Renting_Versus_Buying

Renting an Apartment versus Buying a Home Deidra Keen COM 156 October 27, 2010 Greg Singleton Renting an Apartment versus Buying a Home Owning a home is the “American dream and some home owners are slowly realizing that it is more work than they bargained for and their dream is slipping through their fingers. Buying a home is a huge financial responsibility, and investment, and many people do not take into consideration just how much work it is to obtain and maintain a home. The process of buying a home is very drawn out and cannot be done in a matter of a couple weeks. Having a down payment should be taken into consideration first. According to Sykes and Curry (August, 2007) “Save at least three months' worth of payment, interest, taxes, and insurance (PITI) before you buy. It is important to remember, however, that the costs of buying a home include more than just PITI. Figure into your budget cash reserves for moving, emergencies, unforeseen repairs, association dues, maintenance, and upgrades. In addition, closing costs are typically 3% to 5% of the purchase price. And usually you'll need a down payment of 5% to 20%” (p.82). Depending on the company that the house is through will depend on how much of a down payment that is needed. They vary between five and twenty percent of the purchase price of the home. Then the research begins to find a new dwelling. This may take weeks or even months to complete. Once a property has been chosen that fits your budget and lifestyle, contact the realtor, see the property and, make an offer. The offered made could be denied, wasting more time, and it is not uncommon for financing to fall through. When this happens another financial institution needs to be sought out to lend the money to purchase the home. A substantial amount of money can be lost when buying a home. “When a person buys a home, the money that is paid up front is more significant and may or may not be seen again. For example, a buyer must pay closing costs (typically five percent of the loan amount) and real estate agent commission (typically six percent of the loan amount) before being called a home owner” (Reichert, 1993, p.42). If you are a current home owner then all of this is happening as you are trying to sell you own home, adding much stress to a time that should be exciting. So far the amount of money that has been spent is significant; down payment, closing cost, realtor fees, inspection, and the cost of moving. Some homes will need a few minor repairs; you may just want to put a fresh coat of paint on the walls, or new blinds for the windows. This takes more money to accomplish, and while doing little things around the home, more expensive tasks may arise that were not noticed when you were touring the house. An inspection needs to be done before the bank will finance the home. An inspection does not ensure that everything is going to work properly. My aunt had her furnace break in the middle of winter shortly after buying her home. The repair man came over, looked at the furnace. It was not just a small part or repair that she needed; it was a whole new furnace. A new furnace was $1,200 to replace. “I broke down into tears right in front of him. I knew I did not have the money and I knew we couldn’t be without it.” Homeowners have to plan for emergencies at any given time. Renters have to plan for this as well but do not have to take the financial hit like the home owners. Renters simply call the maintenance person and have it fixed. That sounds less stressful. Bonuses of renting an apartment are numerous. A favorite has to be that some landlords offer heat and hot water included in the rent. This is a huge convenience in the winter months. Homeowner’s might have to scramble every fall to making sure the fund are available to get heating oil. Getting one hundred gallons of oil is not cheap. Oil prices always fluctuate; it may be more than a week’s pay. Heat and hot water being included in the rent is one less bill that you have to worry about. Less worry is something individual needs. “It's hard to imagine the American dream as a two-bedroom apartment with a pool, instead of a single-family home with a white picket fence. But in some of the nation's priciest real estate markets, that's what's happening. The financial reasons for renting instead of buying are the strongest they've been in 25 years.” (Knox, 2006) Another great benefit about renting an apartment would be having the ability to have a short-term lease. This gives the option of moving freely without a major commitment. When owning a home you want to make sure that you are planning to stay in that home for at least five years to make it a good investment. Five years is a long time for some people to stay in one location. With a one-year lease, renting an apartment, changing location is very easy; no realtor to contact and sell your property, you can just pack your things and move to the next location of your choice once you have fulfilled your lease. No matter what decision you decide; rent an apartment or buy a home, decide based on what is best for you, your family and, your budget. Find something you can afford even when times get thought and plan for emergency expenses. These are good tips to remember no matter where you live, or where you plan to live. References Reichert, W.  (1993). is your home your best investment Louisville Magazine, 44(8), 42. Sykes, T. A., & Curry, S. R. (August 2007). Buying Your First Home' Black Enterprise 38 (1)76-82. Knox, N. (2006, August 10). For some, renting makes more sense. USA Today, p.1a.