Benefits of Buying a Home Vs Renting

Low prices and record low interest rates have made buying a home more affordable than it’s ever been AND a bargain compared to renting. One may ask why would people rent instead of buy a home especially now? How much would they benefit if they buy instead of rent? See answers to these questions below:

Why People Rent a House?

·         Uncertainty about the housing market and the economy in general.

·         Uncertainty about their jobs and steady incomes (employed now, but could be unemployed tomorrow).

·         Don’t want to commit to a long term contract.

·         Don’t want to spend time & money for maintenance.

·         Don’t have or don’t want to commit the money for the down payment, closing costs, etc.

·         Low risk of obsolescence. It may be possible for lessee tenant to avoid some of the risks of obsolescence associated with ownership.

·         Don’t qualify for the loan (e.g., low credit score, low income, too much debts, etc.).

·         Lack of real estate knowledge.

·         Bad experiences.

Why People Buy a Home?

·         Control. The homeowner who lives in his/her home has, within the limits of the law, freedom to change/modify/remodel the home as he sees fit.

·         Don’t want rules & restrictions imposed by landlords on properties they live in.

·         Don’t want to waste their money on rents and get nothing back in return.

·         They look at home ownership as an investment to build the equity by property appreciation and paying principal over time.

·         Tax Savings. The owner of a property is entitled to the tax savings resulting from cost recovery rules and mortgage interest during the holding period and when the property is sold.

·         With such low interest rates, monthly mortgage payments could be less than the monthly rent.

·         Great feeling, pride of ownership and being in charge (priceless)
 

Economic Benefits of Buying a Home vs Renting a House

Both values of the homes and rentals are dependent on many factors such as: location, condition, local housing market (supply & demand), size, age, number of stories, etc. In order to compare apple-to-apple, we looked at similar houses (same age, size, condition, etc.) that were sold and leased in last 6 months prior to publishing this article in a specific location (subdivision) in Collin county Texas.

Our findings, for that specific subdivision, are as follow: (See Table 4 for Comp. at the end of this report for detail information)

·         Average Monthly Leased/Sq. Ft. was about $0.70

·         Average Sold/ Sq. Ft. Price was about $85

Texas Five Star Realty has developed a tool that allows you to calculate the amount of saving (or loosing) when deciding rent vs buy.

1))     You can input the data and assumptions based on your specific needs & experiences and come up with different savings by visiting Rent_vs_Own.asp.

Based on a specific set of data and assumptions, as explained in the enclosed study, we found following savings buy vs rent.
 

1: Cost Saving: Buy v. Rent

Conclusion::

Low prices and record low interest rates have made buying a home more affordable than it’s ever been AND a bargain compared to renting. 

Based on the fact described in “Why People Buy a Home?” and financial benefits shown on Table 1, there are clear advantages to owning rather than renting.

Why should someone buy a home NOW more than ever (if possible)?

·         In many locations in the nation, rents have increased more than 10% over the last 12 months. With fewer consumers able to make the leap into homeownership, rents could continue to climb higher.

Source: First Published: April 5, 2012: 9:59 AM ET
http://money.cnn.com/2012/04/05/real_estate/buy-rent-home-prices/index.htm?hpt=hp_c1

·         Asking prices for homes declined 0.7% over the past 12 months through March.

(Source: Reports released Thursday April 3^rd, 2012 by Real Estate Listing Site Trulia)

·         In many Counties, i.e., Collin County Texas, the assessed value of the houses, Property Taxes, insurance, therefore total monthly payments have been reduced compare to the years before. Allowing more money in homeowner’s pockets.