You have decided to move out of your parent’s home or leave your roommate to have more privacy with your girlfriend or fiancé.
The question arises whether you should continue to rent or consider the idea of purchasing?
You have to create a checklist and on the left side place “Buying Benefits” and to the right, “Renting Benefits.”
Now you have to list the reasons for buying:
1. Ownership and building one’s wealth over the long run
2. Tax deductions for the interest on your mortgage and real estate taxes
3. If running a business out of your home, the available deductions for a percentage of the space you are using exclusively for your home based business (ask your accountant for further guidance)
4. Having a mortgage (I call it a “fixed lease for 30 years”) as opposed to a lease which never stays the same and increases over the years as it reduces your wealth.
5. Being your own Landlord and having the security of never having your Landlord telling you that he or she is having their children, relative or friend move in and your lease will not be renewed and you have 30 days to move!
Your Reasons for Renting:
1. No down payment to purchase
2. Poor credit and/or insufficient to qualify for a mortgage
3. No major obligation, just 1-2 year lease as opposed to committing to a 15-30 year mortgage.
4. No responsibility on major repairs (Sometimes there are exceptions to this fact)
5. Heat and Hot water included (most co-ops and some Condos, but generally not houses).
6. Short-term stays due to Job relocation
7. Divorce forcing each spouse to not be able to own, until the settlement is complete.
8. Potential of losing your job, due to industry exporting your job or technology eliminating your position.
Currently renting is more expensive in 48 out of 50 states, except Alabama and Mississippi (National Association of Realtors study 2017).
As noted, I would tell all my customers or current tenants, to beg, borrow and steal (only kidding, ask for a gift from your parents, relatives or friends.
Each spouse can give $14,000 per child per year) to be able to purchase some type of primary residence; because it is the best of times for buyers, as well as sellers.
The lowest interest rates in 60 years, highest demand in 35 years, creating the lowest inventory in 18 years; which I call our perfect storm for all.
Even if you plan to stay even two to three years, based on current appreciation, selling could be more to your advantage than renting, because of the tax deductions and above average appreciation.
You must work the numbers (which I can help you do) to see if it makes sense for you to purchase or go in the direction of temporarily renting and biting your tongue, when you are providing all those benefits to your landlord.
The power of compounding, as you live in your own place and pay your mortgage down, will build equity, slowly but surely, thereby “increasing your wealth, which will occur over time; because inflation and the cost of replacement for similar properties always increases over time, thereby creating greater value in your home.
Bottom line, give this concept some very serious thought and plan it out; and as I always say, “If you Fail to Plan, you may just Plan to Fail.”
Phil Raices is the owner/Broker of Turn Key Real Estate at 7 Bond St. in Great Neck. He has earned designations as a Graduate Realtor Institute and Certified International Property Specialist.
He can be reached by email: Phil@TurnkeyRealEstate.Com or by cell (516) 647-4289 to answer any of your questions or article suggestions.