“In this current climate” is a cliché lately – but it is a valid cliché. However, in this current climate, some people might just not be able to afford a house. Or conversely, a homeowner finds that the value of their home is at an all-time high and wants to cash in. There are plenty of reasons why renting is a beneficial option for buying, especially in certain markets.
- Renting allows for major life flexibility. In major markets, younger people are renting over buying, and this seems to be an extremely popular choice. Due to unsustainable raises in the housing market buying a house may not be an option, therefore renting is the best option. By renting, renters allow themselves the greatest flexibility if a good opportunity presents itself, or if they are not happy with their current situation, or if they want to move to another place quickly. Renting keeps the lease down to one of two years, allowing for life improvements and possible pivots in the future.
- Renting does not lock your life down into debt for 30 years. If not subscribing to the typical white picket fence dream, the prospect of facing paying a mortgage for 30 years may not be the best life choice. The stress of having to maintain a payment for so long locks people down into lifestyle choices – possibly a job they may not like, or circumstances they may change, or unforeseen debts that may occur. There are also studies that show a person having a debt hanging over their heads is clearly detrimental to life.
- Investing instead of paying may lead to bigger monetary gain. The math seems to be there. There are some bets unconsciously made when buying – the result of investments, the real estate market prices (after all, the recession did a number on many people), the pace of inflation, property taxes, paying interest. These calculations have renters winning out in the long run, however, the numbers may be variable.
No matter how many facts and numbers are thrown around, it is ultimately down to the individual needs and desires of the person making the choice. Behavior is behavior, and people tend to seek out facts that support what they feel. Good luck!
There are many factors that go into the typical landlord’s determining of rent and apartment value. Not all are financial, but the beginning factors of deciding a fair price are evaluating the market, along with overhead costs.
Similar to purchasing a house, many landlords will look at comparable properties in the neighboring area. To be comparable, a neighboring apartment will have similar square footage, room counts, and amenities. Landlords can also evaluate apartment buildings in other neighborhoods that are comparable sizes, and then take into account a difference in neighborhoods. The surrounding neighborhood can increase or decrease the rent value for reasons such as park and school accessibility, transit, cleanliness, even the local nightlife.
Once this has been established, many landlords choose to compare the rent, or range of rent prices, to the Housing and Urban Developments annual fair market rental report. This report is used to illustrate how rent prices relate to the types of apartments available, along with the local markets. Supply and demand is also a very common factor when determining rent price, particularly in an area where rental property competition is either very high or very low. This does not necessarily mean that a high demand will drive the prices up too much, as it can be extremely unprofitable for a landlord to have frequent turnover.
Next, overhead costs will play a large part into how much an apartment can be rented for. A landlord will have many overhead costs, some which are quite expensive or even unpredictable. Mortgage of the overall building will be used to calculate rent, along with utilities that must be paid, property taxes, and insurance. All of these expenses must be covered by the combined rent of all units on the property, taking into account that vacancies will occur in between occupants.
Unforeseen expenses are more difficult to calculate, but are equally important to take into account when determining rent of a unit. The landlord must be able to provide their tenants with basic amenities, especially those of which were previously agreed upon such as a working refrigerator. Unforeseen events can also lead to expenses, such as fires or gas leaks, which the landlord are responsible for fixing using the obtained rent money.
Last, many landlords take into account their occupants themselves. In fact, many landlords who live in the same building as their tenants, or owners of smaller properties, are known to be reasonable in order to maintain a relationship with their tenants.
All in all, there are many different factors used to calculate the monthly price of any rental. Landlords may calculate the rent differently based on neighborhood, type of building, and even the landlord’s own proximity to the units. Ultimately, a good landlord will weigh all of the factors to determine a fair and affordable rate, which also covers necessary expenses with a safety net.