Ever want to know when it’s better to be a renter than a buyer. Our professionals have come up with 5 good reasons why renters should be rejoicing. There are so many expenses that homeowners are on the hook for. These costs are often overlooked when purchasing a home or investment property.
Although we often hear the phrase from a renter “I am tired of throwing my money away”. But there is really so much more to take into account. Even after a homeowner pays off his or her mortgage, there are still more expenses that continue to accumulate.
The Black Hole of Maintenance
A renter simply will just call the apartment manager or their landlord when they need a repair. The owner of the home isn’t so lucky. There are many schools of thought. But 1% of the cost of the home is a good number to use as what repairs the home may need. So if you purchased your home for 500,000 thousand, you would want to budget at least 5k a year for repairs.
This will vary from home to home. The older the home, generally the more maintenance will be required. When you purchase a new home, many builders will include a 2-year maintenance free guarantee.
Also called Homeowners Association Fees, these can be quite costly and do add up. When a developer breaks ground on a new community they usually are in control of the HOA. When enough people move-in to homes, they will turn it over for the homeowners to a manager.
HOA fees may cover the cost of operating and maintaining a gate, lawn care for all homeowners, fencing, and even water and cable in some instances. There are a few negatives when it comes to living in a community with an HOA. If there is a major repair needed and there isn’t enough money in reserves, then an assessment will be made. Also, HOA fees seem to go up over time.
This is another overlooked cost but usually not as large as the HOA fee. In the event of a catastrophic loss like a fire or another act of mother nature, the insurance policy will cover the cost of building an entire new home. This usually doesn’t cover flood insurance. This is covered in another policy. It will also cover the loss of your personal items due to left. Policies will vary greatly depending on the size of your home and what you need to be insured. According to Rentkidz, many apartments in Austin are now requiring renter’s insurance. Although it is much less expensive than homeowners insurance. The fees are pretty nominal.
Real Estate Fees
Often overlooked and not discussed are the real estate fees that are associated with buying and selling real estate. The buyer is not responsible for those initial fees, but most buyers at one point or another become a seller.
Commissions are not set in stone and are negotiable. Usually, this number hovers around 6%. Here is an example to review. Suppose you sell your home for 500k. Taking 6% of that total which equates to 30 thousand. Plus you have to add in closing costs as well. The latter is split between the buyer and the seller.
When you do rent an apartment, the amount you pay as many of these fees already factored in. But that’s something you won’t have to worry about. Many people argue that real estate values go up over time. This really depends on the type of property you purchase and where it is located. But you can make a nice profit over time or if you buy in a hot market.
Be aware that home ownership has many expenses. Click over here to see more home ownership costs. And they certainly add up.