What is renting a house
Tenancy agreements can be complicated, but they exist to protect your rights - so it's important to know what you're signing. Here are the important things to look out Tenancy deposit schemes. Find out how deposit protection schemes work and how to resolve a dispute with your landlord. Rental property maintenance and repairs. Renting a home comes with responsibilities. Avoid disputes — find out what's expected of both tenants and landlords.
How to save for a mortgage deposit. Learn about saving for a property deposit plus expert tips on budgeting and schemes to help you buy your first home sooner. Related guides in Which? In Compare Savings Accounts. Compare Savings Accounts. The most important thing you can do is find a real estate agent who knows his or her stuff.
Ideally, look for someone who owns them nearby. Oftentimes, property managers have brokers in-office to help. The best agents will know how to help you do research, understand the costs and lead you through the entire buying process. You can generally opt for three types of investment properties: single-family homes, condo units or multi-family unit properties.
Watch for emerging markets, evaluate the zip code and neighborhood. Has a new school district been built, as well as a lot of new construction?
If so, you could be on the right track toward the best possible location for your rental property. How will appreciation fit into the mix? In other words, ask yourself whether you think the eventual return on your investment will make it worth it in the long run. Neighborhood: The neighborhood you choose for your rental property will attract a specific type of renter.
School district: This is important if you plan to rent to families. A home in a good school system will allow you to charge more rent but home prices will generally be higher.
A mortgage preapproval is like a green light when you shop for a home. You give your lender information about your income, debts and assets and the lender checks your credit. DTI is your monthly debt payments divided by gross monthly income. Need to improve your credit score? Learn some tips. Stay away from big banks: Big banks might not readily loan to you as much as a small bank or offer you desirable loan terms.
Compare both big and small banks side-by-side prior to landing on a lender. Ask for owner financing: Owner financing means that the seller agrees to accept payments directly from you instead of requiring you to get a mortgage. This can benefit both you and the seller, but there are risks involved. Think through this option before you take the plunge. A rental property could be a sound investment, particularly if the rental income you collect offers you some extra income.
How We Make Money. Bankrate Staff. Written by. Share this page. In the U. This is partly because of the decades-old message that being a homeowner is the key to happiness and part of the American dream.
Real estate is also big business for everyone, from mortgage lenders to real estate agents to home improvement stores. It is a part of our cultural mindset and economy.
Consider the pros and cons of each to figure out whether renting or owning is best for you. Renting means you can move without penalty each time your lease ends. However, it also means you could have to move suddenly if your landlord decides to sell the property or turn your apartment complex into condos.
Less dramatically, they could just bump up the rent to more than you can afford. The biggest myth about renting is that you're "throwing away money" every month. This is not true. You need a place to live, and that always costs money in one way or another. While it's true that you aren't building equity with monthly rent payments, not all of the costs of homeownership will go towards building equity. When you own, you might pay nothing more than your mortgage and regular bills in one month.
While you might be temporarily inconvenienced by a leaking roof as a renter, it's unlikely you'll ever have to pay to replace your roof when you rent. Your monthly, home-related expenses, such as renter's insurance, tend to be more predictable and significantly cheaper. As a renter, you face unpredictable rent increases each time your lease is up for renewal unless your apartment is rent-controlled.
If you live in a desirable part of town, rent increases can be steep. In contrast, if you get a fixed-rate mortgage, your monthly house payments will never increase though property taxes and insurance premiums probably will. While homeownership is often touted as a way to build wealth, your home can lose value. The acceptable neighborhood you moved in could decline. A major employer can leave the area, causing a significant population decline and a surplus of housing.
Alternatively, there could be a residential construction boom, which could also keep prices down. Another bit of misleading conventional wisdom: Get a mortgage to get the tax deduction. True, the home mortgage interest deduction reduces your out-of-pocket expenses for mortgage interest early in your loan term, as long as you're itemizing.
If you don't have enough deductions to itemize and claim the standard deduction, there is no tax benefit to you as a homeowner. Of course, renters get no mortgage tax deduction at all. But they can take the standard deduction that's available to all taxpayers. Do you like having your evenings and weekends to use as you please? Do you work long hours or travel frequently? If so, then the time commitment that comes with homeownership might be more than you want to take on.
There are always projects around a house that you will need or want to take care of, from finding a plumber to replacing a rusted-out pipe and repainting the bedroom to mowing the lawn.
If you live in a community with a homeowners association HOA , the HOA might take some homeownership chores off your plate. That will usually cost a few hundred dollars a month. But beware of the headaches that association membership can entail.
If you rent, your landlord will take care of all the repairs and maintenance, though of course they may not be done as quickly or as well as you would like. Although not as universal as homeowners' insurance, renters' insurance is often recommended and sometimes required by landlords for those leasing homes or apartments. Homeownership brings intangible benefits, such as a sense of stability, belonging to a community, and pride of ownership. However, it is not good for restless or nomadic types.
Real estate is the original illiquid asset. You might not be able to sell when you want if the housing market is down. Changing your mind about where you want to live is far more expensive when you own. The overall cost of homeownership tends to be higher than the overall cost of renting.
That is true even if the monthly mortgage payment is similar to or lower than the monthly rent. Perhaps the biggest throwaway expense is mortgage interest, which can make up nearly all of your monthly payments in the early years of a long-term mortgage.
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