Should I Rent or Should I Buy: Part 2
SHOULD I RENT OR SHOULD I BUY? PART 2 ~ By Patricia Forger
Last time we discussed the options of buying or renting when you are fresh out of college and are just starting out. You have realized that renting is probably your best option at first. So, the first thing you need to do, after you have found your rental, is sign a Lease Agreement. This document protects not only you but the Landlord and commits both of you to a set term for your tenancy. In most instances, the Lease Agreement is boilerplate and straight forward. But, make sure you read the entire Agreement and if you have any questions at all, have someone else review it or consult with an attorney. Here is a link to a sample lease agreement: http://aniceapartment.com/967_new_lease_with_sample_lease_only.pdf
You will be required to pay the first month’s rent and a security deposit which could be either one or two months. The security deposit is not normally used for the last month’s rent. In Connecticut, the Landlord is required (in residential leases) to put the funds in an interest bearing account and the current interest paid (it can change yearly) is 1.5%. Here is a great link to the CT Department of Banking site which discusses rental security deposits and can answer some commonly asked questions: http://www.ct.gov/dob/cwp/view.asp?a=2247&q=299050
One other option which I have not yet discussed is renting with an option to buy. It’s not a normal every day occurrence but it can be a possibility. Since the real estate market in Connecticut is much different now than it was 5 years ago, Sellers are finding themselves in a bind with home values dropping substantially from what they paid when they purchased the house. They may not be able to sell their home to cover the mortgage payoff. Some Sellers have lost their jobs and need to relocate for a new job but since they cannot sell the home and payoff the mortgage, they need to figure out what they can do. Some Buyers may not yet qualify for a mortgage as they are just starting out but may be able to after a a year or two. Renting with an option to buy could help both of you out. Basically, this means you, as the tenant, are renting a property with an option to buy it at a future date. The price of the property to purchase should be set and agreed upon by both the tenant and landlord at the time the lease-option is signed. Either an up-front payment (deposit) is put down by the tenant to purchase the property. This amount varies. It can be handled by the tenant paying an extra set amount each month with the rent. The extra funds are held by the landlord and used toward the purchase price of the home at the end of the lease-option period. However, Buyer beware, as the extra amount that the tenant is paying is not returned to the tenant at the end of the lease-option if the tenant decides not to purchase the property. An attorney is needed to review any lease-option agreement to protect both the landlord and the tenant’s rights.
Whatever your decision – to rent or buy – will come after some hard work and a reality check – here’s a place to start – http://realestate.yahoo.com/calculators/rent_vs_own.html. This “rent vs. buy calculator” can help you get started! Good luck with whatever you decide and remember – always start with a Realtor® to help you in your search!
Pat Forger, Sales Executive, Realtor®
Turning your dreams into an address!
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