The benefits of renting in Las Vegas
We ran across an article recently that provided some arguments for renting instead of owning a home. In a market flooded with properties for sale, perhaps there’s some wisdom to this type of approach.
The article, from ManagingMoney.com, highlights the pros and cons to renting versus owning.
If you’re like most people who purchase a home with the intent to sell it after five or seven years, your monthly mortgage payments, about 80% of them according to the article, will go towards paying interest. Not exactly an equity building proposition.
And any equity you do build may be eaten up by repairs, taxes and the cost of selling the home.
If you find yourself in an uncertain employment situation, renting has even more positives, since it’s often a short-term situation and wouldn’t require selling a home in a market with 25,000 other homes for sale.
Some homeowners find themselves in homes that are just too expensive for their income with an adjustable mortgage that keeps going up, and thus the record number of foreclosures in Southern Nevada.
And while housing prices soared, the article points out that rents have merely chugged along. Between 2004 and 2006 home prices nationwide rose 16%, while rents inched up just 1.2%.
So, if you can satisfy your needs by renting a house at $1,000 a month instead of paying a $2,500 a month house payment, then that’s $1,500 a month you can invest elsewhere. Add the $10,000 or $20,000 you would have put up for a down payment and that investment turns into a healthy nest egg. After a few years if you decide it’s time to buy a house then you have enough saved for a healthy down payment.
The rule of thumb for home ownership is that the average homeowner should set aside 5% of the home’s purchase price to cover maintenance and repairs, plus utilities.
A monthly house payment, including taxes and insurance, should be no more than 33% of your monthly income, and your bills should not exceed 38% of your total pay to play it safe. Some lenders have fudged the rules and we’ve all seen the repercussions in the mortgage industry.
The ManagingMoney.com article concludes: So just remember, even if you dream of home ownership you need to make sure the time is right for you. For some people waiting even a few years can mean the ability to buy with more stability in their lives, a larger down payment, and lower prices in a buyer’s market.
Thanks to ManagingMoney.com for the insight and information. ManagingMoney.com was created to offer a single Web site where individuals can find and manage all of the important aspects of their financial lives. A large range of products are available from more than 100 providers including electronic bill payment, credit cards, insurance, loans, legal solutions, and more. The ManagingMoney.com mission is to help people aggregate, integrate and simplify their financial lives.
