Senior market analyst
Renting Vs. Buying
Recipe of the Month
While a lot of times, the conversations we have with our clients tend to focus on much more profound issues or financial concerns, you'd be surprised how often the basics come up. One of our clients will ask whether it's "smart" for them to keep renting an apartment versus buying a piece of property. Or an individual comes to us with the debate of whether they should lease or purchase their next vehicle.
The biggest issue we have with answering these questions is that there really is nothing fundamentally wrong with either option. Every situation is different, be it your current financial situation or your personal life and should be assessed as so on an individual basis. While we can't account for the separate circumstances that affect each of our clients in one blog post. We thought it would be best to simplify the argument by addressing both sides of it and presenting you with the basics as they might pertain to your specific situation.
Reasons to consider renting property:
The property owner owns everything in the apartment/condo you're renting. Meaning that if you need anything repaired or something stops working, it's up to them to front the capital to pay for it.
If you've just moved somewhere new or your planning to move shortly, buying is a huge commitment. Not only financially but also location wise. Going through all of the groundwork buying a home requires, and paying the opportunity costs isn't smart if you have plans to relocate soon. Unless, of course, you're planning on renting the property out as an investment, then this would be a completely different situation.
Rentals in a larger complex sometimes offer newer updated appliances and amenities. Maybe you wouldn't be able to afford to put in a pool or gym of your own if you were to buy a house, but having these amenities readily available might be a huge draw for you.
You don't have to worry about taxes or interest when renting. You also don't have to pay as much mind to what's going on in the markets. If you signed a year lease, you're secure in your monthly payment for the time being.
Renting Vs. Buying
sometimes don’t require a down payment, you might also get away with contributing no initial capital.
After you’ve done your homework, if your lease offers a smaller monthly payment than your loan would, it might make sense to take a look at your monthly financials and see if leasing makes more sense for you.
You need a car only temporarily. Maybe your job or a personal reason has required you to move somewhere new for a year. Leasing might make more sense financially and also save you the hassle of having to sell the car when you leave.
Your car will usually always have a warranty. If something happens and the fault is of the vehicle, that expense is the dealer's responsibility.
Reasons to consider buying property:
The most obvious reason being that once you’ve paid off the mortgage, the property is yours. You can virtually eliminate the category of housing from your expenses. Also, if it has increased in value since the time you purchased it you might even end up making a profit.
It’s a “buyers market” at the time you’re reviewing your options.
The current property value in your city should also play a factor in making your decision. If property value in the area has been steadily decreasing in value over time, would it make sense to invest right now?
The 20% rule of thumb. Do you have 20% of the value of the home set aside as a down payment? If not, maybe you should consider renting until you do. We think this is an excellent way to determine if you can afford to buy property at the moment.
You have a lot of student and/or other debt. Unfortunately, this will affect your mortgage rate. It might make sense to rent until you have settled some of your previous debt.
Reasons to consider leasing a vehicle:
Your someone who likes a new car pretty frequently and there’s nothing wrong with that. However, as soon as you buy a car and drive it off of the property, it’s value immediately depreciates. So if you see yourself wanting a new model next year, save yourself the time and costs associated with buying a car and consider leasing one.
You’re using the car solely for business purposes. You can deduct your lease payment as a business expense, and since lease payments
You have excellent job security and no plans to move any time soon.
Owning a home provides a sense of stability. You’ll have your neighborhood and community to call your own.
If your first few years of paying off your mortgage are going towards the interest on your home equity loan, you can claim a percentage of this on your taxes. Meaning, you’ll have a reduction in the taxes you owe for the year.
Reasons to consider buying a car:
With leasing, you’ll never really own the car. When you purchase a vehicle, and you’ve finished with your monthly payments, the car is all yours. You’ve successfully eliminated your transportation expenses.
You have no mileage limit. With leased cars, you’d have to be aware of how much you plan on driving every month. Otherwise, you could end up paying fees for every month you went over the limit.
When you do want a new car, your old one has trade-in value, and you’d receive cash for that.
When you own a car, you can get repairs fixed just about anywhere, and you can choose to pay less for parts. When you lease a vehicle,
you usually have to go to specific dealers to get repairs done, and more often than not, they’re going to make you pay more for factory parts.
We know that a lot of what we’ve covered are the basics of renting vs. buying. Our goal is not to complicate your decisions further or sway you in one direction versus the other. We instead hope that by giving you the resources you need, you’ll feel better prepared to make a more informed decision. It’s important to remember that these could be some of the most crucial buying decisions you make and deserve the utmost time and consideration before taking the plunge.
However, if you have weighed out all of the pros and cons and are still trying to come up with a final decision, there are tools we can recommend to help guide you even further. For example, when you’re trying to determine whether it’s a good time for you to buy a home, the “Rule of 150” is a great tool. It’s a formula that helps you compare the total cost of owning a home with what you would be saving by not renting.
As the Blink podcast “Quit like A Millionaire by Kristy Shen and Bryce Leung explains it, “ Over the first nine years of a standard 30-year mortgage, only about 50 percent of your payments go towards the actual loan; paying off the interest on that loan accounts for the other 50 percent. Now, additional ownership costs like maintenance and insurance are roughly equal to the interest on a standard mortgage during those first nine years, so that’s another 50 percent.
So to calculate your actual monthly payments, you’ll need to multiply your monthly mortgage payment by 150 percent. That’s how much your home will actually cost per month once you’ve accounted for all your expenses. So say you’re looking at a monthly mortgage bill of $1,500. When you multiply that by 150 percent, you get your true cost – $2,250.
If your Rule of 150 monthly costs is higher than your rent, it makes sense to stick it out in the rental market; if it’s lower, you might want to think about buying”.
Unfortunately, as with most financial concerns, there is no one-size-fits-all solution. But luckily, you have us to help advise you on making the best decision possible for your situation and your financial goals.
Kim and Hank skiing with clients and friends in Taos, New Mexico.
Devon and her husband on a cruise through the islands.
Recipe of the Month
Warm Quinoa Brussel Sprouts Salad
Preheat the oven to 400°F (200°C).
Line a baking sheet with a foil and toss the squash cubes with olive oil, salt and pepper. Roast for 30-40 minutes, or until tender.
Place the quinoa in a small saucepan and rinse a few times. Add 1cup water, ¼ teaspoon of salt. Bring it to a boil over medium high heat. Reduce heat to medium low and simmer for about 15 minutes, or until the water is absorbed and quinoa is tender.
Wash the Brussels sprouts thoroughly. Cut them in half, and then cut out the tough core, as pictures below. Then slice them as thin as you can.
Once the quinoa is cooked, add shaved brussels sprouts, cover and let it sit for 10-15 minutes to soften.
In a large bowl, combine shaved brussels sprouts, squash, quinoa, chick peas, walnuts and cranberries. Toss with honey Dijon dressing and serve warm.
Source * https://www.sweetandsavorybyshinee.com/warm-quinoa-brussels-sprouts-salad/print/
1 cup cubed winter squash (acorn, butternut, or delicate works great)
1-2 tablespoon olive oil
Salt and pepper
½ cup red quinoa
12oz brussels sprouts
1 15oz can chick peas, drained and rinsed
1/3 cup chopped walnuts
1/3 cup dried cranberries
1 cup honey dijon dressing
FSG's February Read
War Against All Puerto Ricans: Revolution and Terror In America's Colony
Written by: Nelson A. Denis
Kim and Chris both found this book to be so enlightening. Kim having lived there years back and Chris, whose family is from there. It's incredible how much we really don't know about about the history of Puerto Rico!
Through oral histories, personal interviews, eyewitness accounts, congressional testimony, and recently declassified FBI files,War Against All Puerto Ricanstells the story of a forgotten revolution and its context in Puerto Rico’s history, from the US invasion in 1898 to the modern-day struggle for self-determination. Denis provides an unflinching account of the gunfights, prison riots, political intrigue, FBI and CIA covert activity, and mass hysteria that accompanied this tumultuous period in Puerto Rican history.