Wizbits From Dad

Whether you rent, or whether you buy, you pay for the space you occupy!

Over the years, Dad has invested in a lot of real estate. Most of which, he wishes he’d kept, but sold right before it took off in value. While I was still living at home, we moved a number of times. We lived in the same house until I was four years old, then moved to Sheffield, Alabama. There, we lived in six different houses before I left for college. Each time we moved, Mother and Dad would try to find something that was more suitable, larger (as the family grew… I have three brothers), better situated, etc. I’m sure he rented at first to find out where we wanted to live, but eventually he would buy a house and keep it for a while, then sell it to move to a larger or better one.

Dad also had a lot of business real estate. He still has some. We had a number of businesses over the years. Each one unique in its needs. Sometimes, he would rent, other times he would buy. But whenever feasible, he would try to buy the property we used in order to grow equity. As I asked him how he decided, and why buy instead of rent, he would tell me: “Whether your rent, or Whether you buy, you PAY for the space you occupy!”

This is still true. Always will be. If you rent from a landlord, you are, in effect, paying his/her payment for them, sometimes a little extra as well. This allows them to finance the property, keep up with repairs, and still show a profit because they also get to deduct the interest on their loan and any costs, plus depreciation. They can actually get a positive cash flow and pay less taxes. It’s good for them.

Sometimes rentals make sense. If you need to find out if you’re in a good location or not, if you’re new to an area, if you’re not sure the business will survive a few years, rental makes great sense. Other times, buying makes more sense.

When you buy, you are building the equity. You make the payment, you get to deduct the interest (for now at least), and one day, perhaps you can sell it and make a lot of money. But you pay the same or a little more for this privilege. Not everyone can do it, but if you can, it makes good sense.

At the time of this writing, there are a number of problems in the real estate market. As a result of the economy, real estate has gone through a crash of sorts and many people have ended up losing their homes in the process. For many years, it has been well established that owning your own home is one of the best ways to save and invest. In fact, for most Americans, that is the only savings they have. It seems that it has always been the best thing you could do for yourself and your family to provide future financial stability. However, in light of recent events, that may no longer be the right decision for all people. For some, during economic downturns, your best bet may well be to rent until things settle and save up for a time when buying makes more sense.

Even in light of the current situation, this wizbit is no less true.