Why Rent When You Can Buy

Renting or Buying:
Advantages and Disadvantages

If you are considering buying a house, one of the first decisions you need to make is whether buying a house instead of renting one is the right direction for you. Since owning a home is the "American Dream", many people simply assume that it's always to their advantage to buy a home, and for most, it is. Take a moment to review the following table to see how your situation fits in. Items in the green boxes are advantages and in the red boxes are disadvantages.

Renting Advantages
More fixed costs for the term of the lease
Not gaining equity, but not losing it either
When the lease is up, you can just move
There is generally less work in maintaining a home or apartment
Smaller amount of "up-front" cash
Renting Disadvantages
No matter what happens with the value of the home, you will never gain equity
Limited--or no--ability to personalize your living quarters
No tax advantage to renting. Your landlord gets any and all tax breaks that are available

Buying Disadvantages
Variable costs
Equity may go up, down, or stay stagnant
If you want to move, home generally must be sold
Work needs to be done by you-or paid for by you
Generally a larger initial investment-the downpayment
Buying Advantages
Over time, the mortgage balance decreases and equity builds, even if the value of the home does not increase
The ability to remodel and redecorate the home to match your needs and desires
There can be tax advantages attached to home ownership. Consult competent legal and/or accounting advice for details for your situation

The buy vs. rent decision, (Yahoo Finance, 2007).
Is it Better to Buy or Rent- calculator, (New York Times, Apr. 2007).
Rent vs Buy calculator, (Move.com,).

Field Guide to Buying vs. Renting
(Updated January 2008) 

In today's market, is it better to Buy or Rent? The information listed here will assist you in helping answer this question. Included are statistics and studies on homeowners and renters as well as financing options and tips. (M. Glick, Senior Information Specialist)

Rent-to-Own Deals: Smart Questions to Ask...
 
For Sellers:
Who will tend to the property and pay for routine maintenance?
Who pays for major repairs?
What are the costs of setting up and managing an escrow account for the portion of rent allotted to the down payment?
Will you manage the property yourself, or hire an agent?
What if the renters change their minds? Who keeps the money in the escrow account?
If the buyers change their minds, what will be required to put the property back on the market?

For Buyers:

How much of the rent is going to the down payment?
How locked in are you if you change your mind?
What will it cost you to get out of the deal?
How long will it take to accumulate enough of a down payment that you are likely to qualify for a mortgage?

Source: REALTOR® Magazine Online.

Statistics & Studies on the Buy vs. Rent Decision

Home Prices Must Fall far To Be In Sync With Rents, (Wall Street Journal, Jan, 2008).  
Should you buy a home in today's Market, (Real Estates ABC, May 2007).
Now that Housing Has Soured, Renters are glad they didn't buy, (Yahoo Finance, Nov. 2007).
The buy vs. rent decision, (Yahoo Finance, 2007).
Is it Better to Buy or Rent- calculator, (New York Times, Apr. 2007).
Rental and Homeowner vacancy Rates for the US:1995 to 2007, (U.S. Census Bureau, Oct. 2007).
To Rent or to Buy, (Real Estate Finance: Smart Money.com, July 2007).
Rents inflated by soft-owner occupied market, (Realty Times, Oct. 2007).
How Much of a Mortgage Can I Afford?, (REALTOR® Magazine Online).
Renting or buying a home-advantages and disadvantages, (HBIC.com ).
Rent vs Buy calculator, (Move.com,).

Consumer Information, Tips & Resources

Why Own?, (Freddie Mac, 2008).
Historical Conventional Loan Limits-1980-2008, (FannieMae.com, Nov. 2007).
Cautious Renters Put off Buying a Home, (REALTOR® Magazine Online, July 2007).
Pros and cons of renting in retirement, (BankRate.com, Oct. 2007).
Rental Help in your State, (Hud.gov).
Down payment assistance, (Housing Assistance Network).
Down Payment Woes, (Black Enterprise, Aug. 2007). Q
Helping home buyers with down payments pays off for society, (Chicago Sun-Times, Dec. 2006).
Buying versus renting, (Ginnie Mae).
Common questions from first-time homebuyers, (HUD.gov).

Financing Resources

Veterans Administration home loan program, (Veterans Administration).
Affordable housing at Freddie Mac, (Freddie Mac).
CICA programs for affordable housing, (Federal Housing Finance Board).
Housing Assistance Council, (Ruralhome.org).
FICO, (Myfico.com).
Financing an energy-efficient home, (U.S. Department of Energy).

Information for REALTORS®

Working with buyers toolkit, (REALTOR® Magazine Online).
What Can You Deduct When You Own a Home, (REALTOR® Magazine).
Why rent when you can buy, #186-90
Buying a Condominium: It Makes Dollars and Sense!, #186-85
Resources for real estate professionals, (Freddie Mac).
Turning Renters into Buyers, (Real Estate Marketing Blogger, June 2007).
First-time Buyer Programs Turn Renters into Homeowners, (Realty Times, June 2006).
Turning renters into owners, (REALTOR® Magazine, July 2001).

Courtesy of NATIONAL ASSOCIATION OF REALTORS®
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