I look in bewilderment at the approximately 32.9 percent (as of the third quarter of 2020 as per the Census Bureau) of those who are renting in the United States and wonder why in the heck are they in that position? Many reasons come to mind as to why this might be and why more renters aren’t buying.
I know so many people who I have had conversations with about renting instead of buying while they are giving their wealth away month by month, year by year. I ask them: Have they thought about purchasing and the overall majority say “yes,” but either they don’t have enough for a down payment, they believe that their credit isn’t sufficient enough to qualify for financing or they say that a rental is less of an obligation financially than a mortgage. Little do they know, they are also obligated to pay their rent every month just like a mortgage, except their lease will never be fixed like a mortgage is for 15-30 years and provide the amazing benefits that go along with it.
If I get a referral and we immediately create sufficient rapport so that they are open to having a dialogue with me, then I sometimes go a bit ballistic and give them a little tongue lashing as if they were my kids. (I never had to do this with my own because they usually listened to their dad!) I then explain to them, after getting enough information, that with the cost of their rental they probably could buy something. What I need to reinforce in no uncertain terms is what they are losing, e.g. the lack of gaining any appreciation, zero tax deductions and write-offs (again handing it all over on a silver platter to their landlord) and the security of not having to move if their landlord doesn’t renew for whatever reason.
Some of my past referrals were running small businesses out of their rentals and weren’t even considering the benefit and value of what they could actually use as a tax deduction on their business and/or personal tax returns. Most had some understanding but never conveyed enough or any of this information to their accountants. I have heard and continue to hear such ridiculous and illogical stories about how individuals and couples lack the knowledge and common sense (as I always say, “common sense is no longer common” and getting much, much worse) and less than stellar approaches to financing and purchasing, even when it comes to either leasing or purchasing a car.
Not to defocus, but here is a quick car story. Over the last two days, I went online in advance to figure out the price, all options that I desired and had to have so I was extremely prepared. I then visited my dealership and decided to trade in my car for a new 2021. I checked their digital sales board and found one of their people who had zero sales for the month of December. However, prior to committing, I negotiated by what some might call “squeezing” the sales associate (they do it to us brokers and agents, too, lol). I handled the transaction in an extremely professional manner, being transparent and very much to the point but very persistently nice and always passing positive compliments to not only the sales associate but to the financial and dealership manager all the way through and then did my “one of a kind” take-away.
Well, I got everything that I wanted and needed at an amazing price and I just drove the car home tonight with a big smile on my face. Pretty much everything in this world is negotiable, except birth, taxes, (unless you have a business) and death. I tell and show my clients how they too can potentially be a homeowner by thinking outside the box and being as creative as necessary within the law. I ask them if at any point in time whether they had in the past made any attempt to devise a plan of action and sat down to try to figure out how to do it. Most of the time they had said, sure, but they gave up before they even started because they were trying to do this on their own, without the necessary professional services of a mortgage and real estate broker or even so much as asking a financial planner in the various ways to come up with their down payment.
We have assisted a multitude of renters to convert their mindsets from considering renting to realizing and becoming homeowners, even with less than 580 credit scores. FHA loans require a minimum 3.5 percent down payment for credit scores of 580 and higher. If you can make a 10 percent down payment, your credit score can be in the 500 – 579 range. However, due to the COVID-91 pandemic, many banks have increased their credit score requirements and are no longer accepting any scores less than 680 credit for an FHA-backed mortgage. But there are terms and conditions that need to be met — income, price range, etc. — and applicants are judged by their specific financial profile and situation.
There are ways to be able to come up with that ever-important down payment. We can show you as well as guide you through the creative ways to accomplish this. So before you pull the trigger and consider thinking about renting or signing that lease, hold off and take a step back and get an education about buying. The inventory of available rentals just went up this past week, so there are more choices because demand slows at this time of the year as most people do not consider a move during the winter months.
So if it ends up that renting is the only possibility, you do have time and choices. We are just a phone call away from a free 15-minute consult to provide you with the necessary information to determine your capabilities in purchasing.
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 39 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S). For a “FREE” 15 minute consultation, a value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.