There is Nothing Wrong with Renting

By
Real Estate Agent with DWELL Real Estate

My homeowners insurance bill came in the other day and I thought to myself, “renters don’t worry about bills like this.” I have been a home owner since the late 1990’s so I am used to property taxes, insurance, property management and everything else related to home ownership.

I remember the days of being a renter. You just have to write that check at the beginning of every month and that was pretty much it. Occasionally, something would break but that was no big deal because you just made a phone call. Instead of driving back and forth to Home Depot and spending an entire afternoon trying to make a repair you just had to call the landlord.

  • Property tax bill due? Good thing I don’t own property. Let’s go shopping.
  • Homeowners insurance rates going up? Who cares? Let’s hit the gym.
  • Roof leak? Call the landlord. I am going golfing.
  • Home prices plummeting? It does not directly affect me. Let’s go the beach.

Renters have few home ownership hassles or headaches. I kind of miss those days

That might sound strange coming from a Realtor. I do understand those who do not want to be homeowners. After one of the worst real estate meltdowns ever it is pretty easy to see why some don’t want to own property. People are hurting and the country is hurting primarily because of loose lending and an overheated real estate market. If you owned property over the last 5 years you probably lost money. The only people who did not lose much money were the renters. It is an overused cliché but the American dream has become a nightmare for many.

However, with all of that being said homeownership is looking more and more attractive. As home prices continue to decline it makes total sense to own property. Here in Sarasota, Florida home prices on the low end of the spectrum are in some instances one half to one third what they were in 2005. The market seems to have overcorrected. I see homes that used to sell for $200,000 now selling for $70,000. It sure does stink for those who bought at $200,000 but what a huge opportunity for buyers. If you have ever wanted to own real estate now is a great time to start looking.

Warren Buffett & Suze Orman on Homeownership

I guess there is some hoopla out there about how Warren Buffett and Suze Orman have differing opinions on home ownership. Here is a link to one of the articles - Warren Buffett, Suze Orman Disgree on Whether to Own?

It sounds like they both agree that homeownership is a great thing IF you can afford the home. Here is a video of Suze Orman explaining that there is more to owning a home than just the rent payment. At the end of the video she says buying a home is great as long as you can afford it.

 

On a side note I remember seeing Suze Orman at a Sotheby's Realty convention in Boca Raton in 2007 where she said that the market was bottoming and that she was looking to buy a home in South Florida. I wonder if she ever did.

Benefits to Homeownership

  • Pride of Ownership – Owning a home gives you and your family a sense of security, stability and control. Do you feel like planting some pretty flowers out front? Go ahead. You own the home and don’t have to get permission from the landlord. Do you think your living room would look better with a different color? Go ahead and paint it. You don’t need to ask anyone. While writing this, my two young boys are out front shooting basketballs in the hoop. I installed a basketball hoop at the end of the driveway in front of my house. Renters can’t always do those sorts of things.
  • Appreciation – It might be hard to believe but you can make money in real estate. It has been a bad investment the last 6 or so years but it is quickly becoming more and more attractive. Remember the time value of money you may have learned in school?

Let's say you have $100,000 to invest in rental properties and you purchase 4 rentals properties worth $100,000 each. You put down $25,000 on each house and get a 15 year mortgage of $75,000 on each house.

15 years from now all of your mortgages are paid off. If you assume the appreciation rates below your four houses are now worth:

  • 2% - $538,347
  • 3% - $623,186
  • 4% - $720,377
  • 5% - $831,571

Your $100,000 investment grew to 4 paid off rental homes that produce a nice monthly cash flow. Imagine if real estate prices averaged 4% a year for the next 15 years. Your 4 houses would be worth $720,377. I can think of worse things.

  • Mortgage Interest Deduction – Our tax system favors home ownership. Mortgage interest is a helpful tax deduction. Of course, consult with your accountant on this one.
  • Property Tax Deduction – Property taxes on your home is also a tax deduction. Consult your accountant on this one as well.

 

The Bottom Line

There is nothing wrong with being a renter. If you live the gypsy life and enjoy moving around then you need to be a rented. You can move around a lot and be a homeowner if you have plenty of dough. Remember, there is a cost to selling your home every time - Realtor fees, taxes, moving expenses etc.

If you get sick by the idea of packing all of your belongings and moving them AND you can afford a home they you should consider buying. I think everyone would agree that you should only buy a home if you can afford to own and maintain that home. If you can jump in the pool.

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Home Buying
Groups:
Realtors®
Vacation and Second homes
Dedicated Bloggers
Diary of a Realtor
Tags:
buying
buying a home
home ownership
renting
renting vs buying

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainer
56,983
Christina Miller
Sarasota Bay Real Estate - Sarasota, FL

Nice post Marc, Hope all is well with you, Have you had a good look at search results lately? Nip Nip :-)

Apr 10, 2011 03:49 AM #1
Rainmaker
102,054
Marc Rasmussen
DWELL Real Estate - Sarasota, FL
Sarasota Real Estate

I have. Quit nipping. ;-)

Apr 10, 2011 03:55 AM #2
Rainer
56,983
Christina Miller
Sarasota Bay Real Estate - Sarasota, FL

Na, that would not be as much fun. Someone needs to keep you, Michael and John on your toes.

Apr 10, 2011 04:02 AM #3
Rainer
117,810
Beverly Femia
BlueCoast Realty Corporation - Hampstead, NC
Broker Realtor Stager - Greater Wilmington, NC Are

Marc, not enough is said about employment opportunity and home ownership.  If the average person will change jobs every 5 to 7 years and be unemployed for some months during transition, home ownership will make less sense then in the days when employees could look forward to working for the same employer for 20 years.  

Apr 10, 2011 04:15 AM #4
Rainmaker
102,054
Marc Rasmussen
DWELL Real Estate - Sarasota, FL
Sarasota Real Estate

Hi Beverly. I agree. Thanks for the comment. ;-)

Apr 10, 2011 07:28 AM #5
Rainmaker
4,796,904
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Marc, then again when the landlord gets the insurance bill, tax bill, etc.  And it has gone up, do you think the rent is going to stay the same?

Apr 11, 2011 07:10 AM #6
Anonymous
Marc Rasmussen

No, the rent will most likely go up. However, it probably will not go up by the size of the increased costs.

Apr 12, 2011 04:19 AM #7
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
102,054

Marc Rasmussen

Sarasota Real Estate
Ask me a question
*
*
*
*
Spam prevention

Additional Information