Why Buy Real Estate?



 Are you tired of paying rent? Have you decided to pay your own mortgage and not your landlord’s? Have you outgrown your current home? Are you looking for an investment portfolio? Are you looking for a rental property? Would you like a larger yard? Would you rather live in a different area? Do you want to shorten your commute? Having a clear sense of your reasons for buying will help you choose the right property. 



 Property ownership is an excellent investment; whether you are looking for your dream home, a rental property, or to expand your investment portfolio. Owning real estate is one of the least risky ways to build equity or to obtain a greater return on your initial investment. 

Renting vs. Buying

Things to Think About Before Deciding on Buying or Renting

There is no universal right or wrong in the rent vs. buy discussion. It comes down to what is right for YOU and YOUR family. Before getting into the list of pros and cons, a couple of things to consider first.

  • With home ownership comes responsibility, while renting is mostly carefree.
  • Rent vs. Buy Ratio - There is a generally accepted “rent vs. buy rule of 15,” which says multiply the annual rent of a comparable property by 15. So if rent is $2,000 a month, that’s $24,000 annually. Multiple that number by 15 and you’ve got a suitable purchase price of $360,000.
  • A common formula is a price-to-rent ratio that follows the same formula, whereby you take the list price and divide it by one year’s rent.
  • Using our prior example, $360,000 divided by $24,000 would be 15. General wisdom considers ratios of 1-15 as more favorable to buy than rent, whereas numbers of 16+ favor renting.

Of course, hot cities like Washington DC, New York City and Los Angeles will typically have much higher ratios along with much higher purchase prices, so look closely at your budget and ratio before jumping to any conclusions. Don’t rely on any blanket rules to make your decision, create a detailed personal budget first to see if there are items that you’re willing to give up in order to comfortably afford to buy a home. Sometimes that hot new pair of boots, or a quick trip to Vegas are going to be more important. You have to be prepared to lose some of that budget freedom before jumping into buying a home.


Renting Pros


The Pros to Renting

  • Typically, the cost of renting is less than the cost of home ownership, especially when considering taxes, insurance, HOA or condo fees and maintenance.
  • A mortgage may appear cheaper at first, but what happens when the toilet breaks? You can’t call a landlord, you have to call a plumber and have the cash to pay that plumber.
  • There’s also psychological freedom to renting. You most likely have a 12 month lease commitment or maybe you’re month-to-month. Not so when you own a home. It’s likely you’re looking at 90 days or more before you’re able to make a move.

Renting Cons

The Cons of Renting vs. Buying

  • On the flip side, renting is temporary. Renting is not the best way to establish a household. You can be asked to leave by your landlord when it’s convenient for them. YOU’RE the temporary part of the equation.
  • You’re limited to what you can do in the property. No pets allowed? You can’t paint, you can’t customize the place to your wants and needs.
  • Rent payments don’t stop. Yes, 30 years is a long time to commit to a mortgage, but your lifetime is probably longer.
  • No relief from payment in your retirement. You can eventually pay off a mortgage, you’ll still pay a landlord as long as you’re renting.
  • In the end, you have nothing to show for it. Nothing to sell and cash out, nothing to hand off to your kids or heirs.
  • Rent will rise, even if you live in a rent controlled apartment, the rent must rise with the cost of taxes, insurance, water and utilities. A mortgage is a fixed payment (assuming you have a fixed interest rate) for as long as you own the home.
  • You might be paying less than your contemporaries who own homes now, but they’ll still be paying the same amount in 10 years, while your rent will rise.


Buying Pros


These are Some of the Pros to Buying Real Estate

  • The most obvious is that you gain equity and ownership in your home. In time, the amount you owe on the property decreases while the value increases. Of course there will be market/value fluctuations, but historically all properties increase in value ahead of inflation.
  • House, condo or multi-family, in time, you’ll own the property, not just the contents.
  • Owning may be cheaper month-to-month than renting depending on where you are living, due to low interest rates and low entry costs to homeownership in certain parts of Long Island.
  • Why pay $2,500 in rent if you can make a $2,200 mortgage payment, especially if you can write off the interest and the taxes?
  • Right now, real estate interest and taxes are fully tax deductible (with limits). Even if you’re paying $2,600 in mortgage vs. $2,500 in rent, with the deductions, you’re still ahead year over year. You have fewer restrictions in a property you own. No need to ask permission to take that wall down or paint the walls purple. It is up to you.
  • You can make the property worth even more in the future by adding on or making other improvements, while also making it more suitable to your  needs and desires.

Buying Cons

The Cons to Buying Real Estate

  • There are plenty of cons and disadvantages to owning. First, there’s the down payment and other costs associated with purchasing. You’ll need at least 3% of the purchase price, plus another 2% – 3% for closings costs.
  • Don’t forget about a few thousand dollars in reserve for lawn mowers, shower curtains, bath mats and some reserves just in case that toilet decides to fail a month after you move in.You’ll always have to pay taxes and insurance, even after your mortgage is paid off. You may even need to pay HOA or condo fees.
  • You’re now responsible for everything. Remember when you could call the landlord or the building handyman to fix a leaky faucet? That’s all you now. You’ll need to acquire a whole new set of skills, or make sure you have the cash on hand to hire someone else.
  • Stress – every little thing that’s wrong, or will go wrong, with your property will give you stress every single day.
  • No packing up and moving on with ease.
  • Unloading a property is time consuming and it costs money. Most people overestimate their net proceeds because they forget about transfer fees, realtor fees and the money it takes to prepare a home for market.
  • It’s possible you could LOSE money. If you need to sell and the timing isn’t great, you could end up bringing money to the table, be stuck with a short sale or even go into foreclosure if something happens and you can’t make the payments.


Still Can't Decide?

Don't worry, we are here to help you. Give us a call at 917-921-5397, or, send us an email by clicking the link below. We will go over your particular circumstances and will point out things you might not have thought of, or, we might clarify things your were not sure about.