Invest or buy a home... that is the question...

[Lane Kawaoka]

Looking for advice and feedback on the following debate. Here is my 2 cents:

Home ownership has been idealized as the American Dream with the white picket fence. Emotionally, it has provided many couples a sense of ownership and a place where they can start growing “deeper roots” or their children. Socially, they are seen as established people, able to buy a place for themselves. While these ideas are true and are great reasons why people should buy a place where they can live, owning one can also affect certain financial concerns.

Buying a home is different from buying a property. A home is basically where you and your family lives while a property can be a house, a piece of land, or a condo unit, which you bought but won’t live at all. If you won’t live in the property you bought then where will you and your family stay? 

Other than discussing the difference between buying a property and buying a home, this eBook will also show you the benefits and disadvantages of renting.

Whether you are thinking of buying your own home or rent a place to live and buy a property, this eBook is written to help you decide and see which one fits best, especially when you consider your current financial situation and goals. The next topics will help you evaluate the costs, benefits, and drawbacks of owning your own home.

Should you buy to own your home or opt to rent?

A young individual who is opting to live independently may not be able to face the hefty costs associated with purchasing a home. Most of them would begin by renting an apartment. As they are able to build their career, save money, and start their own family, most of them would opt to buy their own home.

While owning a home may be a good move for family, there are some who would be better off renting. How would you know if you should rent or own your own home?

Determining whether you should buy your own place to live or rent one demands careful deliberation. This also varies from one market to another.
 

Most homeowners are considered to be living a dream – having their own homes. However, this doesn’t mean owning is better than renting.

The same goes for those who enjoy the flexibility of moving for those who owns their own apartments. The money they spent on rentals and moves may have been saved by having their own home.

But there is also the fact where eventually a one’s homeowner chooses to tell their home and become renters.

To answer more whether it is better for you to rent or own a place to live, here are their differences:

Up Front Costs: Buying your own home entails numerous upfront costs compared to renting. Here are the costs you need to pay before you can own your home.

Downpayment: The down payment, in buying your own home, is a percentage of the home’s full payment which you need to pay up front. This varies and is based on your credit profile, local market condition, and the mortgage loan approved.
 

Home Inspector: Before you can move you need to have the home inspected. There are areas you may have missed during the first walk through. Hiring a professional home inspection can help you check it. There are also other bank who needs a certification that a house is properly inspected before granting loans.

Taxes: Property owners pay taxes up front. This means you need to compensate the tax paid by the seller for the property.

Insurance: The property needs to be insured. You need to pay the first year’s premium up front. Lenders also require a proof of the homeowners insurance.

The above mentioned are just some of the upfront costs you need to handle before you can own your new home. On the other hand, renting an apartment cost much lesser and with fewer items to settle before you can move. You need to give the downpayment (the first month’s cost), a deposit payment (which at times is non refundable), and a security deposit.

Recurring costs refer to monthly or annual payments you need to make. For homeowners, this means loan mortgages, insurance, property taxes, utilities and maintenance.

Meanwhile a renter’s recurring cost payment include the monthly rent, insurance, pet rent (if you have pets) and utilities. The laundry can also be an additional charge as some apartment buildings have an area for laundry.

 Other: There are other costs you need to pay such as furnishing, moving, and repairs. These are usually one time costs you need to pay.

For homeowners, other costs they need to pay are more based on renovation projects. This can be remodeling rooms, replacing floorings, and so on. There are cases where a homeowner sells their home after replacing, remodeling, and renovating the house. But before they do sell it, and leave, they face repairs and other maintenance projects just to keep the place in tip-top shape. However, once the place is sold, some homeowners use the extra money for some other investment.

Renting is seen as a better way to free yourself from that. Repairs alone is not a worry for them. The building owners are the ones responsible for repairing any areas that need it. You don’t also have to do countless remodeling too.

After discussing the difference between buying your own home and renting, you may be wondering what does it have to do with buying your own property?

As we look at the differences between owning and renting a home, you may have noticed how homeowners can earn by selling their property eventually.

After living in it, maintaining and repairing it, you too can eventually sell the property you bought and move to a smaller place where you will have lesser worries on expenses.

The Alternative:

While buying a home is investing, the difference with what we want to share is the fact that some people don’t live in the properties they own. Some either opt to rent a smaller place, while some buys a smaller place (a condominium unit).

Opting for a smaller homes are more maintainable and practical. Some couples buy a condominium where emergency expenses are shared by the whole building residents. Mortgage payments are also lesser with these homes.

With lesser expenses, they can save the money they earn to purchase another property such as an apartment. Since they get to pay it in full, this purchase, they don’t have pay mortgages.

What do you do with your properties can be entirely up to you. You can use it as a vacation home or as another means of income.

Income: ou can earn from the property you purchased either by opening it for rent or by selling it.

Earlier you learned how some people sell their homes and opt to rent or own a smaller place to live. They do this after renovating which would mean it would be sold at a higher price.

In some cases, there are people who also purchase a property and sell it.

Offering our property for rental is another way to earn from it. This goes better for those who owns condo units or apartments.

Compared to buying a house, most couples opt to get an apartment. It is more affordable for them and practical. These people can be your target market.

Beach houses or other places which you can consider as your vacation home can be open for rentals too. Many people would prefer to rent a place for a few days instead of checking in the hotel.

Renting your property can partially – and in some cases can totally – offset your mortgage, tax and other payments.

Owning or Renting: 

Renting or buying a place is a major decision. It requires you to evaluate your present financial status and even your lifestyle. It can also affect the savings you will accumulate over the years. It is important that in deciding whether you buy a home or rent one, you consider your priorities. Here are some questions to help you evaluate.

1. How do you see your financial situation five years from now? How much do you want to see in your savings account?

• It is best to have a clear idea how you will see your finances in the future. Have a quantitative and a qualitative goal in mind how much you want to save and see in your bank account.

2. How important is it for you to have a personal space?

• Some people need a space for themselves either for reading, studying or simply resting.

3. How much space do you need in a home?

• Do you need a large space for your things? Have enough space where you can organize your items properly and even breathe away from clutter.

4. How often can you maintain your home (repairing, renovating, and cleaning)?

• If you are a busy person, cleaning may take a while for you to do. The same with repairing or renovating. 

Some people decide to either rent or own a home out emotional whim. Be sure to be free from this since it will affect your future.