Sunday, November 28, 2021

To Rent or to Buy?

Marv Needles

Marv Needles

The answer to this question may be “yes” to either, depending on one’s circumstances. You may get satisfaction by listening to one of the “talking heads” on NBC, ABC, CBS, FOX or any of other networks that read their crystal ball daily. But you need to consider your specific position in terms of job, family needs, desires and even schools of choice.

In fact, there are advantages and disadvantages to both renting and buying. Let’s first look at renting. I know some of you are expecting this article to support buying and to suggest that you immediately call a Realtor; not so. There are many “up” sides to renting. First, the term is usually for a one year period and, in most instances, the period can be extended for a second year, third year, or even longer. I once had a tenant in a property our firm managed for more than ten years.

For the family who is relocating to a new geographic area, a rental offers the opportunity to experience the area and to discover, before buying, the neighborhood that might best suit individual or family needs. One consideration may be employment that is temporary in nature. Another may be the anticipation of marriage or a new family member (baby or pet) which might necessitate a larger residence. And, as a renter, you can leave when you want, and you don’t have to wait for your house to sell before “moving on.” In today’s economy, the renter, while desiring to buy, may not have the down payment or the credit score to qualify for financing. A good rental record is helpful when trying to qualify to buy at a future time.

Surprise, surprise, there are also “down” sides to renting: If the property is in foreclosure, the renter may have to leave with just thirty days’ notice. The law states that a foreclosure does NOT automatically allow the lender to force a renter out. The lender can only require the renter to vacate when the lender has sold the property to a party who will use the property as their primary residence; and they must give the renter thirty day’s notice. Otherwise, the lender is committed to the terms of the lease.

There are other issues that a renter may face. One is that they are at the mercy of the landlord-from-hell who is less than honest and cooperative, and they may find themselves in a less-than-friendly environment. While the landlord (and tenant) has obligations under the “landlord/tenant act” (F.S. Chapter 83), many landlords do not abide. I’m referring to Florida legislation; legislation may vary from state to state.

Now let’s look at why you should consider buying. To do so, first you must have funds for a down payment, a reasonable credit score, and adequate income to support the cost of ownership. You should also anticipate that the home will be used as your residence for the next three to five years, or longer.

Now for the benefits: As an owner you cannot be evicted at the end of a one-year lease due to a sale, or at the whim of a landlord, for instance, because he, or she, doesn’t like the behavior of you or your kids, or the kind of car you drive, etc.

As an owner, you pay your own mortgage, not the landlord’s mortgage. While you should not expect to make a fortune, there is the benefit of “forced savings” which are derived from the principle reduction with each monthly payment. In addition, while prices are not increasing in most markets, in many markets, price increases are expected in the next three to five years that will result in increased personal equity for the owner, rather than a landlord.

Lastly, the pride of homeownership has continued to be one of the most mentioned when people are asked why they bought their house. Try to remember when you bought your first house; wasn’t pride a factor. If I could remember that far back, I would probably say “yes”, too.

While the foregoing is related to personal circumstances, there are other issues to be considered: inventory is high, allowing a buyer to find a property that best fits their needs; prices are well below replacement cost; and interest rates are at an all-time low. Fact: a 5-year ARM is hovering in the 3.5% range and a 30-year fixed in the 4.5% range. Here are the related numbers: the ARM relates to a payment of $4.49 per thousand ($1,122.63 per month for a $250,000 mortgage); and the fixed relates to a payment of $5.07 per thousand ($1,267.50 per month for a $250,000 mortgage).

Now, since my space is limited and I’m under the gun to submit this column within sixty seconds, it’s time to give you some final thoughts. For the person, or family, who is in a position that requires a short-term commitment, renting is the only way to go. If ownership fits your circumstances, now is a great time to make the jump.

Marv Needles is the broker/owner of ERA Flagship Real Estate which he founded in 1973. He has been a full time resident of Marco Island for over 40 years.

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