Fed up with paying rent? Tired of watching real estate prices rise? Join the club, since a record number of tenants have stepped over the threshold and bought their first abode. According to the U.S. Census Bureau, the home ownership rate has jumped to a record high of 67.9 percent, as of 2002. Should you join the buying fray or stay as a tenant? A host of pros and cons will help sift through the choices.

Freedom: As a tenant, you can usually lock the door and take a vacation wherever your budget will allow, with no worries about mowing the lawn or broken pipes to repair. Inside and out, the property is someone else’s. As an owner, your castle is also your headache.

Flexibility: Don’t like the place? As a tenant, 30 days’ notice and you’re home free, or until your lease expires, whichever comes first. Selling a place is far more involved.

Avoiding the ownership learning curve: As a tenant, worrying about estimates on driveway removal or roofing materials are off your radar. Taking the time to research various choices for one’s dollar takes time and experience. Besides paying for everything under the sun, owners have to find someone who will do the work. Doing the legwork and creating a handsome Rolodex thrills some, tires others.

Noisy neighbors: As a tenant, if you can’t find peace and quiet, you can simply move out and seek it elsewhere. As an owner, it’s a bit more complicated, since a “party house” next door can affect the value of your investment.

Appliance repairs: Depending on the language of the lease agreement, most items, such as stove, refrigerator and other appliances, are up to the owner to repair.

Major items: Roof leaking? If you rent, call the landlord; if you own, you may have to get a loan.

Disclosure: When you move out of a rental, once the deposit period is over, you are off the hook. When you buy or sell a place, disclosure is the name of the game to avoid future litigation. For example, a pending airport is not your chore to report as a tenant, but as an owner it is.

Insurance: According to the non-profit Insurance Information Institute, tenants in the U.S. spent an average of $175 annually on renter’s insurance. Rarely required by most landlords, it’s a risk/cost tradeoff, since landlord insurance does not cover tenant’s personal property. As an owner, insurance is required by most lenders, and costs well over triple tenant insurance, at a U.S. average rate of $569 in 2003.

Life is unpredictable: As a tenant, you live in someone else’s property, which may leave you looking for a moving truck if the owner decides they want it back.

Qualities unique to home ownership:

Investment: Every mortgage payment puts you one step closer to owning the place outright (alright, so it takes 360 months of payments to pay off the typical 30-year loan) Once rent is spent, it’s gone forever.

Pride of ownership: As much as you may adore your unit, the walls belong to another. As a tenant you’re sinking money into someone else’s investment and risking your security deposit by painting the walls.

Major commitment: Choosing a place to purchase requires a longer-term commitment than 30 days or even a year. As an owner, in addition to the time commitment, there’s money. Depending on previous credit and other variables, lenders request down payments varying from 5 percent to 20 percent of purchase price. 

Credit: Scoring big with the FICO numbers often includes a boost from on-time mortgage payments.

Space: As a tenant, knocking out a wall and adding a bedroom is rarely an option. When you own, your budget and imagination are the limit, once zoning and permits are overcome.

Taxes: Owners enjoy the tax savings only a mortgage with someone’s name on it can provide–for the interest portion of the loan. While renters do receive some tax benefit, check with your tax person for details.

Speaking of taxes, bear in mind that as an owner, property tax is due every single year, year in, year out. On the plus side, the tax amount is trimmed off gross taxable income, lowering the tax bracket for some folks.

And lastly, if you get tired of a place or have to move, and you own it, leasing the place out is always an option. Ironically, you may end up being a landlord.

***

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