Renting vs. Buying

Buying A Home vs. Renting

Buying A Home vs. Renting
In the spirit of June 
being National Homeownership Month I thought I’d revisit the topic of buying vs. renting. Long before I became a real estate agent I was a big believer in buying a home or multiple homes. My belief has only strengthened as the years have gone by. Many still consider it to be the American Dream to own a home and it’s truly not as hard as one might think. Gone are the days of needing 20% down in order to get a mortgage. Home prices are rising, so are interest rates and the cost of renting. If you’ve ever thought about buying a home the time is now!
 


Stability – renting does not give you stability. The owner of the property can decide to sell, decide not to renew your lease, or raise your rent to the point that you decide to me. If you own a home and pay your mortgage, taxes, and insurance on time you can stay in the home as long as you’d like.
 


Maintenance- one perk of renting is that you are responsible for little or no maintenance. That might not be as good as it sounds though because you are at the landlord's discretion in getting repairs made. As a homeowner you’re responsible for maintenance but, also in control of who does it and how it gets done.
 


Customization- making changes to the flooring, updating the kitchen, or changing light fixtures isn’t an option when you’re renting but, it sure is when you own your home. Make it into whatever fits your personality and change it as frequently as you’d like.
 


Initial Costs- renting a place will typically mean coming up with a security deposit equivalent to one month of rent, a processing fee for your application, and your first month of rent. Yes, it is less than making a down payment but, rent is money you never get back. When you make your down payment and then monthly payments on your mortgage you’re building equity.
 


Investment- there is nothing related to an investment when you rent. You’re paying for use of the space and will have nothing to show for it when the time comes to move out. When you own you are making a long-term investment.

If you are considering buying in the Alexandria area and have questions about pros and cons reach out to us for answers. 703-988-1711 or amanda@amandadavidson.com. 

 

 

 

Tips For Millennial Home Buyers

Tips For Millennial Home Buyers

Millennial home buyers are defined as someone who is in the 18-35 year age bracket. Many millennials have thought about purchasing a home but, due to rising home prices and student debt haven’t taken the leap.

 

Although millennials have seen the struggle in real estate during the recession the dream of home ownership is still alive and well. The majority of millennials want to buy a home and there are options available for that to become a reality but, it takes proper planning and a little patience.

 

Real estate should be viewed as a long term investment. There will always be ups and downs but, if you’re looking at it from a long term view and are in a good financial position it’s something to seriously consider.

 

Deciding between renting and buying is a big decision. Think about the long term and years from now you will likely be glad you opted to buy instead of rent.

 

Real estate is not a get rich quick scheme. It takes hard work and patience.
 


Millennial Home Buyer Tips
 

Work With An Agent You Trust

This tip really applies to every home buyer but, as a millennial you’ve most likely never bought a home before so it’s extremely important you pick an agent you can trust. Your agent will (and should) know more than you and because of that, you will be relying on their advice. Ask for referrals from family and friends who have purchased a home before. Then interview different agents and ask questions before you select the agent you feel is best suited to represent you.

 

Think about what you’re looking for in an agent and base your questions around that. Does the agent have references? Do they actively sell homes? This is an important one because if they do it means they’ll have a pulse on the current market conditions.

 

Ask how many clients they work with at one time. You need an agent that can work with your schedule and devote time to helping you. If they’re overwhelmed with clients that’s probably not the best fit. Do they practice dual agency? You want your own exclusive representation.

 

As a first-time home buyer, you need someone that can answer all of your questions in a timely manner. Don’t settle for just any agent, you deserve the best representation.
 


Pinpoint Locations and Neighborhoods

A big part of buying a home is to determine where you want to live. Location, location, location might sound cliché but, the old saying is spot on.

 

You can always change how your home looks but, you can’t change its location. Understanding how to pick a neighborhood you'll love is important. The location of a home impacts value and the ability to sell down the road; check out the guide to learn more about the importance of walkability, crime, and schools.

 

Type Of Home
Buying a home requires a decision on what type of property fits your lifestyle. Condo, townhouse, or single family are the most common options but, not always the only options depending on what area you’re in.

 

When deciding on a type of home think about how many people (if any) will be living there. Do you need or want a yard? Do you travel a lot and want a low maintenance property? Are you looking for amenities such as a pool or fitness center?

 

Asking yourself these types of questions will help you decide what type of property is best. Remember to think long term, not just about your immediate needs.
 


Know Your Numbers

Purchasing a home comes with costs that you might not be aware of. There are different fees that you’ll want to account for. Expenses will occur before you actually own the home such as home inspection costs and the appraisal fee.

 

Obtaining a mortgage comes with fees that will be a part of your closing costs. These are just a few of the costs that come with purchasing a home.

 

There will also be moving fees and expenses that come after buying a home including maintenance and utilities.

 

Knowing your numbers up front and planning for the long term will save you a lot of stress and keep your budget on track.

 

Closing Thoughts For Millennial Home Buyers

Buying a home is a big decision. It’s one that requires careful thought, planning, and patience. Take your time and do your research.

 

Assembling a trustworthy team of experts to guide you through every step and waiting to buy a home that you love will benefit you for years to come.

 

 

Should I Sell My House Or Rent My House

Should I Sell My House Or Rent My House

This is a question that I have been asked this year more than any other year during my time in real estate. My answer is always it depends on your personal situation.

 

If you are thinking about moving to a new home whether it’s in the same area or relocating all together you’ve probably thought … should I sell my house or rent my house?

 

As with many decisions, there are pros and cons to selling or renting your home. Deciding which option is best for you comes with considering several factors.

 

Should I Sell My House Or Rent My House? 

Selling My Home: Factors To Consider

Your Home Is Not Your Responsibility After The Sale

If you sell your home you walk away after the sale, no future responsibility to the property whatsoever. Plain and simple every single responsibility that comes with renting your home is avoided altogether if you sell.

 

Selling itself takes work and commitment, even with the best agent guiding you but, it’s temporary and once your home is sold you move on with your life.

 

If you are moving to another state selling is often the best choice. It’s stressful managing a rental property in general and when you factor in being in another state it only complicates matters. Owning two homes means double the responsibility.

 

No Tenants

As with most things in life not all tenants are created equal. They’re strangers living in your home and unfortunately, sometimes that means damage occurs. The extent of damage is an unknown. It could be nothing outside of normal wear and tear or it could be a destroyed house.

 

There’s stress that comes with owning a rental property and the unknown of what and when repairs and maintenance will be needed. If you sell then you will have no tenants or damage to worry about. You will receive your proceeds at closing and the new owner will be responsible for what happens to the house.

 

Remember that if you decide to rent your home and then sell later you will likely be selling it with tenants occupying it unless you can afford to pay the mortgage and keep it vacant. Selling a home with tenants living in it is a challenge at best and a nightmare at worst. They can be very difficult when it comes to preparing your home for sale and allowing showings which often results in lost profits for you.

 

You’ll Have The Equity From Your Home

This is often the biggest factor that causes people to decide to sell. Selling your home will give you the equity that comes with it.

 

That could mean the down payment you need for your new home, having a higher down payment than you’d have if you didn’t sell or have an influx of cash in general.

 

Renting My Home: Factors To Consider

Do You Want To Be A Landlord

Being a landlord is a big responsibility. It’s far more than collecting a check each month. 

 

Being a landlord comes with unknowns because you don’t have much if any control over what tenants do while they occupy your home. Some will be wonderful, pay on time, and treat your home well. Others won’t pay on time and will destroy your property.

 

If you’re comfortable with knowing you’ll need to answer tenant calls, respond to maintenance requests, track down rental payments and handle getting the home ready to turnover in between tenants then being a landlord might work very well for you.

 

You could also consider hiring a property manager to take some of the day to day responsibility off of you. They typically charge in the 10% range of your monthly rental income.

 

Is Your Move Temporary

If you know you’re going to return to the area your home is in renting may be the best option. Selling and buying homes comes with costs and financially it may be best to rent your home out knowing you’ll be returning.

 

You can always decide to sell down the road if your plans change. Understanding that whether you return or end up selling there will be items to repair or update is important to factor in as part of your decision.

 

Will Renting Be Profitable

Not every property is going to generate positive cash flow and analyzing your home to understand if it will is a big factor to consider.

 

To determine if renting your home will be profitable you need to consider all the expenses and deduct them from the income you’ll receive from renting.

 

Mortgage, insurance, taxes, and HOA or condo fees are just the basics.

 

You'll also want to consider maintenance and repairs. Vacancies are frequently an overlooked expense. It is highly unlikely and not realistic to expect to have your property rented at all times.

 

If you’re going to hire a real estate agent to rent the property or a management company to oversee it both of these come with commissions and fees that you’ll want to plan for. If you plan to rent the property yourself be sure to budget for advertising costs.

 

While you can get an estimated budget for expenses it’s not an exact science. Be conservative when running your numbers. It’s often very helpful to consult with a local real estate agent to find out what your property can rent for in the current market as well.

 

Long term you’ll want to keep in mind rental prices go up and down. Just as the market changes for home sale prices it does for rentals as well.

 

Market Conditions

Speaking of rent fluctuating this brings us to market conditions. Many housing markets have seen increases in recent years and are on track to continue to appreciate. While there’s no guarantee your home will go up in value there are indicators to review to guide your decision.

 

If your home is in a market that is likely to increase over the next couple of years you could hold onto it by renting it out and selling for a higher price down the road.


Condition Of Your Home

Buyers are picky and in today’s market, the vast majority are looking for a turnkey property. Does your home need improvements or updating? If you don’t have the money to do them right now renting could be a good option.

 

Tenants differ from buyers in that they are willing to accept homes that are less updated. Renting your home could allow you to save up for future improvements before selling at a different time.

 

Tax Consequences

This is one that I often see overlooked. If and when your home produces cash flow from renting there are tax consequences to factor in. At that point, your home is an income-producing asset and you will be taxed on the income you make from your rental.

 

You can write off the costs associated with renting your home and in turn that will lower the income in which you’ll be taxed on but, it’s still something to consider.

 

Always best to consult with your accountant on taxes. They will be able to consult with you on what can and can’t be written off and how a rental property will impact you.

 

Closing Thoughts

Careful thought and consideration should be put into your decision to sell or rent your home. It’s not something that should be decided overnight. The right choice depends on what your personal circumstances are. Weigh the pros and cons by considering the factors above and then determine what’s best for you.

 

Additional Resources

Buying A Home vs. Renting

Non-Owner Occupied Investment Properties via Luke Skar of Madison Mortgage