Housing - Buying vs. Renting
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Housing - Buying vs. Renting






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Housing - Buying vs. Renting Presentation Transcript

  • 1. Housing Chapter 9 Renting Versus Buying Learning Objective: Students will compare and contrast the advantages and disadvantages of renting versus buying housing. FCS Standard: Housing and Interior Design Standard 2
  • 2. Some Renting Vocabulary      Renting: Paying money to live in a dwelling that is owned by someone else. Landlord: The person who owns the dwelling. Tenant: The person who is renting the dwelling. One can rent anything from a small efficiency apartment to a single-family house. The dwelling can be either furnished or unfurnished.
  • 3. Advantages of Renting  Predictable Housing Costs   Limited Maintenance   Usually nothing is unexpected. Yard work, snow removal, painting, household repairs are usually the responsibility of the landlord. (Single-family dwellings may differ.) Mobility  Renters don’t have to commit for a long period of time. There is flexibility to move due to work, income level, etc.
  • 4. Disadvantages of Renting  Limited Control and Freedom   Lack of Permanence   Don’t have much say over décor, such as paint. Restrictions over number of tenants, children, or pets, etc. Don’t feel a sense of community. Financial Disadvantages  Money spent is not applied toward ownership. No tax savings. Rent may increase after the period of the rental agreement. Renter must pay it or move.
  • 5. Some Buying Information  Most common type of purchase is a freestanding, single-family house set on its own lot.  Units in multi-family dwellings can be purchased.
  • 6. Advantages of Home Ownership  Feeling of Belonging   Independence   Homeowners develop a sense of stability, community, and are more likely to participate in local government. Can renovate or redecorate as you would like or need. This can also add value. Investment Value  Money put into maintenance is not lost. Cash value is traded for real estate. A homeowner can usually sell the house for more than it was purchased.
  • 7. Other Advantages of Owning a Home  Good Credit Record   Making regular monthly loan payments helps one build good credit. Tax Advantages  Interest is tax deductible. It can be deducted from the income amount used to figure taxes. Property tax payments are also deductible.
  • 8. Disadvantages of Buying a Home  Unexpected Expenses   Maintenance is the homeowner’s responsibility. Insurance may pay for part of the expense if due to an accident. It depends what happens! Limited Mobility  The cost of buying or selling a home can be expensive. Buying should be considered a longterm investment.
  • 9. Renter’s Initial Costs    Application Fee: A fee when filling out an application. Helps ensure the renter is serious about taking the unit. Credit Check Fee: The landlord may charge this to the renter. It’s the process of finding out if a renter pays bills on time or has any large outstanding debt. Security Deposit: Covers the cost of any future damage the renter might cause to the unit. May be equal to 1-2 months rent.  Pet owners may have to pay a pet deposit. Is usually returned when the renter leaves if the unit is in good condition.
  • 10. Further Renter’s Initial Costs  Advance on Rent: One or more month’s rent that is paid in advance before moving in.   The landlord considers it a type of “insurance” if the renter moves out unexpectedly. Moving and Other Costs  Expense depends on if you use a moving company or if you pack and move yourself. There may also be a one-time start up fee for certain services (telephone, electricity, cable, internet)
  • 11. Renter’s Continual Costs   Monthly Rent: Depends on space, age of building, neighborhood, services provided. Renter’s Insurance: A policy that covers their personal property against loss by theft, fire, or other hazards.    The landlord’s insurance does not cover the tenant’s belongings. Utilities: Sometimes it’s included in the rent, sometimes the tenant pays for some or all. Parking: There may be an additional fee for garage space, especially in the city where there is little parking space.
  • 12. Buyer’s Initial Costs   The initial costs of buying are usually much higher than those of renting. Earnest Money: A deposit that a potential buyer pays to show that he or she is serious about buying a home.  If the deal goes through, this money is applied toward the total price payment. If buyer’s can’t get a loan, it’s refunded.
  • 13. More Initial Costs for Buyers    Application and Credit Check Fees Inspection Fees: Usually done by a professional who checks the structure, such as electrical or potential problems, such as termites. Down Payment: A partial payment of cash, at the time of purchase. May be from 5-25%     More money put down=Lower monthly payment. Closing Costs: fees due at the time the purchase is finalized. Moving and Connecting Utilities Possibly also appliances and home maintenance tools
  • 14. Buyer’s Continual Costs  Mortgage: home loan. Usually long term, 15-30 years. Includes two components     Taxes: based on the value of the home. Called property or real estate. Often added to the mortgage. Insurance: Should include property and liability    a. Principal: The original amount of the loan b. Interest: The fee the lending institution charges the buyer to borrow money. liability: covers claims filed against homeowner by person’s injured on the property Utilities Maintenance
  • 15. What Can You Afford?  Analyze Your Finances     Income-determine monthly and yearly Expenses-what are fixed and what are flexible. Savings Strengthening Your Finances       Make a budget Set aside savings first, not what’s left over Reduce flexible expenses Reduce current debt Limit impulse buying Continue keeping records