Thinking about buying a house in Daytona or Melbourne? With the recent collapse of the housing market there are certainly plenty of houses, condos and townhomes for sale. And conventional wisdom is on your side, right? Conventional wisdom used to say that when you bought a house, you were building equity with every mortgage check; of course the house will increase in value! And since they're are not making any more land, there will always be someone willing to pay top dollar for your house…. right??
The financial crisis of the past few years has certainly put the above “conventional wisdoms” to rest, at least for now. With home prices continuing to drop, foreclosure rates still at record levels and a complete absence of any home buyer willing to pay top dollar, buying a home is no longer the no-brainer it once may have been considered. There are many benefits to renting an apartment.
Here are a few things to consider between buying a house & renting an apartment:
- Flexibility. Probably the biggest advantage to renting is the huge amount of flexibility it provides. Most apartments rent one year leases, although shorter leases are an option at many apartment locations. Use our real-time search to see what apartments offer short-term leases. This arrangement allows you to live in a great apartment and easily relocate when you want. This is ideal if you expect a job change in the near future. Selling a house is a major hassle that can easily stretch into a couple of months if you are lucky enough to find a buyer willing to pay our asking price.
- Honey, will you please fix that? One of the nicest benefits of renting an apartment is that you are not responsible for repairs or maintenance. If something breaks you simply pick up the phone, let your friendly apartment staffer know of the problem and presto it is fixed. You get to use beautiful lawns, pools, fitness areas and common rooms without ever lifting a finger to maintain it. Ask any homeowner and they will tell you home repairs and maintenance are a significant cost and time burden.
- Taxes. When renting an apartment you agree on a monthly fee and that is it. When buying a house the mortgage you pay the bank each month is just the beginning. Home owners need to factor in property taxes, assessments, homeowner association fees and utilities that are usually absorbed by the apartment (e.g. water and trash disposal).
- Insurance. We highly recommend obtaining Renters Insurance for your apartment. While this is not great news there is a silver lining. Renters insurance is a fraction of homeowners insurance. You can typically obtain excellent Renters insurance for less than 10% of cost of homeowners insurance. Refer to our article Learn about renter's insurance for more details.
- Has the housing market hit bottom? There is still quite a bit of debate about whether housing prices have actually hit bottom. Even if home selling prices are at the bottom most experts are predicting very slow appreciation over the next few years. This means that unless you are planning on owning your home for more than five years there is some question about whether you will actually get your money back from your home when you sell. Factor in that interest rates are expected to rise in the future and there is quite a bit of gambling if you plan to buy a home right now.
- How much down? The days of no money down when buying a home are long gone. If you plan to buy a house expect the bank to require at least 20% of the purchase price when you close. This is a significant amount of money. Renting an apartment gives you a great place to stay while you save for that massive down payment.
There are significant financial and time advantages to renting an apartment rather than buying a house. From the perspective of an investment, buying a house is no longer considered a solid investment. On the other hand the lower costs of insurance, taxes, utilities, no homeowner association dues and no interest payments on a home loan if saved and invested can be a very good investment. Renting an apartment gives you a great place to live where you can save and invest the money needed for a future home purchase when the market has stabilized.
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