Renting vs. Owning Family Economics and Financial Education  Take Charge of your Finances
Introduction <ul><li>Housing is the largest personal expenditure. </li></ul><ul><ul><li>About 1/3 of a person’s income. </...
Reasons for making a  housing choice <ul><li>Personal and financial goals </li></ul><ul><li>Personal values, needs, and wa...
Costs of renting <ul><li>Monthly rent  </li></ul><ul><li>Security deposit </li></ul><ul><li>Utilities – electricity, water...
Renting <ul><li>A  lease  is a legal contract between the tenant and the landlord, specifying the responsibilities and rig...
Renting continued <ul><li>Tenant  (renter) </li></ul><ul><ul><li>The person who rents the property. </li></ul></ul><ul><li...
Moving into a rental <ul><li>Upon moving into a new place, people are usually required to pay a security deposit and sign ...
Advantages of renting <ul><li>Low move-in costs </li></ul><ul><li>Fixed monthly expenses </li></ul><ul><li>Easy to move </...
Disadvantages of renting <ul><li>Subject to terms of a lease </li></ul><ul><li>Rent may change with little notice </li></u...
Costs of ownership <ul><li>Monthly mortgage payments  </li></ul><ul><li>Down payment (one time cost) </li></ul><ul><li>Clo...
Home ownership <ul><li>Home ownership  - the buyer has purchased a housing unit as property </li></ul><ul><ul><li>Goal of ...
Purchasing a home <ul><li>90% of buyers take out a mortgage </li></ul><ul><ul><li>A home loan in which the real estate is ...
Advantages of ownership <ul><li>Build equity which can be borrowed against if necessary </li></ul><ul><li>Pride of ownersh...
Disadvantages of ownership <ul><li>Large down payment </li></ul><ul><li>Move-in costs </li></ul><ul><li>Insurance costs </...
Keep In mind. . . <ul><li>People are always paying  </li></ul><ul><li>for a home.  It’s just a  </li></ul><ul><li>matter o...
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Renting vs owning_a_home_powerpoint_presentation_1_9_3_g1[1]

  1. 1. Renting vs. Owning Family Economics and Financial Education Take Charge of your Finances
  2. 2. Introduction <ul><li>Housing is the largest personal expenditure. </li></ul><ul><ul><li>About 1/3 of a person’s income. </li></ul></ul><ul><li>Choosing where to live is based upon a person’s goals, values, needs, and wants. </li></ul><ul><li>Places to live include: </li></ul><ul><ul><li>House, apartment, condo, mobile home, etc. </li></ul></ul>
  3. 3. Reasons for making a housing choice <ul><li>Personal and financial goals </li></ul><ul><li>Personal values, needs, and wants </li></ul><ul><li>Amount of money available for housing costs </li></ul><ul><li>Financial resources and readiness </li></ul><ul><li>Credit history </li></ul><ul><li>Real estate prices </li></ul><ul><li>Location preference </li></ul><ul><li>Expected length of stay in particular place </li></ul>
  4. 4. Costs of renting <ul><li>Monthly rent </li></ul><ul><li>Security deposit </li></ul><ul><li>Utilities – electricity, water, garbage, etc. </li></ul><ul><li>Renter’s insurance </li></ul>
  5. 5. Renting <ul><li>A lease is a legal contract between the tenant and the landlord, specifying the responsibilities and rights of both parties. </li></ul><ul><ul><li>Identifies the rent amount, security deposit amount and specifications, payment for utility bills, late payment penalties, length of lease, eviction terms, etc. </li></ul></ul><ul><ul><li>This is between the landlord and the tenant </li></ul></ul><ul><li>Landlord </li></ul><ul><ul><li>Owner of the rental property. </li></ul></ul><ul><ul><li>May perform management duties or hire a property manager. </li></ul></ul><ul><ul><ul><li>Property manager - may charge a fee to the landlord to perform the management task </li></ul></ul></ul><ul><ul><ul><ul><li>Duties may include: </li></ul></ul></ul></ul><ul><ul><ul><ul><li>May collect rent and deposits, pay utility bills, complete repairs and maintenance, watch over the property, respond to tenant complaints, assign new tenants, etc. </li></ul></ul></ul></ul>
  6. 6. Renting continued <ul><li>Tenant (renter) </li></ul><ul><ul><li>The person who rents the property. </li></ul></ul><ul><li>Renters are generally </li></ul><ul><ul><li>People who choose not to own a home. </li></ul></ul><ul><ul><li>People who cannot afford to own a home. </li></ul></ul><ul><li>The tenant pays rent to the landlord which allows them to live in the rental property. </li></ul><ul><ul><li>Rent </li></ul></ul><ul><ul><ul><li>The cost of using someone else’s property. </li></ul></ul></ul>
  7. 7. Moving into a rental <ul><li>Upon moving into a new place, people are usually required to pay a security deposit and sign a lease. </li></ul><ul><li>Security deposit </li></ul><ul><ul><li>An advance payment to cover anything beyond normal wear and tear on the unit. </li></ul></ul>
  8. 8. Advantages of renting <ul><li>Low move-in costs </li></ul><ul><li>Fixed monthly expenses </li></ul><ul><li>Easy to move </li></ul><ul><li>Location choices (may be close to work or school) </li></ul><ul><li>Less maintenance and repair work </li></ul><ul><li>Fewer responsibilities </li></ul><ul><li>May offer extra amenities such as a tennis court or pool </li></ul><ul><li>Typically less expensive than home ownership </li></ul><ul><li>May be able to save for other wants or needs if renting a less expensive apartment </li></ul><ul><li>Other expenses may be included in rent payment such as electricity, water, sewer, and/or garbage </li></ul>
  9. 9. Disadvantages of renting <ul><li>Subject to terms of a lease </li></ul><ul><li>Rent may change with little notice </li></ul><ul><li>Less privacy and transient neighbors. </li></ul><ul><li>Restrictions on noise level, pets, etc. </li></ul><ul><li>Fewer opportunities to upgrade apartment such as new carpet, paint, or wallpaper. </li></ul><ul><li>When leaving a property, no equity is returned as it would be if selling a home. </li></ul><ul><li>No tax deductions </li></ul><ul><li>May lose rental if the property is sold. </li></ul>
  10. 10. Costs of ownership <ul><li>Monthly mortgage payments </li></ul><ul><li>Down payment (one time cost) </li></ul><ul><li>Closing costs (one time cost) </li></ul><ul><li>Utilities – electricity, water, garbage, etc. </li></ul><ul><li>Homeowner’s insurance </li></ul><ul><li>Real estate property taxes </li></ul><ul><li>Maintenance </li></ul>
  11. 11. Home ownership <ul><li>Home ownership - the buyer has purchased a housing unit as property </li></ul><ul><ul><li>Goal of many Americans </li></ul></ul><ul><ul><li>A large financial decision </li></ul></ul><ul><li>Owning a home is an investment because if a person sells a home for more than what it was bought for, the person makes money. This is called equity . </li></ul><ul><li>Financial planning and savings can assist a person in planning for the benefits of home ownership later in life. </li></ul>
  12. 12. Purchasing a home <ul><li>90% of buyers take out a mortgage </li></ul><ul><ul><li>A home loan in which the real estate is the collateral </li></ul></ul><ul><ul><li>Collateral is an item promised to the lender if the borrower does not pay back the loan, usually the home. </li></ul></ul><ul><li>Down payment </li></ul><ul><ul><li>Amount of money paid on the home at time of purchase </li></ul></ul><ul><ul><li>Typically 10 – 20% of the purchase price of the home </li></ul></ul><ul><li>Recommended purchase price amount an individual should pay for a home </li></ul><ul><ul><li>2 ½ times their annual household income </li></ul></ul>
  13. 13. Advantages of ownership <ul><li>Build equity which can be borrowed against if necessary </li></ul><ul><li>Pride of ownership </li></ul><ul><li>Feel more comfortable and have more privacy </li></ul><ul><li>Stable mortgage payments </li></ul><ul><li>More room and storage </li></ul><ul><li>Improvement of buyer’s credit rating </li></ul><ul><li>Income tax deductions for property taxes and mortgage interest </li></ul><ul><li>Potential for property to increase in value </li></ul><ul><li>Free to make home improvements and have pets (items typically not allowed in rentals) </li></ul>
  14. 14. Disadvantages of ownership <ul><li>Large down payment </li></ul><ul><li>Move-in costs </li></ul><ul><li>Insurance costs </li></ul><ul><li>Possible for property to decrease in value </li></ul><ul><li>Time, money, and energy commitment </li></ul><ul><li>Repair and maintenance costs </li></ul><ul><li>Property taxes can raise substantially </li></ul><ul><li>Money is tied up in the home </li></ul><ul><li>May take several months to sell a home if trying to relocate </li></ul>
  15. 15. Keep In mind. . . <ul><li>People are always paying </li></ul><ul><li>for a home. It’s just a </li></ul><ul><li>matter of whether it is </li></ul><ul><li>for themselves or </li></ul><ul><li>their landlord. </li></ul>

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