I am currently in the process of evicting my tenants.
They make too much noise at night, leave the house and yard in disarray and have not paid rent for months. Last weekend my neighbor caught them naked on the roof deck, napping lazily and taking in the view.
What’s wrong with that, you ask? Well, I don’t have a roof deck. In fact, I don’t even own any rental property.
My tenants, Leonard, Sheldon, Howard and Raj, are a family of raccoons that appear to have taken up residence in my chimney. In real estate parlance that’s called adverse possession or more colloquially, squatting.
I’m not suggesting this as a way to find a residence, mind you, but I do know that many people in our area are trying to decide between remaining a tenant and becoming a homeowner.
Whether it’s for sale or for rent, housing in D.C. is some of the most expensive in the country. The Greater Capital Area Association of Realtors reports that as of June 2013, the average sales price was $706,000 for a house and $450,000 for a condominium or cooperative. The average rent during that time ran from $1,800 per month for a small, garden condo to more than $4,500 for a detached home.
So what should you do? First, think about your career and lifestyle, what you want to embrace and what you want to change. Then, consult with an accountant, tax adviser, and/or mortgage lender to learn more about how your finances will be affected by renting or buying. The more information you are armed with, the easier your decision will be, so here are some items for consideration.
Mobility vs. Stability: Is your job or other reason for being here temporary? Do you need to be able to make a quick move for that next promotion?
If you do not plan to be in the area for at least two years then renting might be the best option. In general, your home must appreciate by 8-10 percent for you to sell and get back the money you invested to buy it. If you are settling in, though, buy now while homes continue to appreciate.
Credit & Finances: Do you need to repair your credit after a short sale, foreclosure, or spending spree? Do you have enough money for a downpayment and closing costs?
If your credit score is too low or you have negative information still on your credit report from previous home ownership, renting may be your only option. If lack of funds is what’s stopping you from buying, be sure to check with a mortgage lender for the amount you will truly need. You might be surprised. In addition, see if you meet the qualifications for some of D.C.’s low to moderate-income buyer programs or consolidate any remaining student loans at a lower interest rate to reduce your monthly debt.
On the other hand, if you have a high salary and Uncle Sam pays you a very expensive visit on April 15 each year, get thee to a Realtor and purchase a home before interest rates and prices rise further, so you can take advantage of housing-related and perhaps other tax deductions.
Enjoyment: Do you know your way around D.C. and where you want to live? Do you want to be creative with your personal space?
If you are new to the area and want to get a feel for it, renting can be a good way to do so. If, however, you want to paint the walls purple, rip out the carpet, improve the floor plan, or create a landscape to die for, buying a home will allow you to do all that and more. Upon consultation with the Architectural Committee, even a condo or co-op will allow for more personalization of your space than a landlord will.
Bridging the Gap: Here’s the secret. If you find a house, condo, or co-op for rent that you think you would like to buy but you need more time, money or motivation to do so, then go ahead and rent it. The D.C. Tenant Opportunity to Purchase Act (TOPA) automatically grants the first right of refusal to purchase to the existing tenant(s), so by default you will have a lease with option to buy at the market price when the landlord or lady does decide to sell.
In the meantime, you’ll find me on the roof deck with the guys. Just holler, “Penny!” and I’ll come right down.
Valerie M. Blake can be reached at 202-246-8602 or at Valerie@DCHomeQuest.com. Prudential PenFed Realty is an independently owned and operated broker member of BRER Affiliates, Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.
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