The Gardens at Twin Hickory

When deciding whether to rent or buy, you are making the choice to rent an apartment home or renting the capital needed to buy a home. Most Americans don't consider that they are renting equity (from the bank) to buy a home. As you are aware, very little equity is built in the first few years of paying a mortgage. Many people are surprisingly still very unaware of this fact.

This following article explains how renting is financially better than buying in about 75% of cases!

For the Past 30 Years, Renting Was Generally Better Than Buying

If homeownership is the American dream, then the nation had better wake up. That's the message from a new research paper that examines whether buying or renting a home was a better financial decision over the past 30 years. Most would find the result surprising: over the period Americans were better off renting between 65% and 75% of the time, depending on the investment alternative.

The article essentially looks at eight-year periods and assumes that a person invests the money he or she saves by renting. Since buying is generally more expensive than renting, renters have extra money to invest. It also makes a number of assumptions favorable to homeownership, including gains from the mortgage interest tax deduction, the option to refinance, and the ability to walk away -- loss-free -- from an underwater mortgage. Still, renting wins approximately three-quarters of the time.

The staff at economic research organization e21 explains why this result actually shouldn't be so shocking:

Counterintuitive as the finding may be to some, it is actually quite logical. Unless someone possesses the cash necessary to buy a residence, he or she will be renting one way or another. The choice is between renting the property directly or instead renting the capital necessary to buy the property. The amount of capital to be rented is a function of house prices, while the bulk of a mortgage payment is interest, which is the rental payment on this capital. After 2 years, the typical 30-year amortizing mortgage balance has been reduced by less than 3%. This means that a household that took out a $300,000 mortgage with a 5% interest rate to buy a home has only reduced its mortgage balance by $8,600 after two years despite spending nearly $39,000 in total over this period.

Housing advocates may respond by pointing out that at least the $8,600 in this scenario went towards home equity rather than simply being squandered on rent. But, as demonstrated in the Real Estate Economics article, the principal component of each mortgage payment - i.e. the portion of the mortgage payment that goes towards reducing the principal mortgage balance instead of interest - is an added expense renters don't have.

This turns the real estate industry's biggest talking point on its head: you aren't throwing rent into the wind each month, you're casting away equity.

Of course, that equity also provides a potential benefit. The analysis's eight-year rolling methodology appears to miss the biggest reward of owning a home: living rent-free once the home is paid off. After that 30-years is up, the longer a family remains in that home rent-free, the more buying pays off. Taking this into account would almost certainly change the result in some, if not all situations. Renting may be a better option initially, but there's no eventual reward.

An important point still needs to be made here: buying a home that you don't plan to live in for an extended period of time probably isn't a great idea. The rent you pay in the form of interest on a 30-year loan for five or even 10 years won't be any better than if you had just rented outright. But if you're planning on living in a home for 30-plus years, then you could potentially get some benefit from buying rather than renting.

Original article by By Daniel Indiviglio, The Atlantic

WE ARE KICKING OFF THE SUMMER WITH NIGHT OUT AT THE DIAMOND AND FIREWORKS!
THURSDAY, MAY 26TH GAME STARTS AT 7:05 P.M.
Pick your tickets up in the rental office
(Limited tickets available first come first serve for The Gardens Residents only)

START OFF YOUR MEMORIAL DAY WEEKEND FESTIVITIES WITH US!!!!

POOL OPENING AND COOK OUT
FRIDAY, MAY 27TH
4 P.M.- 6 P.M.

(click here to print flyer)

Compared to owning a home, living in an apartment home community is incredibly relaxing and easy. Why do the work yourself when you can rely on a dedicated property and maintenance staff if anything needs fixing? Not to mention, no lawn maintenance or pool care.
 
Believe it or not, you often get more for your money when renting in an apartment home community. Oftentimes you can rent an apartment for much less than the cost of buying a home, especially if you live in or near a larger city like Richmond, VA.
 
Getting a big tax break is one of the great advantages of owning a home. But, you can't always rely on getting that tax break. If your annual mortgage interest payment and your other deductions aren’t greater than your standard tax deductions, you will not receive any tax benefit from owning a house. However, if you rent an apartment, you will always receive some form of tax relief because a large portion of your rent is tax deductible every year.

Now, if you use part of your apartment home for business, you can also deduct expenses for the business use of your home. These expenses include your monthly rent, renters insurance, and utilities. A home office deduction is available for renters as well as homeowners.

There are two basic requirements for your apartment home to qualify as a deduction. The first requirement is “regular and exclusive use” which means you regularly use part of your apartment exclusively for business purposes. If so, you can take a home office deduction for the extra room or space you are using. Secondly, it must be your principal place of business.