Should You Buy or Rent?

December 2, 2011

Buying Real Estate, Miscellaneous

Assuming you can qualify for a loan and are gainfully employed and can service said loan, ask yourself the eponymous question entitling this article.

If you are making a reasonable amount of money, say enough to qualify for AMT, then your answer is simple – you should absolutely buy.

Why?  Because if you don’t, you are going to throw away money by paying taxes to the government for pursuing happiness, or wealth.

You are constitutionally protected to pursue happiness, well okay, it’s implied through the declaration of independence.

The point is, the government cannot really tax happiness…yet.

If you do not make enough money to qualify for AMT, you probably do not understand what the hell  I am talking about.

AMT is Alternative Minimum Tax and is a tax code that is rolled over every two years so that the codified tax rate associated with it can be adjusted according to times and conditions.

I have argued for many years that the AMT (that point when you are hit with it) is that point where the government designates you as being rich.

Call me crazy, but that’s what I think.  Nuff said.

The point is that the only reason to own property is to realize appreciation on the money you invest or spend on your living quarters.  True you have the repairs and the taxes.

But if you rent, those costs are already built into your rent and you are paying someone else’s bills.

Some would argue that renting provides you with more flexibility.  This is not really true because if you need to move for a job or whatever, you can easily hire a management company and will not experience any real vacancy time.

This is assuming that you have obeyed the cardinal rule of real estate – location, location, location.  When you own, you have the same flexibility as when you rent.  Now, here is the drawback:

Repairs

If you ever have a big repair, like a roof or a boiler, you better have some equity in the property you can take out or at least have some money in the bank to make the repairs.

This is your biggest risk – unexpected repairs, damages by tenants, floods, etc.  If you insure your property properly, this is not a problem either.

And if you obey that cardinal rule, you can build those fees into the rent and people with the means will pay to live in your house.

On the other hand, if congress and the Obama Administration has their way and eliminates the homeowner interest write-off, there is absolutely no short term reason to own property.

Unless of course you believe that you will have more appreciation on your money with it being tied up in your house.  Not likely.

Although you could argue that it would be nice to have a place to hang your hat when you are at retirement age and no longer want to make a house payment.

Hopefully, the State, City, County and Federal Government don’t raise your property taxes beyond your retirement means.

But who could blame them.  After all, it is your fair share, right?

Appraisal Source is a New York based residential real estate appraisal firm. Their highly-qualified appraisal staff of New York City and Long Island real estate appraisers provide independent residential real estate appraisals for a variety of purposes.

Here’s the original article…Should I buy or rent?

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