Owning your own home as long been – and still is — the American dream. It offers stability, asset appreciation and a feeling of familial comfort. It’s your nest to do with as you like. But it’s not for everyone, and it’s not for many people at certain points in their lives. Sometimes there are very good reasons for renting … or living in the parents’ guest room.
How long will you be there?
It costs a lot of money to buy, and later to sell, a house. You have fix-up costs, closing costs, financing costs, real estate commissions – not to mention the general inconvenience of having people wander through your home (which must be kept immaculate while selling). It takes a while for the cost of housing to rise enough to cover those costs. When you’re paying 6 percent commission plus marketing and closing costs, the market has to do more than “edge” up to cover that.
Most people move every 5-7 years, and in most traditionally appreciating markets, that just about covers those costs. If there’s a good chance you won’t stay in your new home at least that long, perhaps renting is a better choice for you. If your job is tenuous, you don’t much care for the city you live in or some other reason that’s likely to drive you elsewhere, don’t risk the money and headache.
When you first move to town, it might be worthwhile to get a feel for the city before deciding what part of town you like most. You don’t want to be making big lifestyle and investment choices without knowing the paths you generally travel, where family and friends will be living and where good schools and entertainment might be.
Do you need to save money?
Even if you know you want to own and where, you must be financially prepared. Rather that jump into a financial obligation that’s going to stress and strain you, it might be better have fewer long-term obligations and less monthly expense. Renting also gives you the opportunity to test how well you can test drive the expense of home ownership.
Other renting advantages:
- In addition to flexibility, with a rental you don’t have major maintenance headaches, or expense, allowing you to focus on work or other pursuits and also save money for a down payment later.
- It also allows you to test drive parts of town where you might want to own a house eventually. You can see if you’re comfortable with the commutes, the shopping and restaurants in the area, the access to recreation.
- If you’re new to town, you may well discover that the people with whom you spend time live on the other side of the city.
- Renting also makes it easier to lock and leave.
- Insurance is cheaper.
- If the housing market goes down, you haven’t lost equity.
Advantages of owning:
- It’s your place, and you can do what you want with it – turn it into your own castle. You can make it the dream home for you and your family.
- The bank may own more of the house than you, but you get 100 percent of the appreciation. When you sell, you will capture that (minus the cost of sale, which is no small amount).
- Mortgage interest and taxes are deductible from your federal income taxes. (Nevada has no state income tax, so it doesn’t help you there, but hooray for that anyway). In the early years of a mortgage, it’s predominately interest you’re paying, so it’s a significant tax break. That also generally means you can itemize deductions, which might allow you to get other deductions that weren’t worth itemizing previously. And because it’s a deduction you didn’t haven’t before at presumably the same income, it reduces your taxes at the high end of your rate. (Check with your tax preparer.)
- Stability. The landlord isn’t going to sell or up your rent on you. If it’s a fixed rate loan, you know what you’re going to be paying for the rest of the time you’re in the house (not counting taxes, which tend to rise more than fall).
- If you have kids, they can go to the same schools and keep their friends.
- For some people, home ownership is the rock that makes them feel secure, knowing that they won’t have to move. The peace of mind is worth it for them.
Free consumer’s guide on buying a new Las Vegas home
Want a FREE advance copy of Hal DeKeyser’s upcoming book on how to buy a new home in Las Vegas? It walks buyers through all the steps in the process, from figuring out what kind of home you want to finding financing, shopping the models, monitoring construction to what you do in the first year. It’s a helpful guide even for those who have done this before. To get one, simply email Hal.DeKeyser@gmail.com with “I want the book” in the subject line. (No obligation.)