Should you Rent or Buy a House

Ken: One of the most commonly ask— Daria: How come you always start this? Ken: I don’t know, all right go you start. Daria: It’s not fair. We’re going to talk about something that actually we’re going to share a secret with you. Ken: Another one? Daria: We’re going to talk about—should I rent or own my home? Ken: Yeah that’s a good start Daria because that’s a quandary that been facing an awful lot of our viewers and listeners over the years. How many times have we had that question? Should I rent of buy? Well first of all rent or buy, there is no answer because it depends on your particular situation. But its been exacerbated Daria by the fact that an awful lot of people face with renting or buying are saying, “Wait a second, our market is horrible in America. It’s a great time for buying so I’m not just going to throw away my rent money.” Well the myth is been throwing away the rent money. We’re going to talk a little math at the end of our little talk here. Daria: And— Ken: But it’s tricky because there are some real great bargains. Daria: Oh there are some great bargains. There’s are people professionals who think that housing prices will go lower before they start coming back. I’m not recommending that you make with decision to rent or buy predicated solely on trying to time the real estate market. That’s about a successful for the average persons who is trying to time the stock market is. Ken: Yeah it’s really a two ply decision and we hope at the end of the next five minutes or so that you’ll figure it out for yourself with the information we give you. It’s really as lifestyle decision and a financial decision. Daria: But with that said, we’re going to tell you what were in the process of doing right now. We are in the process of selling our home and we are in the process of renting a condo. For a couple of reasons. Ken: We have no secrets in our audience. Daria: For a couple of reasons. Number one, we want to travel more so the house has got to go one way or the other. But we haven’t lived in a high rise condo. Ken: And why we never get? Daria: We’re not sure we found what we like but we’re not sure. I mean we lived in apartment buildings in New York City but not in a residential community that is the situation. Ken: When we work in radio and TV in New York. Daria: So were not sure if it’s at the end of the day, the high rise condo is really going to be what we want or if we’d be more happy with the townhouse which we have within and on the past. Ken: Yeah we’ll still see with that. Daria: So we have a couple of things to working for us here. Number one, we get a free one year look-see on how we like the place, the lifestyle, etcetera. Ken: That’s one way to look at it. Daria: And number two, we’re going to save a ton of money. Ken: Yeah we’re going to talk about that. There are two major decisions when you talk about renting. This is a lot of major decisions. It would be mostly in your own life but number one is how long you want to stay put. You’re going to stick around for at least five years, I’m using a generalization. And number two another concern and we talked about it before Daria despite all the good stuff you’re talking about. I’m going to talk pros and cons, by the way in just a second, is it’s a buyers market Daria. Daria: Yeah, well you know—but I see in an argument against renting used all the time and there’s validity to it but its not—it’s only half the truth. You know, you hear about—well you know at least if you buy a house for the 30 years fixed rate mortgage you know— Ken: You own something. Daria: Well, but put that on the side for a minute. You’ll know for 30 years that your payments are going to be the same. Ken: Yeah. Daria: You rent every year, every two years you’re going to be hit with a rental increase. Ken: Every new lease. Daria: So think about this. This is the fallacy in that argument. That house may not, your mortgage payment may not change but I guarantee you if there’s a way to raise your property taxes and the cost of heating it— Ken: Not fair Daria. Daria: And the other stuff, there’s going to be, if not an equal escalation in cost to you it could even be more escalation in cost to you. Not to mention the fact that in many of the markets where housing became buying houses you know where we now have the biggest bust going on where the most houses were being bought and the prices were going up and up and up. Ken: Up and up and up, yeah. Daria: The rental market was either flat, very slightly more expensive and in many cases off quite a bit. Ken: Okay here’s some of the pros and cons of owning a house and we’ve own houses over the years. Number one, you own it. Number two, you can put a whole in the wall. You can change it. Number three that maybe some tax deductions, something—we don’t talk about it. Daria: 70% of all home owners don’t even itemize their taxes. So if you’re not itemizing, you’re not getting the benefits of the tax. Ken: Some of the cons about owning a home, other says it’s expensive and you may not have a down payment. The price is good for down, the truth could go down, the truth are going down and all right that pros and cons of home buying. Some of the cons of renting is that maybe you had miss this hot buyers market number one. Number two, you don’t own anything. Daria: Yeah but if you got in a hot buyers market and you’re in a hot area or—an area that was a hot area, your odds are you’re looking at house less worst than what you pay for. Ken: All right that’s good—worthless. Daria: Worthless. Ken: Yeah less worth. Just run the tape back in case it will work. All right lets talk for one second about the myth if you rent your throwing you money away. I was amazed with this calculation and see if you get it. Daria: Yeah but this is only if you’re disciplined. Ken: Thank you Ms. Francis. Daria: Okay. Ken: All right. Daria: Ding dong. Ken: Ding dong, right. If you took the home extent or you don’t own a home, they could have run why do math? Property taxes, utilities, all the stuff relating to a home I’m telling and in almost any house, lets use the number $8400.00 per year roughly in many parts of America is much more than that. Daria: In State of Florida the taxes are more than that. Ken: All right, if you start with a thousand dollars today, if your rent start with a side account of a thousand dollars and put in that $8400.00 a year, you don’t have to pay for because you didn’t own the house. For 30 years, you’ll have over $600,000.00 in that account. That’s not a bad capital appreciation in your portfolio as supposed to maybe not likely capital appreciation if you’d purchase a home. Daria: And if your house expenses are $8400.00 a year? Ken: Or more— Daria: I guarantee you your house isn’t worth enough to get a $600,000.00 capital gain in appreciation. Ken: I never thought of that, you’re right. You’re absolutely correct. Daria: Unless you leave in a very cheap area. Ken: That are case for renting. Daria: And if you know where that is please tell us we’ll move there. Ken: So the bottom line is, there are some of the ways to look at it. One maybe better for you and the other is somebody else. I do want to say one little caution. A lot of people— Daria: Oh yeah this is a big issue. Ken: Yeah, yeah— Daria: Pay attention to this. Ken: Yes, if you’re going to rent or if you’re renting now be careful about the building in which you are renting or thinking of renting because the sub prime mortgage disaster has hurt a lot of apartment I said apartment, it can be any kind of condos, had rent a buildings and a lot of people— Daria: Because the speculators buying the building and trying to make a fortune— Ken: To kick it out. Daria: Thinking that we’re going to flip it, couldn’t flip it. Okay we’ll rent it and at least we can minimize the loss in revenue from this and then they foreclose on the owner of the building because they’re not making all the payments. Ken: Yeah what does the bank say? Daria: Sorry renters. Ken: Either see you later renters or we’re going to jack up the rent a real long way so that we can get our money back. So be careful with the way you are living. Daria: No who the owner is. Ken: Exactly right. Renting versus buying the answer it’s your answer but we try to give you some of the things to help make a good decision.s