We’ve all heard that if you rent, you’re throwing away your money, but this opinion just isn’t true for everyone. There are many perks to renting a home in this struggling housing market, especially if you’re flexible and looking to save money. Even though renting does not build equity and you can’t customize the home to your liking, you will save money and be able to relocate as need be. And always remember that just because you don’t own your house, doesn’t mean you don’t need to protect your possessions with renters insurance. Here are 10 major advantages to renting a home:
- More Flexibility and Mobility: Renting provides much more freedom for tenants who have to move or want to upgrade at the end of their lease. They aren’t tied down to a property for years like homebuyers. Those who have to relocate and sell their property run the risk of losing a great deal of money in the sale.
- No Upkeep Fees: When a tenant’s dishwasher breaks or the AC goes out, there’s a maintenance worker who fixes it at no cost to you; however, homebuyers are responsible for taking care of needed repairs and mowing the lawn. Upkeep is tedious and expensive.
- Save Money: Contrary to popular belief, buying a home does not necessarily save you money and is often more expensive than renting. When you buy a home, you accrue several fees that add up quickly. You have to pay closing fees, mortgage interest, property taxes, homeowners’ insurance and maintenance costs. Not to mention, buying a home requires a large up-front investment and typically a bigger mortgage than rent during the first few years of ownership.
- Reduced Commute: Small rental homes are often located inside or very close to most major cities, making your commute a breeze. Those who buy single-family homes outside of the city and in surrounding suburbs will have a longer commute and are further away from the city amenities.
- Don’t Have to Worry About Neighborhood Value: Unlike homebuyers, renters don’t have to worry about the value of their neighborhood. They don’t have to consider home value, schools and other factors that affect homebuyers much more.
- More Incentives: The struggling housing market has caused landlords to offer some unbeatable incentives for renters. In an attempt to get renters to renew their leases, landlords are making rent cuts, offering free months rent and throwing in lavish amenities like flat-screen TVs for staying. Homeowners don’t get these kind of incentives.
- No Foreclosure Risk: Buying a home is expensive, and unexpected events can make it financially impossible to pay your mortgage. Failure to make payments can result in your property being foreclosed. Not only do you risk losing your house but your credit rating and finances will also suffer. Those who rent don’t have to worry about foreclosures because they don’t own the property.
- Lease Term is Negotiable: Unlike home ownership, renting provides negotiable lease terms. This means that if for some reason you have to move out, you can as long as you haven’t signed a lease that states a desired term. Breaking the lease can certainly hurt your credit, but renters have alternative options of subleasing or sticking it out until they can move.
- More Options: Those who rent have a wide variety of options to choose from. Many of today’s rental homes offer modern amenities and furnishings that would cost a fortune in a new home. There has also been a significant increase of owners converting their properties into rentals to offer tenants more affordable, luxurious living.
- Rent is Cheaper than Buying: In many cases, renting is cheaper than buying a home in the largest U.S. cities. When calculating the price-to-rent ratio, mortgage fees and maintenance expenses outweigh the rental price for most homes.
When it comes to life’s most important milestones, buying a home ranks up there near graduating, getting married and having a kid. Typically, it symbolizes the growth of your family and financial security, the latter of which you’ve worked hard to maintain. Even though it’s currently a “buyer’s market,” you aren’t guaranteed to find the best deal, and regardless of the fluctuations in prices, your purchase is guaranteed to be a big one. In April 2011, the average price of a new home sold in the U.S. was $268,900, according to the U.S. Census Bureau. With that much money at stake, you don’t want to mess it up — or, for that matter, forget about the necessity of affordable home insurance. As you conduct your research and begin to shop around, consider these basic things to simplify the complex process.
- Already existing debt will limit how much you can borrow: Credit card debt in particular can prevent you from receiving an attractive mortgage offer, as a high debt-to-income ratio demonstrates that you’re a high risk financially to your lender. Typically, lenders prefer borrowers whose debt doesn’t exceed 40 percent of their monthly income. If you’ve accumulated a load of debt on your credit card, pay it off with the money you’ve saved instead of offering a large down payment on a home.
- A home’s cost doesn’t stop with the sales price As with buying a car, the final price agreed upon when buying a home doesn’t include everything you’ll be paying. The finalized transaction includes loan fees, title and closing charges, government filing fees, broker fees and possibly inspection fees. Then, of course, once you’re living in it, you’ll be responsible for home insurance, property taxes, maintenance and utilities, the costs of which vary. To avoid being blindsided, draft a comprehensive financial plan prior to determining which homes are most realistic to purchase.
- There are programs to help first-time home buyers: If you’re not financially capable of producing a large down payment, you can find federal, state and local programs that’ll ensure buying a home is still a possibility. For example, with the HUD 203(b) loan, lenders provided 97 percent of financing, and with a HUD 203(k) loan, property and repairs of fixer-uppers are covered. There are also programs that assist those who are struggling with interest rates and loan terms.
- It helps to pre-qualify with a lender before finding a home: Going into the process, it’s important to know how much lenders are willing to let you borrow based on your credit report, earnings, savings and debt. This can be done with a lender of your choice — ideally an organization you trust and have a history with — and can be undertaken in as little as a few hours. It also allows you to consider the aforementioned extra expenses.
- Hiring a buyer’s agent is essential: Real estate agents represent the seller of the house, while the buyer’s agent represents the buyer. It’s the job of the buyer’s agent to obtain valuable information about a property, including how long it has been on the market, the details of the last mortgage and the cost of comparable homes in the area. This enables you to get an idea of the price and then consult the buyer’s agent during negotiations. If you purchase the home, then the buyer’s agent earns a commission.
- A smart buyer examines the neighborhood and surrounding school district: Undoubtedly you want to live in a neighborhood that’s best-suited for your family. If the surrounding area is showing signs of decay and the school district is mediocre, then you should consider looking elsewhere, even if you have to temper your expectations for your home. Keep in mind that the home’s value is largely tied to those factors, which an owner can’t “fix up.” Homes in nice areas, even when modest, have higher resale values.
- An inspection is a must: It’s common sense, but it can’t be stated enough. The last thing you want is to discover that your home has major issues that cost a lot of money — money you may not immediately have — after you’ve made the biggest purchase of your life thus far. A qualified inspector, one who is a member of the American Society of Home Inspectors (ASHI) or your state’s home inspectors association, will check everything from the foundation to the roof, including appliances, to ensure you’re getting your money’s worth. While issues such as a cracked foundation or termites might be red flags, minor problems related to plumbing and electrical wiring, for example, shouldn’t prevent you from going through with a deal. Note that in many cases the seller will pay for the inspector’s services.
- A foreclosure deal can be a steal under the right circumstances: Consider it, but don’t become fixated on it. Many buyers fail to realize that the homes are sold “as is,” and the transactions may be complicated. There are several stages in the foreclosure process — missed payments, pre-foreclosure, auction and post-foreclosure, the latter of which is the one that presents the most advantages. Because the bank is motivated to sell the property fast, it’ll be willing to negotiate the overall price, down payment, escrow length and closing costs. Additionally, the title is free of liens or back taxes, and inspections and mortgage financing can be done in a reasonable amount of time.
- You may have to bid against other potential buyers: With more people looking to buy a home, it’s possible that another buyer could swoop in and steal your deal. Pre-qualifying for a loan helps your cause in a competitive situation, as it shows you’re capable of undertaking such a purchase, but offering a large down payment, 10 to 20 percent, could tip the scales in your favor. Knowing the value of the home should prevent you from overbidding.
- Insurance costs can be reduced: Hearing about additional expenses during the home buying process can be bit discouraging, but it shouldn’t preclude you from securing your new home. There are several ways to reduce insurance costs and thus lessen the burden each month. An insurance company may offer discounts if you purchase both homeowners and auto insurance from them, install a security system and smoke detectors, and simply enroll in an electronic payment system.
Construction Managers' averaged $58,588 in annual salary in 2008.
