Renting vs. Owning

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Renting vs. Owning. The Difference Between Renting and Owning a Home. Outline. Introduction Reasons for making a housing choice Comparison of Expenses Renting Advantages and disadvantages Owning Advantages and disadvantages. Introduction. Housing is the largest personal expenditure - PowerPoint PPT Presentation

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  • Renting vs. OwningThe Difference BetweenRenting and Owning a Home

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    OutlineIntroductionReasons for making a housing choiceComparison of ExpensesRentingAdvantages and disadvantagesOwningAdvantages and disadvantages

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    IntroductionHousing is the largest personal expenditureAbout 28% (max of 30%) of a persons gross income (the amount you make BEFORE taxes are taken from you paycheck)Choosing where to live is based upon a persons goals, values, needs, and wantsPlaces to live include:House, apartment, condo, mobile home, etc.

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Reasons for Making a Housing ChoicePersonal and financial goalsPersonal values, needs, and wantsAmount of money available for housing costsFinancial resources and readinessCredit historyReal estate pricesLocation preferenceExpected length of stay in particular place

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Costs of RentingApplication FeeCredit Check FeeSecurity depositAdvance on RentMovingMonthly rent Utilities electricity, water, garbage, etc.Renters insurance Parking

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Costs of OwnershipEarnest MoneyApplication and Credit Check FeesInspection FeesDown payment (one time cost)Closing costs (one time cost)Monthly mortgage paymentsUtilities electricity, water, garbage, etc.Homeowners insuranceReal estate property taxesMaintenance

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    RentingRentThe cost of using someone elses propertyTenant (renter)The person who rents the propertyRenters are generallyPeople who choose not to own a homePeople who cannot afford to own a homeMove oftenJust starting out in a new job and has little to spendRetired couples

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Renting continuedLandlordOwner of the rental propertyMay perform management duties or hire a property managerProperty manager - may charge a fee to the landlord to perform the management tasksDutiesMay collect rent and deposits, pay utility bills, complete repairs and maintenance, watch over the property, respond to tenant complaints, assign new tenants, etc.

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Moving into a RentalUpon moving into a new place, people are usually required to pay a security deposit and sign a leaseSecurity depositAn advance payment to cover anything beyond normal wear and tear on the unitLeaseA legal contract between the tenant and the landlord, specifying the responsibilities and rights of both partiesIdentifies the rent amount, security deposit amount and specifications, payment for utility bills, late payment penalties, length of lease, eviction terms, etc.

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Advantages of RentingLow move-in costsFixed monthly expenses predictable housing costsEasy to move - mobilityLocation choices (may be close to work or school)Less maintenance and repair workFewer responsibilitiesMay offer extra amenities such as a tennis court or pool

    Less expensive than home ownershipMay be able to save for other wants or needs if renting a less expensive apartmentOther expenses may be included in rent payment such as electricity, water, sewer, and/or garbage

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Disadvantages of RentingSubject to terms of a leaseRent may change with little noticeLess privacy and transient neighborsRestrictions on noise level, pets, etc. Fewer opportunities to upgrade apartment such as new carpet, paint, or wallpaperWhen leaving a property, no equity is returned as it would be if selling a homeNo tax deductionsMay lose rental if the property is sold

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Analyze the following when considering your housing choiceIncome determine both monthly and yearly incomeis the income steadyExpenses A. Fixed: paid regularly and the amount is basically the same for each paymentB. Flexible: vary in amount and do not occur regularly Savings life is full of surprises and savings makes it easier to cope with unplanned expensesmust save money for a down payment and closing costsafter moving into a home or apartment savings can be helpful for paying for unexpected repairsStrengthen Your Finances make a financial planpay yourself firstreduce flexible spendinglimit impulse buyingkeep records to know how much money has been used Human Resources investing time, energy and talent into a home can save you moneybuy a fixer-upperbecome your own Interior Designerdo your own plumbing

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Rental AbbreviationsWhen looking for housing in the newspaper or on some internet sites, you will notice that apartments and houses are usually described with abbreviations. Below are the most commonly used abbreviations. apt - apartment a/c - air conditiioning apls - appliances b/c - balcony ct - a bathroom with ceramic tile crptg - carpeting dlx - deluxe english apt - same as a garden apartment f/a - forced air, new heating and cooling system, will have its own meter fpl - fireplace garden apartment - ground level or basement apartment hdwd fl - hard wood floor htd - heated lft - loft, which is a large room, probably a converted warehouse mstr bdrm - master bedroom mod - modern nly dec - newly decorated pnty - a pantry sm - small spcs - spacious tenant htd - tenant pays for heating wf - wooden floors

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    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Affordable OptionsPrivately Owned HousingPublic Housing designed for low-income families, senior citizens and those with disabilities (built for those that cannot afford private housingrent is usually set as a percentage of the monthly income of the renterif you make below a certain amount you qualify)Subsidized Housing government helps low-income families live in private housing by paying part of the rentpayments are sent directly to the housing ownerthe tenants pay what they can afford and the government pays the restfamilies that live in these units must meet certain income guidelines

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Home OwnershipHome ownership - the buyer has purchased a housing unit as propertyGoal of many AmericansA large financial decisionOwning a home is an investment because if a person sells a home for more than what it was bought for, the person makes money. This is called equity.Financial planning and savings can assist a person in planning for the benefits of home ownership later in life

    1.9.3.G1 Family Economics & Financial Education Revised April 2005 Housing Unit Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

    Purchasing a Home90% of buyers take out a mortgageA home loan in which the real estate is the collateralCollateral is an item promised to the lender if the borrower does not pay back the loan, usually the homeDown paymentAmount of money paid on the home at time of purchase Typically 10 20% of the purchase