You must budget for maintenance expenses and be prepared to do it yourself or hire a capable person.

Mobility

At the end of the leasing period you simply pack up and leave. If you must move before the lease is up for renewal, you usually can negotiate a mutually agreeable termination.

Selling costs may be considerable, including sales commissions and fixing-up expenses. You are at the mercy of the marketplace. If home demand is down, you must either accept a lower price or incur carrying costs until the market improves.

Financial Risk

The only risk you face is the possible loss of your personal property in the rental unit. This risk can be covered by renter’s insurance

Your home is also an investment. You can insure it against natural disasters and most other risks. However, you cannot insure against a forced sale at below market price resulting from the loss of your job.

YOUR HOME	RENT	OWN
Lifestyle Choices	Landlord may place restrictions on pets, guests, and children. There also may be restrictions on how you may redecorate your rental unit.	For condos and co-ops, similar restrictions may exist in the bylaws. The single-family home provides the most freedom in choice of lifestyle. You need only abide by city zoning ordinances.
Privacy	Both other tenants and the landlord may bother you. The landlord will have rights to inspect the premises and to show the unit to prospective tenants.	You can have as much or as little privacy as you want, depending on the type of home ownership you choose.
Maintenance	Maintenance costs will be included in your rental payments. With a responsible landlord you will be free of maintenance concerns. With an irresponsible landlord your only remedy may be to move.	You alone are responsible. You must budget for maintenance expenses and be prepared to do it yourself or hire a capable person.
Mobility	At the end of the leasing period you simply pack up and leave. If you must move before the lease is up for renewal, you usually can negotiate a mutually agreeable termination.	Selling costs may be considerable, including sales commissions and fixing-up expenses. You are at the mercy of the marketplace. If home demand is down, you must either accept a lower price or incur carrying costs until the market improves.
Financial Risk	The only risk you face is the possible loss of your personal property in the rental unit. This risk can be covered by renter’s insurance	Your home is also an investment. You can insure it against natural disasters and most other risks. However, you cannot insure against a forced sale at below market price resulting from the loss of your job.

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A Home to Own or to Borrow?