What I have learned since being an owner is that there are other costs of homeownership that aren't often discussed or known. I have now realized I didn't account for the one thing, that as of today, has been my biggest homeownership expense.Read More
Financial Blog For Busy Families & Impact Investors
I am a financial planner. I am educated on the laws of supply and demand, on interest rates, saving and the value of a dollar. I still bought my house at the peak of the housing market in 2018 and...I don't care.Read More
The New York Times Your Money column had a timely article on renting versus buying by Tara Siegel Bernard. She interviewed a couple who are renting, by choice, in southern California due to high home prices in the area. She also interviewed a few financial professionals in the article. In summary, they agreed on the following: 1) In the short-term, no one can predict what the real estate market will do on a consistent basis. Therefore, if you are planning to live somewhere for just a few years and have no interest in being a landlord, it is better to rent.
2) If you plan to live in a place for 5+ years, buying may be the better investment, but it depends on the assumptions (time horizon, tax bracket, risk tolerance, etc).
3) While the research supports that buying a home isn't necessarily always a good investment, it disregards the non-financial benefits of owning (such as stability) and it assumes that you are disciplined with your money in terms of saving and investing.
4) When left to our own devices, many of us don't save as much as we can afford. If you are one of those people, a forced savings plan, like a mortgage payment, can be a good thing.
Some of my clients don't know how long they will be living in San Diego. They are members of military families, students, medical professionals or they may just be looking for a change in a few years. Here are a few of the many factors to consider when deciding whether to rent versus buy. (1) Time horizon - No one can consistently predict what real estate prices are going to do in the short-term, just like the stock market. For that reason, if you have a short time horizon, it typically makes sense to rent. If you decide to buy and need to move shortly afterwards, you may find yourself taking a loss on the property if you have to sell it.
(2) Rental Cash Flow - If you are not opposed to being a landlord, you may consider creating a rental cash flow analysis in the event you have to move and the market is not conducive to selling (or you don't want to sell.) It is easy to look up rents in the area and compare projected income to the cost of continued ownership. Factor in expenses such as your mortgage payment, property tax, insurance, property management fees and maintenance / repair costs. You may also choose to factor in some period of vacancy. If your potential property would be cash flow positive as a rental, that gives you some peace of mind. The rental market can change at any time, so this is not without risk, but at least you would know where you stand as of today.
(3) Job Stability & Risk Tolerance - If your rental analysis shows you would be slightly cash flow negative if you had to rent the property out, you may still consider purchasing it if you feel you have a stable job and a healthy personal cash flow. If funding a shortage of say, $200 per month, would not affect other areas in your life, like saving for retirement and other goals, buying may still be feasible. If any sort of a shortage would stress you out, or if you have no interest in becoming a landlord, go ahead and rent until your future becomes clearer.
Planning Within Reach, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
Purchasing raw land is different than purchasing a property with a house already on it. While it can be appealing to start with a blank slate, it can also come with a lot of frustrations if you are not prepared. Here are some tips:
1) Learn as much about the property as possible.
Look at SunCalc.net to get an idea of the property’s sun exposure throughout different times of the year. Review the USDA soil maps here to understand the type of soil on your land and surrounding properties. Speak with neighbors about the property to get their opinion.
2) Find a friend or real estate agent with a lot of experience.
You need someone who is familiar with the zoning laws, rules and restrictions unique to the area. You also want to make sure there are no easements and nothing preventing you from doing what you want to do with the land (such as build a home or farm).
3) Understand that you have different loan options
While many people put 20% down on their primary residences, land loans may require 30% or more. They also have a higher interest rate than your typical mortgage loan because vacant land is considered riskier.
4) Getting water and utilities can be expensive.
If you are purchasing land in a rural area, you will need to get clear on the logistics of getting water and utilities to your property. For water, you may need to drill a well. The cost associated with this will depend on how deep they have to drill and the type of soil. A "perc test" will determine if a septic system can be installed in an appropriate location.
Purchasing land requires a lot of due diligence to make sure it doesn’t become a money pit. Even with asking all the right questions, there can be surprises. Planning ahead and working with trusted professionals can make the process go smoothly.