Five factors often omitted in the rent versus buy equation!

By
Real Estate Broker/Owner with Richard Weisser Realty
https://activerain.com/droplet/4m9v

Five factors often omitted in the rent versus buy equation by Richard WeisserThe choice of renting versus buying a home is one that many consider when seeking housing. And there is no across the board right or wrong answer.

Because there are many factors that should be considered when making an informed housing decisions. These commonly include the duration of residency, the initial cost of acquisition, current market price, prevailing interest rates and maintenance.

But some variables are NOT always considered when making this important decision;

One: Rent can go up, sometimes dramatically. Here in Coweta County Georgia, a typical usufruct is for one year. After that year, anything can happen. In our hot rental market we have seen some rental amounts escalate as much as 25% at annual renewal.

Two: Your lease may not be renewed. An investor may decide to cash out and sell your home. In theory you could be forced to move every year. And while some enjoy the mobility one cannot deny that there are significant expenses associated with moving from one place to another.

Three: If your landlord stops paying the mortgage, you might be in for a surprise. And while there may be protections set in place there can still be a significant amount of inconvenience to tenants living in foreclosed properties.

Four: You may be looking for housing in a landlord friendly jurisdiction. While we have read about some foreclosures taking even months or years to execute, here in GA a tenant can be successfully evicted within the first month following default. Before making a choice to rent in an unfamiliar area be sure to understand ALL of your rights of tenancy BEFORE you sign the lease.

Five: Consider the TOTAL cost of the lease. While fifteen hundred dollars a month may not seem like a lot of money, eighteen thousand dollars for a one year right to occupy a property is a huge chunk of change.

As I said, there is no right or wrong answer to the question: “Should I rent or buy?”

 

But it is important to consider all of the factors involved in making the right decision.

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Rainmaker
475,189
Marie Story
Coldwell Banker - Pinecrest (Miami) - Pinecrest, FL
Broker Associate, Pinecrest (Miami) Specialist

I think one also has to keep in mind how long you are going to stay in a particular area.  If you are not going to stay very long, it will usually be cheaper to rent.

Aug 22, 2014 06:53 AM #12
Rainmaker
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Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

Absolutely, Richard. My younger son just went through this test and decided to buy.

Aug 22, 2014 07:47 AM #13
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Richard Weisser
Richard Weisser Realty - Newnan, GA
Richard Weisser Retired Real Estate Professional

Sheila Anderson ...

And getting ALL of the information needed! Thanks!

Than Maynard ...

The same is true here. Much cheaper to buy than to rent. TYVM

Sybil Campbell

I once tried to explain to an analyst that a house will eventually be paid off and he said "yeah. but how often does that happen?{ Thanks.

 

Aug 22, 2014 08:20 AM #14
Rainmaker
384,796
Ann Zieve
Keller Williams Success Realty - Eden, UT
Unmatched Ownership Experience

Like others mentioned, I think  the key here is "Practicality".

Aug 22, 2014 08:23 AM #15
Rainmaker
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Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

Richard, those are excellent points to consider! Even if they do represent what might be the worst case scenario, renters should weigh those possible risks/costs against the benefit of what might be a cheaper and more flexible arrangement than buying.

Aug 22, 2014 08:30 AM #16
Rainmaker
783,771
Jeff Pearl
RE/MAX Distinctive / LIC in VA - Lovettsville, VA
Full Service Full Time Realtor

Good list of factors to consider. I've seen more than one family rush to find a rental just because they didn't consider things on this list and they waited too long before they started looking.

Aug 22, 2014 10:14 AM #17
Rainmaker
562,113
Women of Westchester Working Together
Women of Westchester Working Together - West Harrison, NY
Women helping Women get ahead

Yes, there are a few not so obvious costs.  The moving is a big cost and huge inconvenience. - Debbie

Aug 22, 2014 11:32 AM #18
Rainmaker
1,317,757
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I think the points you make are things that folks should consider when they are trying to decide whether to rent or buy.

Aug 22, 2014 01:23 PM #19
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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Richard, well said - there is no right or wrong. It all depends on personal circumstances. However, may good points you have mentioned that I had never thought of.

Aug 22, 2014 03:48 PM #20
Rainmaker
2,855,237
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Rent can go up within a three-month period

Aug 22, 2014 04:21 PM #21
Rainmaker
1,568,761
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

This is a great list of factors to consider when trying to decide whether to buy or rent.

Aug 22, 2014 09:22 PM #22
Rainmaker
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Rob Spinosa
Guaranteed Rate, Marin County, CA - San Anselmo, CA
SVP of Mortgage Lending, Marin County

From my own experience, I also like to share with my clients the psychological differences between the two.  Not everyone is receptive to it, and that's OK, but I know that when I finally got that first set of keys, I felt a heavy weight of transiency lifted and all at once felt a sense of community and permanency that allowed me to foster better friendships and commit to things with greater intent.  To me that mattered and it came with ownership --- all economics aside.

Aug 22, 2014 11:13 PM #23
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Amanda Christiansen
Christiansen Group Realty (260)704-0843 - Fort Wayne, IN
Christiansen Group Realty

This is a very informative and accurate post Richard.  Not many people think about the rent going up or the owner (landlord) not paying the mortgage.  Thanks for the insight.  

Aug 22, 2014 11:28 PM #24
Rainmaker
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Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Richard, a rent vs. buy analysis is a must. Many renters don't realize they can purchase a home.

Aug 22, 2014 11:50 PM #25
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Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Of course we will never get to 100% ownership. Some people should rent if their credit needs repairing in order to get the best rate, that they have a sense of responsibility that not only includes paying on time but realizing they are now responsibile for repairs and upgrades. On an Excel spreadsheet I can dramtically show that with interest and pro[erty tax deductions plus appreciation that the cost of home ownership is better. It is personal responsibilty that also must be included and a spreadsheet doesn't show that.

Aug 23, 2014 01:47 AM #26
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Rene Fabre
First American Title - Seattle, WA
Marketing in the Digital Age

Great read, Richard... I'm of the opinion, even if you're only going to live there for a few years is buy! Of course it only makes sense if you can afford to do it. If that $1500 a month rent were thought of as a 30 mortgage at 4% interest that would equate to a mortgage right around $300,000. In many markets that's purchasing power for a pretty decent place to call home.

Aug 23, 2014 05:16 AM #27
Rainmaker
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Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Time flies . . . and in a short time, maybe 15 if planned correctly, a home can be paid off.  Being a renter, this can never occur.

Aug 23, 2014 08:07 AM #28
Rainmaker
422,551
Dennis Burgess
AmeriTeam Property Management - Mid Florida, FL
Orlando Property Manager and Realtor

Hi, Richard:  With all due respect, there's no synchronicity or consistency in this post's content.

You say "there is no across the board right or wrong answer" when one is considering whether to rent or buy.  I can agree with that.  But then you proceed to rattle off 5 factors which (if viewed by the unbiased eye) say "Buy, buy, buy, buy and buy".

Unless you truly believe there IS an across the board right or wrong answer, wouldn't it make sense to present at least one point in favor of renting along with your five against doing so?

I'll offer a few things here that you and others who favor folks buying versus renting might overlook, for example:

1) some who are re-locating to an unfamiliar area choose to rent while getting accustomed to the area and deciding where they might want to buy or build a year or so down the road.  These folks being pushed toward buying in a place they ultimately hate benefits no one.

2) many are still having credit issues that render them unable to buy- or make it a possible yet imprudent thing to do.  Their situation might be better after renting for a year or so.

3) some in the rent an apartment/condo or buy a condo market fail to do their diligence with respect to researching the fiscal health of their COA's, etc- and with as many as I've seen around here that have gone under or slapped members with $1,000 special assessments to cover non-paying neighbors, everyone isn't prepared for that.

4) there's also the implication of the nuclear family in any argument for buying versus renting- which we know doesn't exist in every circumstance.  It's not ths best of ideas for boyfriends/girlfriends to co-sign for each other's vehicles- making leasing together a bit less ideal and buying together far from ideal.

Aug 23, 2014 01:13 PM #29
Rainmaker
257,420
Vanessa Saunders
Global Property Systems Real Estate - White Plains, NY
From Manhattan to the Catskills of New York

I've tried to educate clients many times on the pitfalls of renting verses buying.

Unless there is a serious credit issues, buying will trump renting most every time.

Aug 24, 2014 12:11 AM #30
Rainmaker
1,745,749
Jeremy K. Frost
Keller Williams Realty - Dripping Springs, TX
Associate Broker, ABR, CNE, CRS, ePro, PSA, SRS

This is really great information. Thank you for sharing and best of luck!

Aug 24, 2014 12:16 AM #31
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