Rent, Rent to Own, or Buy?

Question

My apartment's lease is up in February. I am looking for a place for just myself. I don't understand the whole process of buying a home/townhome/condo/loft, so the first thing I want to do is rent. But, people keep telling me I'm throwing away my money by renting.

So...what are your thoughts? What about the whole rent to own thing?

I'm on a bit of a time crunch. Is buying a home time consuming? If so, should I go straight for the rent to own thing or just stick with renting for now until I figure it all out?

Where do I start with owning my own home? Do I have to already have lots of money?

Answer 1

It is time consuming to buy the home/apartment/condo. Then there are ownership costs that you don't often see when renting.

One of the hazards, that sometimes pops up, usually not, in "rent to own" is that you don't own it, so you might not have anything to protect your investment in case of loss.

Renting may be as some of your friends say, "My rent receipts and a dollar will buy me a cup of coffee--depending on where I buy coffee." But that isn't all bad. A lot of people are being burned right now by treating their residence as an investment. Sometimes that works, and sometimes it doesn't.

Many years ago there was a revolution of sorts in the insurance business, where whole life insurance was being painted as the bad guy because the smart person would "buy term and invest the difference". The problem was that for all those that bought term insurance, they rarely invested the difference, so universal and variable life insurance was invented to essentially do that very thing. If you are renting but want to buy, figure out what the norm is to buy the kind of property that you rent right now. Set yourself a period of two to five, or even ten if you must, years to get that 10-20 percent down payment (if you don't already have substantial long-term savings). Then figure the difference between your mortgage and all those other expenses like taxes, maintenance, and the depreciation of things that need maintaining (a new roof every 10-15 years, new plumbing every 20, new carpet every 5, new paint every 5-10, new wiring every 15, etc.--then save money to replace them periodically) The nice thing is that you will develop an equity and what you pay for a residence will gradually become yours. But if you are 65, then a 30 year mortgage doesn't make much sense. If you are student at a small town college but going to move to get a good job at a big city upon graduation, then ownership may be a good piece of practical experience but not enough time to build up much equity to justify the effort.

Think about it. You may be just fine renting. Smile and fish out a dollar and say, "I guess I'll buy some coffee."

Answer 2

Right now, it is a buyer's market in the real estate market. Sellers are offering incentives, because the market is flooded with houses for sale. That being said, you need to have money set aside for closing costs which can run a couple thousand. You will also need to have money for things like paying deposits on water, electricity, gas, and property taxes. If you don't have a cushion to help you cover these costs, it will be hard to buy.

Do not rent to own! I worked as a foreclosure paralegal for several years, I can't tell you how many people I evicted from properties they were renting to own. Basically, what that means is that the owner of the house has the house in their name and the mortgage in their name and the deed in their name. You are paying the mortgage for that owner. But should the borrower fail to pay that mortgage all the time (and a lot of them are shady), then you will be evicted and there will be little recourse you can take because the bank will have the house and the old owner is not going to have the money to give you back the thousands of dollars you invested in a property which had your name nowhere on it.

Renting is not throwing away money. You have a place to live. Someone else is responsible for land maintence, maintence of the residence, and the taxes. You pay upfront fees and are never taken by surprise. It si a fine way to go, especially if you don't want to make such a huge commitment as buying a house because once that happens, you are stuck in a spot and in a mortgage until you sell the house, and that is hard to do in this day and age.

Also, if you are looking at condos. Be aware, there are monthly condo fees which are mandatory alogn with the mortgage. True, this pays for some maintence, but they are usually a couple hundred dollars a month.

Answer 3

2

Answer 4

Money magazine published an article recently that said with the housing market the way it is now, it is smarter to rent than buy. Example- If you purchase a home for 150,000 and your payment is 1200. only about $50 goes toward the principal each month and you are not building much equity. If you rent a place for 600. and put 600. in money market you make more money. For you this might be a good thought since you are not sure what your future is. -- On top of that 1200. mortgage you have to consider your repairs, etc. While renting your landlord handles all of that.

Answer 5

It may pay off to rent. People say there is nothing like owning but you have to add it all up (property taxes ins. etc) If the numbers make sense and you can get something at a good price then buy.
Another possibility, which would build your wealth, Is to buy say a 4 unit apartment building and live in one of the units. Then you have 3 other units paying for your mortgage and if you play it right, after increasing their rent in time, they will be paying for your unit too.
Then, sell the building in a few years and put your profits from the sale into a nice house where your mortgage is very low (because you made so much on the building sale)
It can be done ! I am an investor who has a lot of experience in all this . I also do loans for buildings and houses but I am not supposed to say that !

You can e-mail me for further guidance

Charles C [e-mail]

Answer 6

First of all, if you're on a time crunch, it's a simple NO.

Buying a home or condo or whatever takes TIME. If you don't have the time, continue to rent. You need tons of time to find the right place at the right price, that fits your budget. You also need to time to prepare your documents, make sure your credit is flawless and your assets are seasoned.

There is a lot of preparation involved in getting a mortgage and finding the right home, so my recommendation is to continue renting, but maybe month to month while you look for a property that fits your profile.

Learn more about credit and mortgage:

http://www.thetruthaboutmortgage.com

Answer 7

L.E.
do NOT BUY a house now, keep renting an other 6 or 12 mths. While you get Educated about buying a house. get 'House buying for Dummies' read it. visit daveramsey.com to learn what bankers/mortgage comps. pray you never ever learn. Cause right now you are the proverbial sucker the money changers would love to have their hands around.
there is a lot for you to learn about house buying. 1 thing might be - it isn't right for you.
the house 'tax benefits' aren't usable by some 77% of people with houses. translation - you spend 1000$ a yr for 250$ tax break that in truth you can't use. that's the house write off.
now when it comes to loans that is a can of snakes you don't want to open unless educated.
go with money and KNOWledge , not speed .

Answer 8

You have a very vague question w/no details about amount saved, income, debt, home prices in your area. You clearly have many questions and learning everything in the next month is not the best for your situation. Try to find a place with a 6 month lease. If you are financially ready in 6 months, then you can search. Go to http://www.bankrate.com/brm/rate/mtg_home.asp to take a look at some of the calculators available. Rent vs buy, can you afford it?, etc would be things to look at.

Answer 9

It's far better to buy a home, the monthly note is paying off the house, where as just renting is basically a waste of money. Not too familiar with the rent to own stuff, just make sure that you don't have a balloon payment at the end. Best of luck to you.

Answer 10

Buying a home is only as time consuming as you want it to be. If you are serious about buying, you should consult with a loan officer or bank first. They will be able to pre-approve you for a home loan and tell you how much your payments will be.

It is possible to get into a home with "no money down". Ask your loan officer and real estate agent about how to go about this.

After you have done this and decided on a purchase price you can afford, get in touch with a real estate agent. The agent will be able to send you listings complete with pictures of properties that meet the criteria you are looking for. You will be able to schedule time to view the properties when it is convenient for you.

After you find the property you want to purchase, your agent will handle all of the paperwork. It can take as little as two weeks to a month to close on the property. You will have the opportunity to negotiate a closing date.

In the meantime, your current landlord might be able to rent to you month to month if you don't find anything by the end of February. With month to month, you won't be restricted to living for a longer period of time.

If you are looking in or around St. Louis, MO, I would be more than happy to help. Visit us on line at www.RealtyPlusUSA.com or www.MortgagePlusUSA.com.

Good Luck!