Better off renting or buying?
Ownership responsibilities take some by surprise
November 16, 2009
By Dian Hymer
Inman News®
The push for an ever-increasing homeownership rate in this country recently led to a huge housing bubble, followed by a tsunami of foreclosures and declining home prices. Lax lender qualifications a few years ago fueled a run-up in home prices that couldn't last. It left many homeowners who bought beyond their means with damaged credit -- and without a home.
Homeownership has been the American Dream. But owning a home isn't for everyone. Factors often not taken into consideration by homebuyers: homeownership requires a lot of time, effort and a financial commitment that go beyond merely paying your principal, interest, property taxes and insurance.
In order to preserve the value of your property, you need to keep it in good condition. There's routine maintenance like clearing debris from the roof, gutters and downspouts. And occasionally there are larger projects to deal with, like replacing an entire roof or painting the exterior.
Homeowners often don't budget for these expenses and they're left with a home that has a lot of deferred maintenance. This has a negative effect on the property's value.
HOUSE HUNTING TIP: Practicing a regime of preventative home maintenance can save money in the long run. For example, if you caulk a shower to keep it from leaking, it can last for decades. If you don't, you'll end up having to replace the shower within a few years, which could cost $4,000-$6,000, depending on where you live and which finishes you use.
In addition to preserving the value of your investment, a well-maintained home gives the owner a sense of satisfaction often referred to as pride of ownership. Other benefits of owning rather than renting are tax relief, the possibility of equity build-up and appreciation over time, and the ability to modify your home to suit your wants and needs. You are master of your domain.
Condos are often touted as a maintenance-free alternative to a single-family residence. However, to preserve your investment and quality of life, it's wise to become involved in the homeowners association. This requires a commitment of your time. But it's a way to make your feelings known on issues that might affect your lifestyle.
Renting, like owning, has its pros and cons. On the plus side, the owner is responsible for maintenance. It usually costs less to rent than it does to own. Your financial well-being is less impacted by fluctuations in the housing market. You can't lose equity if you don't own the property. And, you may be able to rent in an area where you could never afford to buy.
On the other hand, unless you rent in a city where rents are controlled, your rent could increase over time. It could also decrease during recessionary periods like we are experiencing now. You may not have the luxury of painting using colors you like. Some landlords won't accept tenants with pets. There is always uncertainty as to how long you can stay in a rental. Moving a lot can be expensive and disruptive. And it can be difficult to find a rental that will suit your long-term needs.
Lower prices and interest rates can make buying a home a more affordable and less risky proposition these days than it was at the peak of the latest boom. However, worrying about how you're going to afford your next mortgage payment or afford to keep the place in good shape can destroy your pride of ownership. Owning a home can become a ball and chain.
THE CLOSING: Make sure you don't discover this after you've purchased.
Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."
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