St Clair Solutions Real Estate

Although owning a home can be a wise decision for your financial future, there are some occasions when it makes greater financial sense to rent. Never buy a home if you are unsure whether or not you want to live in a particular area for an extended time period. Many people buy homes thinking that they can quickly sell them or rent them out if they choose not to live there anymore. Buying a home is a commitment and a long-term investment. It is not something to be entered into lightly. You should never purchase a home unless you are willing to live there for at least 5 years. Real estate is an illiquid asset and can be hard to sell during economic downturns. Condo owners have had a particularly difficult time unloading their properties recently.

Renting may also be a better option than buying when you are looking to rebuild your credit history. It has become increasingly difficult to get a mortgage loan without pristine credit over the past 2 years. This is due to the large number of bad subprime loans that were written during the real estate boom. With so many unsold homes on the market, you may be able to prove your creditworthiness to a financial institution by entering a rental agreement. Let’s say a house has a mortgage payment of $1300.00 per month. You can enter a rent-to-own agreement in which you are making rental payments that are close to the value of the mortgage. After 2 years of making payments on time, you could approach a bank about obtaining a mortgage. This would demonstrate that you have been able to make the rental payments on time and are ready to assume the mortgage on the property.

If you are still on the fence about whether to buy or rent, use the rent ratio. The rent ratio is when you take the purchase price of a house and divide it by the yearly cost of renting a home. According to the New York Times article, “the number 20 provides a useful rule of thumb. When you do the math, you discover that a ratio above 20 means you should at least consider renting, especially if you may move again in the next five years or so. When the ratio is well below 20, the case for buying becomes a lot stronger.” Also, make sure to factor in other costs associated with owning a home such as homeowner association fees, property taxes, homeowners insurance, and maintenance costs.

Also, know your personal situation. If you’ve got debt up to your eyeballs or you’ve just gone through a big life change such as marriage, a newborn, divorce, or a death in the family, taking on the responsibility of owning a home might not be in your best interest.

Source: Money Crashers

For assistance in renting a home, here are some excellent online resources:

PHOENIX CRAIGSLIST, RENTALS.COM, and RENT.COM
 

HOME - ABOUT - SERVICES - RENT - BUY - SELL - CONTACT