Rent or Buy
There are a few factors you should consider. (And you probably are).
These days it is typical for rent payments to be about equal to the mortgage payments on an equal property. So, it seems on first glance to be a simple decision. If the monthly cost is the same, why not buy? The first thing to consider is the down payment. The initial down payment, plus the associated closing costs, will probably approach seven or eight percent of the purchase price- at a minimum. And, although the monthly payment might be the same, the overall cost is not. As a tenant, when something breaks, you call us. As the owner, when something breaks you call a repairman. Homeowners also spend much more than tenants on home improvements, landscaping, and general upkeep. Plus, there are taxes and interest to consider. All in all, the overall costs favor the tenant.
In general, homebodies should buy. If you are active or travel frequently, then you might not want the responsibility of homeownership. On the other hand, folks who want to customize their surroundings to their own taste will probably want to buy.
Most people believe that housing prices will always rise. Although the recent housing/mortgage meltdown has many people reconsidering that opinion, it is probably true that home prices, when measured over a long period of time, will rise and the homeowner will benefit.
But, that's not the entire story. First, prices are not guaranteed to rise every year. Over a decade, they probably will. But over a three year period, anything can happen. And, that is not the worst of it. First, consider that closing costs and REALTOR commissions average about nine percent for the typical seller. So, if you sell for $200,000, the proceeds of the sale will probably be less than $185,000 after those costs are paid. If you paid more than $185,000 for the house, you lose money despite the fact that the value increased by $15,000. Over the last thirty years, we have seen housing prices in the Shreveport-Bossier City area increase at a rate of about 2.5% per year. So, if you are going to keep the house for less than four years, you will probably lose money on it.
There are usually two reasons why homeowners might need to sell within less than four years. Babies and job transfers. (There are more, like a death in the family or divorce, but the first two are predictable.) The point is, any home which does not meet your foreseeable needs for the next four years is probably a loser…unless you keep it and allow us to manage it, as we have for so many other owners.. If your family size increases, and you really need that extra bedroom, you have a problem. Or, if your employer sends you off to a new city – same problem.
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Contact UsDiamond Property Management, LLC
315 East Texas Street
Bossier City, LA 71111