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Which is Better: Renting or Owning?

You’re moving. You’ve found greener pastures, and are looking forward—a little excitedly, a little nervously—to your new surroundings. You’ll be asking a lot of questions during this time. One of the biggest is, where will you live? To be a little more specific, should you rent or buy?

Here are some questions to ask yourself as you’re weighing your options:[i]

  • Can you afford to buy a house right now? How much money do you have saved?
  • How long do you plan on staying in the area?
  • Are you looking to settle down or do you want the flexibility to travel or move frequently?
  • Are you handy? Are you inclined or willing to do home repairs or renovations?
  • What are your goals involving your career and your family?

What are the advantages of renting? What are the benefits of owning? Let’s explore both sides.

Here are reasons why renting is good:[ii]

  • As a renter, you may have fewer maintenance costs and repair bills. If something that is part of the rental property breaks, it may be the landlord’s responsibility to fix it.
  • You may have access to amenities, such as swimming pools or fitness centers, that may cost homeowners bundles.
  • The taxman doesn’t cometh. You won’t get a property tax bill.
  • A tough housing market may spell bad news for homeowners, but renters are mostly immune to shifts in the real estate market.
  • You can jump ship relatively quickly as a renter and move elsewhere. You’re responsible for selling your home if you want to downsize or move. If you’re not committed to living in one spot for at least three years, renting may be your best choice.[iii]
  • If you fall into dire financial straits, you’re not saddled with a hefty mortgage.
  • As a renter, you don’t have homeowner’s insurance, you have renter’s insurance that is usually relatively inexpensive.
  • Apartment renters usually have lower utility costs.

Here are reasons why owning a home is good:[iv]

  • Owning a home is generally a good investment. If you own your home for many years, it may increase in value.
  • You’re able to create equity. Equity is the difference between what you owe and your home value. With each payment, you build equity. With your house, you can borrow against your home’s equity to meet other financial needs.
  • You may be able to reduce the amount of income taxes you may owe. Federal rules may allow you to deduct mortgage interest. Tax law has changed so you should consult with a professional tax preparer to learn more.[v] You may be able to deduct more during the early years of your mortgage with higher portions of your monthly payment going to interest.
  • Making consistent, on-time mortgage payments builds your credit history and may bolster your credit score. Lenders view you as a responsible borrower with a lower-default risk.
  • You have the freedom to decorate or renovate your home as you envision. You can paint your walls whatever color you want. You can knock down walls, redo floors, lay new carpeting, and design your home to fit your tastes or personality—without seeking permission from a landlord.

As you weigh your options, you can use rent-versus-buy calculators to determine your best financial options. The calculators request you plug in specific information: zip code, target monthly rent, target home price, and available home price. The calculator then shows you which is less expensive, buying or renting. Go to https://www.trulia.com/rent_vs_buy/ for a sample calculator.

Bankrate asks you a series of questions to help you determine your best choice financially. These questions include:

  • How much of a down payment are you able to make?
  • How much debt do you have?
  • What percentage of a home’s value would you be willing or able to make as a down payment?
  • What is your credit history?
  • How long do you plan to stay in your new home?
  • What are the average home prices in the area you’re considering?
  • Do you plan to itemize your mortgage interest?
  • What is the state of your budget?

To learn more, go to https://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx.

We can guide you in making the tough financial decisions. Working with an independent financial professional can help you build a strategy for the pursuit of your future goals.

Contact us today at 800.929.1001 to learn more or visit our website!

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.bankrate.com/mortgage/renting-vs-buying-a-home/

[ii] https://www.investopedia.com/financial-edge/1112/reasons-renting-is-better-than-buying.aspx

[iii] http://time.com/money/collection-post/2792045/rent-or-buy-my-home/

[iv] https://www.discover.com/home-loans/articles/advantages-of-homeownership

[v] https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law

What Would You Like Your Retirement to Look Like?

 

You’re on a beautiful golf course. It’s a sunny afternoon. Once you finish the 18th hole, you’re on your way to meet with friends for lunch at the new restaurant on the corner.

Perhaps you prefer putting your life skills to work by volunteering at a charity or maybe working part time at the local home supply store.

‘Tis retirement. You decide how you spend your leisure.

You’re no longer constrained by the demands of a job or a work routine. You set your own schedule. You choose how you’ll spend your day. Those long years of employment are over, and you’re setting sail for your golden years, on your own terms.

Questions and concerns about retirement

While the scenes described above appear idyllic, they do require preparation and planning.

How do you envision your retirement? What do you want it to look like? And, most important, what do you plan to do, and what kind of retirement strategy will you implement during your working years to pursue your retirement goals?

Those are some of the questions you should ask yourself. In the years prior to retiring, you should begin painting that picture. You’ll have to compare and contrast your retirement dreams with your financial ability to sustain a comfortable lifestyle.

Here are additional questions to consider as you shape your financial strategy:

How long do you want to keep working full time? Are you interested in taking part-time work once retired? If so, do you want to pursue something in your current profession or try something new?

Once you’re retired, with or without a part-time job or doing charity work, what types of hobbies or activities do you wish to do?

How do you want to spend most of your time? If you’re so inclined, plot out your typical day of retirement.

Sometimes planning for retirement and being retired can feel like work. But the “work” is necessary. After all, you can probably expect to live nearly another two decades[i] or more, according to estimates.

Are you healthy?

As you dig deeper into developing your plan, consider these questions: Are you healthy? What do your genetics reveal about your longevity? Does your family line have predispositions or tendencies to certain conditions (heart disease, cancer, diabetes)? In other words, what do you think is your projected lifespan, and how do you expect to maintain an active lifestyle during those years?

As you start laying out your retirement plan, you also have to assess your financial condition. The federal government requires seniors to make minimum withdrawals (required minimum distributions) from certain accounts, including your IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts at the age of 70 ½.[ii]

Basically, you have to look well into the future—sometimes as much as 35 years or more depending on your health and lifestyle—in determining your budget. To oversimplify it, how can you make your retirement savings stretch across several decades or so of retirement? Your investments have the potential to continue generating interest income over your retirement.

Don’t forget your health maintenance. Medical expenses, which may include long-term care, in the later years of retirement must be factored into the equation. Some estimates put health and medical costs for a retired couple at $280,000.[iii]

Shifting gears

The shift from work to retirement can feel jarring. Some people ease into it while others take the leap. After retiring, some retirees, still healthy and active, work part time to keep income at a comfortable level.

Delaying taking Social Security allows retirees to increase their benefits by about 8% per year after their full retirement age to a maximum of about 125% of your full retirement age amount.[iv]

Consult with a financial professional to help you wade through the financial morass of retirement preparations. Financial professionals have the tools, the resources, and the experience to help you develop the most productive retirement plan to suit your needs.

If you’d like more information about your financial options or to learn more about your financial needs, we’re happy to help. Call CapSouth at 800.929.1001 or visit our website.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.forbes.com/sites/wadepfau/2016/08/25/how-long-can-retirees-expect-to-live-once-they-hit-65/#72e7700b6b4f

[ii] https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions

[iii] http://time.com/money/5246882/heres-how-much-the-average-couple-will-spend-on-health-care-costs-in-retirement/

[iv] https://www.ssa.gov/OACT/quickcalc/early_late.html

IRS Provides Resources to Help Small Businesses with Taxes

The IRS offers small business leaders helpful information on taxes. Last year’s Tax Cuts and Jobs Act may have helped bolster revenue for many businesses, but understanding tax reform can be challenging.

Many small business owners may be able to take advantage of new 20% tax deductions on their qualified business income. To learn more, go to https://www.irs.gov/tax-reform.

The agency also provides detailed information on technical aspects of the tax law. The Tax Reform Guidance page provides a list of guides.

The drop-down articles provide some easy links to information and the Frequently Asked Questions answers common tax questions: https://www.irs.gov/newsroom/tax-reform-resources.

Publication 15, Circular E, Employer’s Tax Guide provides a more in-depth overview of employers’ tax responsibilities.

Tax Reform News has links to news articles and fact sheets about tax laws.

Other details may apply, and you can find more information on the IRS website.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

To learn more about CapSouth Wealth Management, click here.

Tip adapted from the IRS.gov[I]

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.irs.gov/newsroom/irs-resources-can-help-small-businesses-better-understand-how-tax-reform-affects-their-bottom-line

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