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Planning
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Renting
Rents tend to increase.
You need to think about the likely rate of increase in order to make
a good decision about whether you should buy. Supply
and demand
Even if you've never studied economics, you know
that your landlord will try to get the most they can for the
property. What they get will be determined by supply and demand.
If a lot of people are
moving into an area, demand will be high, and rent will go up
further.
As new developments are
built, supply will increase, and rental costs will not rise as much,
and may even fall.
Estimating
increases
Over time, inflation is a reasonable estimate of
rental increases. But even if you assume that your rent will only
increase at the rate of inflation (e.g. 3%), you are still looking
at doubling your rent in less than 20 years.
Further, inflation may
be a conservative estimate of future increases in rent, because when
rents increase, they tend to increase dramatically. In many cities,
rents can double in well under 10 years.
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Buying
What makes a house a
home? For many people, the two are the same thing. But for others,
a house is only a home when they own it.
Setting down
roots
One of the greatest joys of ownership for many
people is setting down roots. When you buy a house, you have your
own land, your own house and a sense of becoming part of a
community; meeting and sharing with your neighbors, getting involved
in local issues, maybe even running for city council.
This lifestyle can be
very attractive, especially if you have children who will enjoy the
stability a home can provide.
Repair
responsibility
So, now you're a home owner. Guess who gets to
fix the hot water heater when it breaks in the middle of the night?
Guess who gets sued if someone trips and falls in your driveway? And
who is the lucky person who gets to pay for the new roof? (Don't you
suddenly miss your landlord?)
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Selling
Time is generally the
most influential factor in the rent vs. buy decision. Unless you
live in an area where property prices are rocketing upward, it
generally does not make sense to buy a house if you can't commit
to owning it for at least 4 years.
Transaction
costs
There are a myriad of fees and charges and
deposits required in buying and selling a home. These transaction
fees can cost you 10% or more of the selling price of the home.
With costs like that, it
generally makes sense to stay put for a while and wait for the
property's appreciation to cover your transaction expense.
Be
conservative
If you are not sure how long you will own a
house, make a conservative guess. The average American moves every
10 to 13 years.
Most people move for
lifestyle changes, not financial reasons. You may get transferred,
read a compelling article about the joys of life in rural South
Carolina, or decide that you and your spouse shouldn't be living in
the same city, much less the same house.
In these cases, the last
thing you want is to stay because of money, but for the rest of us,
it can make the difference between making a profit and taking a loss
on housing.
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Moving
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