Rent Or Own?

[Anonymous]

The lease on the house I'm renting is up after Christmas. I want to buy investment property and have  a few bucks stashed to do that. But I am trying to decide whether to rent or buy my next living space.

On the one hand, I like being on the road to debt free and a mortgage will put me $300K or more in the hole....for 30 years.

On the other, "owning" would give me some degree of security...or as much as one can have when the bank owns your house. But it will leave me less to invest in real estate which will have renters paying off the mortgage FOR me.

I'd like some feedback....rent or "own"???

[Anonymous]

I'm new here, but I'll answer you anyway, since I'm going through the same thing atm.

I say buy. There is no use in paying someone hundreds of dollars every month, when that money could be going to something that is yours.

With your own home there are no restrictions on what you can do (within reason) in it. No noisy/nosy neighbors above of below you, and no waiting for the landlord to get around to fixing that leaky faucet, or creaking door.

Good luck on whatever you decide!

[Anonymous]

Hi there. I'm new too but I'll give my two cents:

It really depends on your local market. Across the country it's definitely a buyer's market, but there are pockets where sellers can still rule the day. What does your market look like? Here are a few pros & cons, as I see them:

Pros

- Tax benefit of deducting mortgage interest

- Probable (but not guaranteed) return on your investment as property value rises

- Greater control of what happens to the property - the points Astrid makes, plus you don't have to worry about the property being sold out from under you

- Pride of ownership and satisfaction - this isn't a tangible, monetary thing, but rather an emotional satisfaction that I enjoy from owning my home, even with the mortgage attached.

- Your monthly payment is actually an investment in something you own, rather than lining someone else's pockets

Cons

- You're responsible for all repairs, taxes, upkeep, etc - no more calling the landlord!

- In many markets, homeowners who want to rent out their homes are finding that rents won't completely cover the mortgage (renting is cheaper than buying in some cases). So find out if that's true in your area

- You have less mobility to pick up and move

Again it just depends on your personal motivation - what is leading  you to make this decision. For me, I'd rather own my home for the perceived emotional satisfaction and stability - the financial investment is somewhat secondary, but still important. You may have different motivators. Good luck in whatever you decide!

[Anonymous]

Have you heard of lease to own? I know someone who did this...

Their terms were something like this (all agreed upfront):

• agree on sale price of property in 2 years
• 2 year lease
• % of lease payments gets applied to downpayment of house (placed in escrow)
• $1000 earnest money to the owner for doing this (more might be needed depending on situation)
• After 2 years, both parties have the option of continuing the purchase if they wish to

Renter

- if they decide not to buy afterall, they lose earnest money, but can walk away from the purchase, also lose moneys in escrow

- if they decide to do this, there's money in the escrow to be used towards downpayment

The person I know who did this chose not to purchase after 2 years as he got a nice job offer out of state. BTW, this was probably 7 years ago and he's still not a home owner.

Definitely need an attorney involved. A not for everyone, but thought it was worth mentioning.

[Anonymous]

I think owning your home is the way to go if you are ready for it.  Owning is a big responsibility and comes with a lot of worries though. 

Now being a landlord is not all wads of cash and the easy life.  Before you decide to invest in rental properties ask yourself if you are ready (financially and emotionally) to deal with the stress.  What if a major appliance goes out?  What if something happens to the home and insurance won't cover it?  What if you can't get it rented--can you still afford to buy a home for yourself AND investment properties?  Can you afford an attorney to help solve disputes between yourself and tenants?  What if your tenants trash the house?  I've been both a homeowner, and a landlord.  When I was a landlord the money was nice, but it was a LOT of work.  I've cleaned out nasty refrigerators, spent whole weekends painting and cleaning carpets.  I've had to haul off other people's junk, gotten called at 1 a.m. to light a pilot light or call a plumber for a busted pipe.  I'm not trying to discourage you, but like anything investing in rental properties is a business that has drawbacks as well as benefits.   Just think it over before you jump in and talk to some landlords in your target market.

[Anonymous]

How about a multi-unit like a duplex, live in one and rent the other side?

My parents have had rental property longer than I've been alive. And I think my late grandmother has had rental property since my mom was probably 4 or 5. My late father was an architect which helped greatly, very DIY. My mom was a pharmacist and her family business was a drug store. Rental property has contributed to their net worth more so than their professions. Mind you, it doesn't happen overnight.

Yes, there's certainly work, but due diligence pays off. It's not for everyone. My 3 siblings don't want to touch rental property with a 10' pole!

Laugh, I remember growing up, we had one tenant who wound up staying for like, 30 years. He was never late with rent and didn't complain about increases, but boy, did my dad try to make it hard for him to stay. After they finally moved out, I did a walk-thru with my dad. The place needed so much, it took 6 months to get it to a rentable state.

If you go rental property, be very choosey when selecting applicants. You legally can pull a credit check, but you also have to write a report on those that you don't select explaining why they didn't get the rental. Check references.

My parents' average renters have been around for over 20 years. Um, two have passed away even. So there are good enough reasons for people to rent (I think my parents as landlords definitely count ).

[Anonymous]

Your own place first then investment properties - why pay someone else's mortgage and have them enjoy the increased equity while you rent?

It costs less to buy  your own residence than an investment property - so replacing that money in the investment pool will take less time.

[Anonymous]

Zen - definitely buy, especially in this market.  Work your best price at the best location you can find.  It is by far the best buyer's market in 20 years, so go for it.

Regarding the investment property - only if you can definitely rent it out to cover all your expenses, principal, interest, insurance, taxes and utilities.....

I would be VERY VERY wary of buying property for investment, as prices are STILL dropping around the country.   I myself was forced into bk solely for this reason - 3 FL properties purchased to flip and then they all crashed and burned.  One piece of land went from $150k to $50k in less than 2 years......

So be very very careful with the investment property.

But, full speed ahead on the primary residence purchase!!!

[smallfry]

I am a RE bear so I say rent and let the landlord take the equity hit. Do you see RE going up the next few years? I sure as heck do not.

[SmartCookie]

If you have the money and the itch, now is definitely the time to buy.  Simple as that.

Get a 2 family perhaps.