Saturday, January 22, 2011

10 Hidden costs of owning AND renting a home

This is nice piece from Trulia's website... Good information for all.

Everyone thinks that the costs of renting are limited to, well, rent! On the other hand, there is a laundry list of expenses we all know go along with owning a home. 

But many people aren't aware of the hidden, surprising costs associated with both owning AND renting a home, and it's what you don't know that has the potential to derail your rent vs. buy decision-making, so here are the Top 5 Hidden Costs of both renting and owning your home:  

Top 5 Hidden Costs of Owning


1.    Special assessments. HOA dues to maintain the complex come as no surprise to condo owners, but hefty special assessments to make unexpected (and unbudgeted) repairs to the roof, windows, boiler or even foundation often catch unit owners unawares. Even if your home doesn’t belong to an HOA, don’t be surprised to see special assessments tacked on top of your property tax bill, covering public services including things like street lighting, tree trimming, pest control, libraries, and even schools.

2.    Utilities and services you didn’t need while renting. Many renters have never had to pay for things like gas, garbage, water and pest services, and they've also looked to their Electric, gas, garbage, alarm, water, pest, home warranty – which mitigates larger surprise costs of unexpected major repairs, gutter cleaning/maintenance, snow removal/winterizing, etc)

3.    Private mortgage insurance. Today’s savvy homebuyers are well aware that they’ll have to pony up for private mortgage insurance, or PMI, if they’re putting less than 20 percent down on their mortgage.  But the cost of PMI has spiked over the last year, and the amount definitely catches buyers off guard. 

4.    Penalties and fines.  HOA rule violations, like parking in the wrong spot, installing hardwood floors in an upstairs unit, or painting your home a forbidden hue can result in surprising fines, on top of the costs of remediating the issue. Even single-family homeowners can get ticketed and/or fined by their city or town for violations like having overgrown weeds or other building code violations – especially those which create fire and safety hazards.

5.    Items you didn't need while renting, but you do as a homeowner. This varies based on your climate and the type of home you own, as well as on the services you outsource, but can include landscaping equipment (e.g., lawn mower, snow/leaf blowers), washer/dryer, fridge, window treatments, and light fixtures.

Top 5 Hidden Costs of Renting


1.       Opportunity Costs.  When you rent, you lose out on the chance of equity – which can mean an increase in your home’s value but, even in a down market, can also mean the chance of ever owning the place you live free and clear.

2.       Income taxes.  If you earn above a certain level of income, the income taxes you’re paying as a renter will be substantially higher than they would be if you owned a home and could deduct your property taxes and mortgage interest.

3.      Storage.  Many a renter simply has too many personal belongings to stuff into their small apartment, so it’s not uncommon for tenants to also pay for a storage space, without calculating that expense into their “housing” budget.

4.      Costs of improving the property. Long-term renters may paint, replace the flooring, and do other improvements to make the place livable.  But since it’s not technically “their” home, when they
 do move out, all the cash they invested is lost. In fact, some landlords may require them the pay or forfeit deposit money to bring the place back to its original, neutral d├ęcor.

5.       Lost deposits.  Anyone who has rented more than a couple of apartments is well aware of the chances of losing some or all of your security or peet deposits, no matter how well you care for your home.

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