Sometimes renting is just fine
May 15th, 2007 | by
mbhunter |
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It’s my feeling that better deals in real estate are yet to come in many areas.
It’s not always a good idea to buy a house. I wouldn’t want to be buying where I live now. Liz Pulliam Weston has three bad reasons to buy a home:
- “It’s a good investment.” Tell that to folks who bought last year in California. It has been a spectacular investment over the past few years in a number of areas. But what goes up this fast probably will come down as fast, or faster.
- “I’m tired of throwing away money on rent.” I’ve thought about selling and renting, actually. People who bought houses in hot areas a few years ago — myself included — have huge paper gains. But the only way to realize that gain is to sell! You give up ownership rights with renting of course, but that’s also the advantage — you don’t own the property if the market goes soft!
- “I need the tax deduction.” Like I need a hole in the head! Hmmm … pay a boatload of interest so that I can get back only part of it in the form of tax savings. Doesn’t sound that great to me. That’s even assuming that this mortgage interest deduction sticks around! The rules can change at any time. But everyone involved in real estate sales, from the lender to the real estate agents, will drive this point home as if it’s the greatest financial bonanza in the world.
There’s a small recent hint of sanity in lenders’ practices now that sub-prime borrowers are getting foreclosed on in droves. But it’s likely that loan approval amounts will still be generous enough to strap homeowners if they take the lender’s word for “how much house they can afford.”
Though renters have more restrictive terms as to how they can use a property, their rents are dictated by market forces, not by how much is owed on the house. The landlord may want to be able to cover the mortgage payment and expenses with the rent checks, but that doesn’t mean that it will happen. If the property was bought at too high a price and the local real estate market turns, he or she may need to rent just to slow the bleeding. It may not stop it! The renter can always look for a better deal. They’re not obliged to cover the landlord’s expenses.
So if your mortgage payment and expenses for a house would really take the joy out of your life, consider renting. The time will come to buy again.
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