Your Money_ The Missing Manual - J. D. Roth [99]
How long will you stay in one place? The longer you plan to stay put, the more sense it makes to buy a home. Buying lets you recover your costs and build equity.
How do costs compare? Find a good rent-vs.-buy calculator and crunch the numbers. The New York Times has a nifty web-based calculator (http://tinyurl.com/NYT-rbcalc) that can help you compare costs for renting vs. owning. The site lets you plug in numbers for your situation, and then shows you how long it would take to break even with buying.
How would you spend the savings? When renting is cheaper, you can use the money you save to pursue other goals. Sure, you could spend the cash on purses and videogames, but you'll be better off in the long run if you use it to fund your retirement (see Chapter 13), budget for a new car—or even save for a down payment on a house.
How do you feel about homeownership? For some, owning a home is a piece of the American Dream. For others, the chores and maintenance are a nightmare. Your feelings about homeownership are just as important as the financial stuff.
Note
Here's an excellent article from the New York Times (http://tinyurl.com/NYT-buying) that explains why the author—a long-time renter—decided to buy a home. It does a good job of laying out the pros and cons of each choice.
If you decide to buy, do it for the right reasons: because it fits your goals and will make you happy. Don't do it because you think it's a good investment. A mortgage is not a retirement plan—it won't make you rich. Instead, think of it as an investment in a certain lifestyle. If homeownership is a lifestyle you want and can afford, then buy; if not, rent.
Tips for Renters
One advantage to renting over buying is you have a lot more options, so make the most of it. Be choosy; don't settle for the first thing you see.
Pick a neighborhood close to work or school, and one with stores and entertainment options. If exercise is important to you, find a spot that gives you access to spaces for biking or running. By finding a rental in a walkable neighborhood, or next to a bus or train line, you can save tons by not owning a car (see Car-Free Living).
Tip
To find out how walkable an address is, check out WalkScore.com, which calculates how close it is to things like restaurants, libraries, and grocery stores.
Don't rent a place if it's going to cost so much you can't afford to have a social life or meet your financial goals. A good rule of thumb is to limit your monthly rent to no more that 25% of your pre-tax pay. You can use the Rentometer (www.rentometer.com) to find affordable rentals in your area.
Tip
If you have the time and inclination, you can save money by taking a gig as an apartment manager. Yes, you'll have to deal with locked-out tenants and leaky faucets, but you'll get free (or at least reduced) rent. The box on Renting out a spare room has an example of someone who does this.
Before you sign a lease or rental agreement, tour the unit you'll live in. This may seem like common sense, but you'd be surprised at how many people rent places sight unseen. If you can, visit the unit at various times of the day, and maybe once over the weekend. A neighborhood that's quiet on a weekday morning may be party central on Friday nights.
Believe it or not, you can often negotiate on rent before you sign the paperwork. Wait until you and the landlord seem to have made a connection. (Here's a list of tips for knocking the socks off your next landlord: http://tinyurl.com/GRS-renttips.) Once he likes you, it's okay to ask whether he can do things like include the cost of your Internet service in the price or let you have a dog: "Well, it's a great place, but I don't know. You don't allow pets. My next stop is with somebody who'll let me keep a dog. Is there anything you could do to help?" (See the box on Close the deal for tips on negotiating.)
Remember to read (and understand) the contract before you sign it. Pay special attention to costs and dates, and don't be afraid to ask questions: What