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Renting Versus Buying a Home

By Carmello on October 16, 2011

Renting Versus Buying a Home

Time to make a Pro and Cons List

Pro

  • Living in this house is slightly cheaper than living in a similar house – At least $200 – $300 a month cheaper.
  • Sense of Ownership and Pride
  • Can do whatever you like to your home
  • Rent does not go up (except an increase in tax, that usually also increases rent)
  • No possibility of being throw-out of your place due to default of landlord
  • Your house can appreciate
  • Something about owning a home, makes you “honest”

Con

  • Something Breaks, its your problem – Financially and Emotionally. Furnace, Roof, A/C, Water Pip Breaks, Foundation Issues, Toilets, Dishwasher, Fridge, Oven, Washer, Dryer, Water Heater and everything else you can’t think of until it happens. A house is like a living creature that requires upkeep on major components. It’s a bit of a gamble actually – You might go 5 years with no problems or you might get 5 problems in 1 year.
  • As SOON as you buy your house, you most likely lost 6%  of your home value – if you bought at Fair Market Price from a broker. Lets say you bought a house for $200k. You want to sell it the next day? Maybe you can find another buyer for $200k – Then you have to pay $12,000 in commissions to sell it. Most likely you are out 6% the day you move into your home.
  • Improvements to your home rarely result in an actual gain.
  • I did a rehab for approximately $25k, but it also made me realize how valuable my time can be to me. If you valued my time at even $10 an hour that $25k would quickly become $35k at least. My father also contributed a lot of time as well – Trust me, the time I put into this home  — It was a loss. I did enjoy the process however (for the most part).
  • Although I am saying that it “costs” me $795 a month to own – that is if you count the equity against the cost – That means its actually $960 out of pocket a month.  I might be able to find a house this size for $960 if I find a desperate landlord.
  • You are not flexible to leave for job opportunities
  • You are not flexible to leave for preferences of home. (Maybe you thought you would like your place but quickly found you want something else)
  • You have to put up with stress of selling your home when you actually do sell the house. (This can include bids / lowballs offers / inspections / concessions / brokers and realtors / loan officers / etc.)
  • Your house can depreciate
  • You tend to find ways to spend large quantities of money, that even infrequently can add up. (I want new carpet, I want a new vanity, etc)
  • The larger the house the more it costs to heat and furnish your home.
  • Less Free Time – Think – Yard Work and “To Do Lists”
  • Things you can even plan – Dead Tree in the back of your yard? – That’s going to cost you.
  • Bad Neighbors – Can’t relocate after your lease
  • Very good chance that once you “dig in” to your new home – you are going to find problems, possibly costly ones even after inspection.

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