Why Buy Instead of Rent?
The Jacksonville area real estate market is different from most real estate markets, so I’ve prepared this small brief to help answer the many questions you may have. Below are some common questions I run into frequently with inbound customers that play a big part in their decision to either rent for a time, or buy a home. After the Question/Answer portion, I’ve compiled some numeric data to illustrate the advantages of buying your own home now vs. later, and the costs that will be incurred either way you choose. Again remember that real estate is local in nature. Jacksonville has advantages that you may not have had at your last location, and prices vary from area to area. I truly hope that this helps.
Q. Isn’t it expensive to buy a house? I don’t have a lot of cash to put down on a home.
A. The Veterans Administration (VA) backs home loans up to 100%. In other words, lending institutions will finance 100% of the purchase price of your home if you choose, which means no down payment.
Q. Ok, so there’s no down payment; but there are still closing costs to handle right?
A. Yes, there are costs involved both for the buyer and the seller. Some of these costs are negotiable between the parties. Jacksonville is unique in that in order for sellers to be competitive in the housing market, homeowners here normally pay a large portion if not all, of the buyers closing costs. It could cost you over 2 times the amount initially to rent a home instead of buying your own.
Q. But I need a place to stay quickly. How long will I have to wait to move in?
A. Again, Jacksonville has advantages that other communities don’t. Many new and re-sale homes currently on the open market are vacant. Many sellers, if asked, will allow the buyers to move in upon credit approval, normally just a couple of days. That couple of days could ultimately save you thousands of dollars.
Q. But if I use my VA eligibility now, how will it effect my ability to buy a home in the future?
A. It’s a fallacy that you can only use eligibility one time and one time only. When you get ready to sell, remember that this is a military town. Having the new homeowner substitute his/her VA entitlement for yours is an everyday occurrence. This frees up your eligibility so you can buy your next home.
Q. What if I buy a home now and have to transfer in a couple of years. I don’t want to buy a home if I can’t be sure I’ll be able to sell it quickly in the future.A. A very big concern here, right? Statistically, polls are done throughout the U.S. to determine the overall housing market. A study done a couple of years ago, showed that Jacksonville, N.C. was the sixth fastest moving city in the United States. Over 35% of the households turn over every year.
Q. If I do buy, how long will it take for my home to appreciate in value, to cover the cost of selling it if I don’t want to keep it.
A. Home appreciation values are important. In our area, it costs approximately 9%-12% of the purchase price of the home to sell it. I realize that sounds like a ton of money, but remember, your initial costs could be as little as 500 dollars in most cases. When you sell, you’ll be passing that same advantage on to the next buyer. To answer the question, it takes about three years to “break even” from the appreciation value to the cost of selling. Some areas are appreciating as much as 7% per year, to a low of about 2.5%. Taking care of your investment will assist in the increase in appreciation also. Proper maintenance of the home and yard will help immensely.
Q. If I keep the house as an investment will it be hard to rent out, and what costs will I have?
A. We enjoy a very large turnover in homes every year due to the surrounding military bases. Rental homes are abundant and rent out very quickly. As I said though, taking care of your investment is the very best insurance against your home not renting. Costs involved in renting through a property management office vary. There are monthly fees that are charged to the homeowner. The costs of not using a property management office could wind up being hundreds or thousands more in repair bills from tenant destruction. The very best advice I can give is to let the experts handle all the problems. It’s definitely worth the modest cost involved and it could save you a bundle over the long haul.
Let me ask two final questions of you before you decide to put your money into someone else’s pocket. There are only two major tax break incentives today in the U.S. 1)Dependants; and 2) Home mortgage interest. Do you really want to give away $10,000-$20,000 in tax deductions over the next few years, or would you rather shelter that money from taxes yourself. Lastly, if you rent for a short time to “get settled in” and then buy, won’t you still have the same costs and time to wait for appreciation values? Only at that time, six months to a years worth of payments that could have been very useful to you, are now going down on someone else’s taxes and they’re getting all the benefits from your payments. Wouldn’t you like that money working for you???