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Renting vs. owning


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Renting vs. Owning Presentation

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Renting vs. owning

  1. 1. Renting vs. Owning
  2. 2. Introduction <ul><li>Housing Is the Largest Expenditure </li></ul><ul><ul><li>About 1/3 of a person’s income </li></ul></ul><ul><li>Places to Live </li></ul><ul><ul><li>House, Apartment, Condo, Duplex, Mobile Home, etc. </li></ul></ul><ul><li>Two Options </li></ul><ul><ul><li>Rent </li></ul></ul><ul><ul><li>Own </li></ul></ul>
  3. 3. Renting Terminology <ul><li>Rent </li></ul><ul><ul><li>The cost of using someone else’s property </li></ul></ul><ul><li>Tenant (Renter) </li></ul><ul><ul><li>The person who rents the property </li></ul></ul><ul><li>Landlord </li></ul><ul><ul><li>Owner of the rental property </li></ul></ul>
  4. 4. Why Rent <ul><li>Can’t Afford a Home </li></ul><ul><li>Short-term Housing Option </li></ul><ul><li>Do Not Want to Own Home </li></ul>
  5. 5. Advantages of Renting <ul><li>Less Expensive </li></ul><ul><ul><li>No down payment </li></ul></ul><ul><ul><li>Cheaper monthly payment </li></ul></ul><ul><li>Fixed monthly expenses </li></ul><ul><li>Shorter commitment </li></ul><ul><li>Little maintenance or repair work </li></ul><ul><li>Extra amenities </li></ul><ul><li>Utilities may be included </li></ul>
  6. 6. Disadvantages of Renting <ul><li>Subject To Lease Term </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 </li></ul><ul><li>Fewer decorating options </li></ul><ul><li>No equity </li></ul><ul><li>No tax deductions </li></ul><ul><li>Property could be sold </li></ul><ul><li>No Pets </li></ul>
  7. 7. Home Ownership Terminology <ul><li>Home ownership </li></ul><ul><ul><li>Buyer has purchased a housing unit as property </li></ul></ul><ul><li>Equity </li></ul><ul><ul><li>Current market value of a home minus the outstanding mortgage balance </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>10 – 20% of the purchase price of the home </li></ul></ul><ul><li>Collateral </li></ul><ul><ul><li>Item promised to the lender if the borrower does not pay back the loan </li></ul></ul><ul><ul><li>Usually the home </li></ul></ul>
  8. 8. Home Buying Facts <ul><li>Mortgage </li></ul><ul><ul><li>Home loan </li></ul></ul><ul><ul><li>90% of buyers take out a mortgage </li></ul></ul><ul><li>Largest financial decision </li></ul><ul><li>Recommended purchase price </li></ul><ul><ul><li>2 ½ times their annual household income </li></ul></ul>
  9. 9. Advantages of Ownership <ul><li>Build Equity </li></ul><ul><ul><li>Use as collateral for other purchases </li></ul></ul><ul><li>Pride of ownership </li></ul><ul><li>More privacy </li></ul><ul><li>Larger living space and storage </li></ul><ul><li>Improve credit rating </li></ul><ul><li>Investment </li></ul><ul><li>Free to make home improvements </li></ul><ul><li>Pets </li></ul><ul><li>Income tax deductions </li></ul>
  10. 10. 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>Commitment—time, money, and energy </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>Relocate—sell time unknown </li></ul><ul><li>Possible for property to decrease in value </li></ul>
  11. 11. Reasons for Making a Housing Choice <ul><li>$$ </li></ul><ul><li>Personal and financial goals </li></ul><ul><li>Personal values, needs, and wants </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>
  12. 12. Costs of Renting <ul><li>Monthly rent </li></ul><ul><li>Security deposit </li></ul><ul><ul><li>Advance payment to cover anything beyond normal wear and tear on the unit </li></ul></ul><ul><li>Utilities </li></ul><ul><ul><li>Electricity, Gas, Water, Trash Pick- up, etc. </li></ul></ul><ul><li>Renter’s insurance (optional) </li></ul>
  13. 13. 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 </li></ul><ul><ul><li>electricity, water, garbage, etc. </li></ul></ul><ul><li>Homeowner’s insurance </li></ul><ul><li>Real estate property taxes </li></ul><ul><li>Maintenance </li></ul>