Tool rental shop, White Center, Washington. (Photo credit: Wikipedia)
Home Buying or Home Renting?
With rents climbing and home prices continuing to show strong signs of stabilizing, the factors to be weighed when choosing between home buying or home renting are shifting in favor of buying for many people. Although there is less unemployment many of these jobs do not pay as well as is needed to handle even an average mortgage. Student loan obligations have delayed many potential home buyers, particularly in the late 20s age group that should be prime for this investment.
More people are taking the plunge, buoyed by a disturbing trend towards sharply increasing rental prices. As always there are many factors to be considered which are fully discussed in my book On Home Buying and Credit Repair. Along with the basic question of whether or not you can afford to buy, perhaps the most important consideration is whether or not you are willing to commit to living in one area for 5 years or longer. Home Buying or home renting turns on that question many times.
Investors are Leading the way
Investors are starting to rush in to buy and then renting homes out in some areas. Flush with cash and lacking attractive alternative investments, these people are betting that the home buying market is ready to explode. Rental incomes can deliver up to 8% on investments. Families displaced by foreclosures make for a waiting and willing market. Home buying or home renting is not a matter of choice if you have no down payment and your credit is ruined. This investment activity in many cases can help stabilize hard hit areas. Many are afraid to miss the boat if the latest era of home depreciation is truly over.
With opportunity comes risk. Investments of $20,000.00 plus are usually necessary to rehabilitate properties that have been run down and neglected. Rushing into the rehab business can cause a lot of sleepless nights to those who don’t have both cash and expertise. The home rehab business is very attractive on its face. It is also very risky for the inexperienced investor who thinks easy money is to be had. Tradesmen and jack of all trades type handymen have a considerable advantage over pencil pushers and dreamers.
