We Are Refinancing Our Home. Original Purchase Deed Titled, &Quot;John: Fill & Download for Free

As you did not specify the time period during your mortgage payment, I will assume that you have already paid off your mortgage and need info on the documents that you should receive. Please find below the different scenarios. thanks for your questionhttps://www.sapling.com/How to Look for Public Mortgage RecordsBy: Madison GarciaKnowing how large a mortgage an owner took out on a home can give you a tactical advantage during the bidding process. Unfortunately, a real estate listing rarely will tell you that. Multiple listing services, such as Zillow, Trulia, and Redfin, pull some information from public property records, but normally don't show existing mortgage details. If you want more information, obtain a copy of the mortgage record from the county office where the property is located.Public RecordsAfter a home sale, the security instrument -- either a mortgage or a deed of trust -- is filed and maintained by the county recorder, register or clerk. Along with identifying the borrower, the lender and the original loan amount, public property records detail property ownership history, maps of the property, a record of sales listings and historical tax assessment information. Records also note the assessed property value, the property square footage and the number of rooms the dwelling provides.Request the DocumentsSince mortgage records are public documents, you're free to inspect the records or request a copy. To obtain the mortgage record, contact the county recorder office with the full street address of the property. You can look at public records in person at a district office during normal business hours. You also can order copies by mail by phone. Some counties maintain an online index of property records and allow you to place orders through the county website.Although the information you get through county public records is thorough, it may not always be up to date. RealEstateABC estimates that public records are always outdated by at least 6 to 8 weeks.Pay the FeesIt's free to inspect mortgage records but you'll be charged to obtain a copy. Fees for copies of property records vary by county but expect to pay between $5 and $15 for a full set. For example, Placer County, California charges $2 for the first page of non-certified copies and $1 for each additional page. Los Angeles County offers certified copies for $6 for the first page and $3 for extra pages.What documents do you get when you pay off your mortgage?Once you pay off your loan, the release of lien tells the world your property is no longer encumbered by that lien. To summarize, you need to get back your original note, mortgage, the release document and final statement from the lender showing your loan paid in full. That should be it. Apr 26, 2013How to Find Old Mortgage Loan RecordsBy Ilyce Glink| July 12th, 2019How to find old mortgage loan records? This homeowner wants to find proof of old mortgage payments made before they refinanced and modified their loan.Q: I purchased my home back in 2004 and got a mortgage with a lender that has since been purchased by one of the huge banks. I made all of my payments owed to the original lender and then also made extra payments on the loan.In 2005, I lost my job, filed for bankruptcy and refinanced my loan with the original lender. They refinanced us with an adjustable-rate loan that was then sold off to the bank that wound up buying them. Several years later, I was finally able to get a loan modification.Our mortgage is now serviced by a different loan servicer. This service only has records going back to 2005 and not 2004. How would I prove the payments I made against the loan back in 2004? I was told by the banks that I should shred all old documents as they are no longer valid. I did that. So, what are my options now?What to Do When Mortgage Loan Records Are LostA: The issues of what happens when records are lost is an important one. Let’s start with the questions on keeping old records. We’ve frequently told our readers that they can toss out their financial records after seven years. Even so, there are some records you should keep forever, including certain financial documents, deeds to property, stock certificates, and others.So, don’t just toss all boxes dated from the year 2011 or before. Instead, go through the box and see if there’s anything important in there. Given today’s technology, you can easily scan any documents and keep an electronic copy. Again, original stock certificates, original title documents to cars and boats and items like that should be kept forever.What Documents Do I Get After Paying Off My Mortgage?By Ilyce Glink| April 26th, 2013What documents do I get after paying off my mortgage? These are the documents you should receive from your lender after paying off your mortgage.We are close to paying off our home mortgage and would like to know the documents that we will receive from the mortgage company once we finish paying off our mortgage.Our loan was recently transferred to a new servicing company that we are not familiar with. This new company does not have the same level of service or rapport with us as customers. We want to receive all the appropriate documents (especially if they are required by law) to show that we own the property free and clear.What Documents Do I Get After Paying Off My Mortgage?When you pay off your loan and you no longer have a balance with the lender, the lender should automatically show your account as having no balance. You’d assume that as a given, but you need to distinguish between different kinds of mortgage loans.If your loan is the standard 15-year or 30-year fixed-rate mortgage, your lender should send you a letter telling you that you’ve paid your mortgage in full. The lender should enclose the original note and mortgage you signed many years ago. Each of those documents may be stamped “canceled” by the lender. (Some of our readers actually frame their canceled mortgage document!)The note you signed some time ago is an instrument that gives the holder the right to collect money under the loan. One lender may transfer that note to another lender. Each subsequent lender can rely on the note to claim payment from you. Think of your note as a check that’s written to a friend. The friend doesn’t cash the check but endorses it over to a different person. At some point, the holder of that check may want the money owed under the check.Because the note you signed is a legal instrument, you want to get it back and see that it has been canceled.But if you have an equity line of credit – a loan against which you can borrow, repay and borrow again – the lender knows you can withdraw funds in the future, on-demand. If this is the kind of loan you’re asking about, you won’t get anything from the lender unless you tell the lender that you want to close the loan and terminate the arrangement where you can borrow additional funds.How It Works When You Have an Equity Line of CreditOnce you terminate an equity line of credit or if the term ends and you have no balance on it, you’d expect to get the canceled note and mortgage back from the lender.So if your loan has come to an end and you’ve paid it off in full, and you’ve received from the lender your canceled note and mortgage, you still need the lender to release the lien it had on your property. In some states, your lender may send that release document straight to the office that records or files property documents where you live. That document may be called a “Mortgage Release,” “Release of Deed of Trust,” or maybe referred to by some other similar name. You could then check with your local recorder of deeds office to see if the release has been filed.When you took out your mortgage, your lender had a lien placed on your home to have your home serve as security in case you failed to make payments under your loan. Once you pay off your loan, the release of lien tells the world your property is no longer encumbered by that lien.To summarize, you need to get back your original note, mortgage, the release document and final statement from the lender showing your loan paid in full. That should be it. With those documents, you should have enough to have comfort that you’re done with the lender.Update Homeowners’ Insurance to Remove Lender’s NamePlease remember to contact your homeowner’s insurance company to have them remove your lender’s name as an additional insured on your policy. Now that your loan is paid in full and doesn’t have a lender, you don’t want to deal with that lender in the future if you suffer a loss on your home and make a claim with the insurance company.Also, some lenders have become quite slow in returning the note and mortgage back to their borrowers. If you don’t get these documents back, but the lender does release the lien and you have a statement from the bank showing that your loan balance is zero, you should be fine.While it would be great to have the original documents, a quick check of your credit at AnnualCreditReport.com should show that your lender has reported that the balance outstanding on your loan is now zero.A final wrinkle: if the release is sent to you directly by the lender, you must take that document to your local recorder of deeds office or another office where real estate documents are filed and record or file that document. Once you do that, your property will then show that the lien of the lender has been released.

I wrote this article some time ago:Don't Insure for the Mortgage Amount (Regardless of What the Bank Says)Author: Bill WilsonEvery agency has experienced this to one degree or another: A client buys a house and the replacement cost of the dwelling is considerably less than the mortgage amount. The insurer refuses to issue a policy with a Coverage A amount greater than the replacement cost, but the lender insists on a policy limit equal to the mortgage amount.Here's a typical situation:"We need your help! We're getting beat up by lenders insisting that we insure a home for the loan amount rather than replacement value. In our area, selling price values are soaring but replacement values are steady. People are refinancing with lower interest rates, starting a vicious battle between the loan officer (representing the lender) and us (representing the insurance company)."Here lies the problem: the loan officer will absolutely accept nothing short of the loan amount and they become angry and very threatening if we don't do exactly as they demand. The insurance companies demand some type of proof as to why we are requesting an increase (and a refinance is not the reason)."A typical situation is as follows: The bank faxes our office a request to change the mortgage clause and increase coverage to the loan amount. We respond that we need an appraisal showing replacement value from them to increase coverage. They normally supply an appraisal which agrees with our current coverage. We then advise them that we cannot increase coverage as we currently insure at replacement value and that their appraisal agrees. Now the trouble starts. We normally receive multiple calls from the loan officer calling us illegal, unprofessional, not serving our client, threatening to take the business away from us, and on and on. The calls start at the CSR level, then move up to the personal lines manager, and sometimes moves up to me, the owner, with each one of us explaining the same thing."This problem is only getting worse and I'm afraid it could get a lot worse. I'm concerned that banks will use this issue as leverage to rewrite our policies into their markets."I contacted the local insurance department office and he advised I could lodge an individual complaint on each situation with them. We're getting about 7 to 8 requests per day of which 1 or 2 can get real ugly."The lender's position is understandable, but misguided. Clearly, they want to protect their investment. That investment consists of two components: (1) the real estate (land, home, outbuildings, etc.), and (2) the loan itself. Insurance is the mechanism designed to protect against the pure risk of loss to the real property. However, the loan itself is a speculative business risk...that's not the function of insurance.As an example, let's say the purchase price and loan amount for a home is $200,000...for the sake of simplicity, we'll forget about any down payment. This $200,000 represents market value, not insurable value. The cost to rebuild the home itself might be $140,000, with the $60,000 balance being the value of the land and other structures. The purchase price includes the value of land, all structures, and even other property that may not be covered by a homeowners policy.The purchase price may also include the "value" of the location. I once looked at two new homes, both built from the same floor plan by the same contractor. The asking price for one of the homes was 50% higher than the other based SOLELY on the location of the home in a "preferred" neighborhood. The cost to rebuild the homes would be virtually identical.Under a homeowners policy, the insurance company would never pay more than $140,000 if the home was completely destroyed unless required to by a state's valued policy law (which is another reason for not insuring the loan amount). There has been no damage to the land or the "location value" (or at least the policy isn't going to pay that amount), so it would largely be pointless to insure the property for more than the structural replacement costs.It does not serve the bank's interest in any way to be the mortgagee on a policy with a policy limit equal to the loan amount because neither the insured nor the bank will ever collect that amount. The policy will only pay an amount based on the valuation method included in the contract. Again, this is the case if no valued policy law applies...if it does, then the insured could actually profit from the loss by insuring the loan amount rather than the replacement cost of the property. This would violate one of the fundamental tenets of insurance and, conceivably, could create a moral hazard.If an insurance company issues a replacement cost (or, worse, an ACV) policy with a limit greater than the actual cost to repair or replace, they may be in violation of the insurance laws in most states. I'm pretty sure all states require that rates/premiums be adequate, not excessive, and not unfairly discriminatory. What these banks are asking is that the insurance company issue a policy with an excessive premium (payment for coverage the insured can never collect without a total loss and triggering of a valued policy law, which has a likelihood of maybe 1-3%) and that's probably illegal.For example, TENNESSEE has an "Unfair Competition and Deceptive Practices" statute regarding loan amounts that exceed the value of a building or structure:"Lenders of money - Extenders of credit."(a) No person who lends money or extends credit may:"(8) Require, in connection with a loan or extension of credit secured by real property, that the debtor procure insurance for the protection of the property for an amount that exceeds the replacement cost of the structures existing on the secured property at the time of the loan or extension of credit or, in the case of a construction or improvement loan, insurance which exceeds the value the structures are expected to have upon completion of the construction or improvements."This law was enacted by an initiative of IIABA's state affiliate, the Insurors of Tennessee, in response to the situation described above.So, as you can see, a lender should not be permitted to demand an insurance limit that exceeds the value of the property insured as defined by the insurance contract. The insured or lender should never receive more than the actual value of the damaged property. In addition, "over-insuring" the property could be illegal, by statute or contract.Note: For another excellent article on this subject, and specific to FLORIDA law, check out Insuring for the Mortgage Amount on the Florida Association of Insurance Agents web site. As the article explains, Florida Administrative Code prohibits a mortgage lender from requiring insurance in an amount that exceeds the replacement cost of the home:"4-167.009 Mortgage Fire Insurance Requirements LimitedNo mortgage lender shall, in connection with any application for a mortgage loan in this state which is secured by a mortgage on residential real estate located in this state, require any prospective mortgagor to obtain by purchase or otherwise a fire insurance policy in excess of the replacement value of the covered premises as a condition for granting such a mortgage."Another state that has responded to this situation via insurance department directive is GEORGIA. According to Georgia Directive 98-PC-1, Establishment of Property Values and Corresponding Insurance Amounts on Mortgaged Properties Insured in Georgia (June 26, 1998):"Land values may not be included in the computation when determining the amount of appropriate homeowners insurance because homeowners insurance does not insure the land on which the home is located. Therefore, such activities are in violation of O.C.G.A. 33-6-5(6)(A) which provides as follows: 'No person shall knowingly collect any sum as premium or charge for insurance, which insurance is not then provided or not in due course to be provided subject to acceptance of the risk by the insurer by an insurance policy issue by an insurer as permitted by this title.'"The directive goes on to say that agents engaged in this practice can be fined from $1,000-$5,000 for each act and/or have his licensed suspended, revoked or placed on probation. Any insurer in violation of the law may have its certificate of authority suspended, revoked or placed on probation.Following the publication of this article, we heard from several other states who have similar "over insurance" laws besides Florida, Georgia, and Tennessee...below is a summary listing of the other states we're aware of with "over insurance" prohibitions.ArizonaARS 44-1208. Loans secured by real estate; prohibited practices; insurance. Except for consumer lender loans regulated pursuant to section 6-636, for any loan that is secured by real property, a person shall not require as a condition of the loan that the borrower obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer.[Note: The statute covers only real property (not mobile homes) and does not include commercial buildings. For more information, go to: http://www.azleg.state.az.us/ars/44/01208.htm]CaliforniaCalifornia Civil Code § 2955.5 says, in part:(a) No lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real property, to provide hazard insurance coverage against risks to the improvements on that real property in an amount exceeding the replacement value of the improvements on the property.(b) A lender shall disclose to a borrower, in writing, the contents of subdivision (a), as soon as practicable, but before execution of any note or security documents.(c) Any person harmed by a violation of this section shall be entitled to obtain injunctive relief and may recover damages and reasonable attorney's fees and costs.(d) A violation of this section does not affect the validity of the loan, note secured by a deed of trust, mortgage, or deed of trust.ConnecticutStatute 360-757 originated with public act PA 84-212 which prohibits a mortgage lender from requiring a prospective home buyer to obtain a fire insurance policy in excess of the home's replacement value, as a condition of granting a mortgage loan on residential property located in the state and secured by such a mortgage. The act was effective on October 1, 1984. On October 1, 2000, the statute was broadened by PA 00-95 to include flood insurance, extended coverage insurance, or any combination of insurance, including fire insurance.IllinoisPublic Act 093-1021 Effective August 24, 2004:Section 5. The mortgage Insurance Limitation and Notification Act is amended by adding Section 17 as follows:Sec. 17. Insurance coverage.(a) No lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real property, to provide hazard insurance coverage against risks to the improvements on that real property in an amount exceeding the replacement value of the improvements on the property.(b) Any person harmed by a violation of this Section shall be entitled to obtain injunctive relief and may recover damages and reasonable attorney's fees and costs.(c) A violation of this Section does not affect the validity of the loan, note secured by a deed of trust, mortgage, or deed of trust.MassachusettsGeneral Law, Chapter 183, Section 66 says, in part:A bank, lending institution, mortgage company or any mortgagee doing business in the commonwealth, when making a mortgage loan, shall not require, as a condition of a mortgage or as a term of a mortgage deed, that the mortgagor purchase casualty insurance on property which is the subject of the mortgage in an amount in excess of the replacement cost of the buildings or appurtenances on the mortgaged premises.MichiganMORTGAGE LENDING PRACTICES (EXCERPT)Act 135 of 1977445.1602a Property/casualty Insurance as condition to loan; limitation on amount required; amount as condition of sale, transfer, or assignment. [M.S.A. 23.1125(2a)]Sec. 2a. (1) Except as provided in subsection (2), a credit granting institution that requires a mortgagor to maintain property/casualty insurance as a condition to receiving a mortgage loan shall not require the amount of the property/casualty insurance to be greater than the replacement cost of the mortgaged building or buildings.(2) A credit granting institution may require an amount of property/casualty insurance that is required of the credit granting institution as a condition of a sale, transfer, or assignment of all or part of the mortgage to a third party. This subsection does not require that the credit granting institution anticipate a sale, transfer, or assignment at the time the mortgage loan is made.History: Add. 1995, Act 214, Imd. Eff. Nov. 29, 1995MontanaIn 2009, SB 375 amended MCA 32-1-430, 32-3-604, and 32-10-401 to provide that a “lender may not require insurance on improvements to real property in an amount that exceeds the reasonable replacement value of the improvements..”New HampshireRSA 417:4 printed 01-12-2006 from NH Insurance Dept websiteXVI. COERCION IN REQUIRING INSURANCE.(a) No creditor or lender engaged in the business of financing the purchase of real or personal property or of lending money on the security of real or personal property may require, as a condition to such financing or lending, or as a condition to the renewal or extension of any such loan or to the performance of any other act in connection with such financing or lending, that the purchaser or borrower, or the purchaser's or borrower's successors shall negotiate through a particular insurance company or companies, insurance agent or agents, broker or brokers, type of company or types of companies, any policy of insurance or renewal of a policy insuring such property. This provision does not prevent the exercise by any mortgagee of the right to approve on a reasonable nondiscriminatory basis only insurance companies authorized to do business in this state, selected by the borrower.(b) There shall be no interference either directly or indirectly with such borrower's, debtor's or purchaser's free choice of an agent and of an insurer which complies with the foregoing requirements, and the creditor or lender may not refuse the policy so tendered by the borrower, debtor or purchaser. Upon notice of any refusal of such tendered policy, the insurance commissioner shall order the creditor or lender to accept the tendered policy, if the commissioner determines that the refusal is not in accordance with the foregoing requirements of this subparagraph. Failure to comply with such an order of the insurance commissioner is a violation of this section.(c) Whenever the instrument requires that the purchaser, mortgagor, or borrower furnish insurance of any kind on real or personal property which is being conveyed or which is collateral security to a loan, the mortgagee or lender shall refrain from disclosing or using any and all such insurance information to its own advantage and to the detriment of either the borrower, purchaser, mortgagor, insurer, or company or agency complying with the requirements relating to insurance.(d) Notwithstanding any other law to the contrary, a creditor or lender of a loan secured by an interest in real property shall not require the borrower to keep the mortgaged property insured under a property insurance policy in a sum in excess of the value of the buildings on the real property.(e) Notwithstanding any other law to the contrary, no creditor or lender shall require as a condition to closing a loan that the borrower provide an original insurance policy at said closing; provided, however, that the creditor or lender may require the borrower to produce at closing a binder showing the borrower as a named insured and creditor or lender as mortgagee, and confirming that insurance has been issued, is in force, and will remain in full force until a copy of the final policy is delivered to the creditor or lender or until the creditor or lender has received notice of cancellation in accordance with the policy conditions.(f) No insurer may automatically write insurance on a debtor who has contracted credit based on the principle that the insurance is applicable unless specifically rejected by the debtor, unless the premium or such other identifiable charge as may be applicable is paid in full by the creditor.New JerseyNJAC 3:1-13.1Insurance tie-in prohibition(c) No lender shall, in connection with any application for a loan secured by a mortgage on real property located in New Jersey, require any mortgagor to obtain by purchase or otherwise a fire insurance policy in excess of the replacement value of the covered premises as permitted under N.J.S.A. 17:36-5.19 as a condition for granting such mortgage loan.New York3 NYCRR 38.9 Limitation on excess insurance and required disclosures(a) Limitation on excess insurance.No mortgage banker or exempt organization shall require any mortgagor, in connection with the granting of a mortgage loan, to obtain a hazard insurance policy in excess of the replacement cost of the improvements on the property as a condition for the granting of such mortgage loan.North Carolina58-63-25 "Unfair methods of competition" or "unfair and deceptive acts or practices"The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance:(13) Overinsurance in Credit or Loan Transactions. In connection with a loan or extension of credit secured by real or personal property or both, requiring the applicant to procure property and casualty insurance against any one risk which results in coverage which exceeds the replacement value of the secured property at the time of the loan or extension of credit. In connection with a secured or unsecured loan or extension of credit, requiring the applicant to procure life or health insurance against any one risk which exceeds the amount of the loan. In connection with a loan secured by both real and personal property, requiring credit property insurance, as defined in G.S. 58-57-90, on the personal property. For the purposes of this subsection, "amount of loan" shall be deemed to be the amount of the principal and accrued interest to be paid by the debtor including other allowable charges.PennsylvaniaHere is a paper written by our Pennsylvania association on this issue relative to PA laws.Rhode IslandCHAPTER 27-5 - Fire Insurance Policies and Reserves - SECTION 27-5-3.2§ 27-5-3.2 Property insurance. No person, bank, or lending institution doing business in this state, whether acting under state or federal authority, which includes but is not limited to (1) a bank, savings bank, or trust company, as defined in this title, its affiliates or subsidiaries, (2) a bank holding company, as defined in 12 U.S.C. § 1841, its affiliates or subsidiaries, (3) mortgage companies, and (4) any other individual, corporation, partnership, or association authorized to take deposits and/or to make loans of money under the provisions of chapters 20, 21, 22, 23, 24, 25, 25.2, and 25.3 of title 19, making a mortgage loan, shall, as a condition of the mortgage or as a term of the mortgage deed, require that the mortgagor carry property insurance on the property which is the subject of the mortgage in excess of the replacement cost of any buildings or appurtenances subject to the mortgage; provided, that if a mortgage is sold, transferred, conveyed, or assigned, it shall be the responsibility of the holder of the mortgage to notify the insurance producer issuing the property insurance policy in writing of that sale, transfer, conveyance, or assignment. This notice shall be made in writing and shall be sent to the insurance producer within thirty (30) days of the sale, transfer, conveyance, or assignment by registered mail. In the event that the holder of a mortgage shall fail to notify the insurance producer who issued the property insurance policy that is in force, in writing, of that sale, transfer, conveyance, or assignment within thirty (30) days, the holder shall indemnify and hold the insurance producer harmless.VirginiaThe question posed was if a bank could force the consumer to have an insurance policy with the insured amount being the loan value even if this exceeds the value of the building. Under Virginia Banking code banks are not allowed to do this. The statutes does not reference personal or business loan so we would assume it applies to both.VA Code- 6.1-2.6:1. Fire insurance coverage under certain loans not to exceed replacement value of improvements.A. No lender shall require a borrower, as a condition to receiving or maintaining a loan secured by any mortgage or deed of trust, to provide or purchase property insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement value of the improvements on the real property.In this section, 'property insurance coverage' means insurance against losses or damages caused by perils that commonly are covered in insurance policies described with terms similar to 'standard fire' or 'standard fire with extended coverage.'In determining the replacement value of the improvements on any real property, the lender may:1. Accept the value placed on the improvements by the insurer; or2. Use the value placed on the improvements that is determined by the lender's appraisal of the real property.B. A violation of this section shall not affect the validity of the mortgage or deed of trust securing the loan."Wisconsin632.07  Prohibiting requiring property insurance in excess of replacement value. A lender may not require a borrower, as a condition of receiving or maintaining a loan secured by real property, to insure the property against risks to improvements on the real property in an amount that exceeds the replacement value or market value of the improvements, whichever is greater.For an example of a related article regarding flood insurance prohibitions on this practice, "Flood Insurance Mandatory Purchase Guidelines".Last Updated: May 17, 2014Source:https://www.independentagent.com/Education/VU/Education/VU/Insurance/Personal-Lines/Homeowners/Conditions/WilsonMortgageAmount.aspx

Don’t buy a house to live in if you live in a primary market (Seattle, CA, Hawaii)., Instead buy rentals in secondary markets like Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other tertiary markets.Sophisticated investors focus on the numbers… which require the Rent-to-Value Ratio of more than 1% is needed to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%.Home ownership is part of the American Dream. In the minds of many, psychologically and mentally, it represents security, stability, and financial independence. Renting has traditionally been seen as throwing money away, as many people also see homeownership as a financial investment in their future thanks to the popular belief that property will only ever rise in value, even if the recession of 2008 demonstrated otherwise.The reality is that allowing for inflation, house prices have increased by just 1% during the last century, representing an extremely poor return on investment, and one that has been easily outperformed by the stock markets and direct investment in businesses and hard assets. Research has shown that the net value of homeowners is, on average, 44 times greater than that of non-homeowners, however, it’s unclear whether this is a correlation or causation.So should you buy or rent? The truth is that there’s no ‘one size fits all’ answer to that question. Every individual has different circumstances that determine if buying or renting their home is best for their long-term financial prosperity. This guide is about you making the right financial decisions for you. It’ll examine the pros and cons of buying and renting, what you should take into account before making a decision, and the relative financial considerations of a mortgage versus rent.If you are a numbers guy here is the spreadsheet (Is a Home a Good Financial investment).Join the movement of high income earners who are renters (Rich and Renting: Understanding the Surge of High-Earning Renters - Rentonomics) cause they did the math and did what made sense.*I spent $300 dollars for an editor to get the grammar and spelling right on this article. I am sick and tired of seeing young families make this mistake.**What’s in this guide?**This guide will cover everything you need to consider about purchasing a home, renting, and purchasing a property to rent. This includes:* The advantages and disadvantages of renting* The advantages and disadvantages of buying* The costs associated with renting vs buying* Choosing a property* Taking on a home loan* Using your home to finance your future* Buying a property to rent* Useful resources**Financial freedom**Firstly, this guide is about helping you to achieve financial freedom. What the wealthy do to achieve security and optimize investment returns is not always conventional wisdom. When financial freedom is your goal, there are two simple principles to follow:1. Prioritize purchases/acquisitions that make you money2. If a purchase/acquisition doesn’t pay you and you are speculating on increasing home values, don’t do it.While this may seem black and white, sticking to these principles will again depend upon your individual circumstances. See the difference in how the poor, the middle-class, and the wealthy live financially:For some, buying will generate the most financial opportunities, for others it’ll be rentingHint: If you can’t save money to save your life then buying a home acts as a forced savings account, which will benefit you in the future.So let’s look at the case for each.Rent or buy? What to considerBefore going any further in this guide and considering whether buying or renting a home is the best option for you, there are a few important things you should bear in mind as you continue. These are:* Are you comfortable living with unknown and variable costs? Or prefer having your costs fixed?* Do you like to personalize your home, or are you happy to live with other people’s choices?* How much space do you really need? Do you really need 2,000 square feet and that 4th bedroom to raise a family or is that your ego’s need to *keep up with the Joneses* talking?* How much time and work are you prepared to put into the upkeep and maintenance?**Renting**Chances are that you’ve been told repeatedly that renting is like flushing water down the toilet. That you are paying money out each month and twenty years later you have nothing to show for.The wealthy do not believe this misnomer and see housing as just another line item in their personal finances.Our changing lifestyles mean that renting can be a sensible option for many people which can actually help you achieve your financial dreams.So what are the advantages of renting?**Flexibility and mobility**The biggest argument in favor of renting over buying is the flexibility and mobility it offers. If you have to – or want to – move regularly, then renting allows you to easily pick up and relocate. Equally, if you decide you don’t like the property/neighborhood after all, that your commute is too long, or that you want to get your kids into a better school district, you have the flexibility to do that. Remember, gone are the days where you stay a loyal employee for decades. Often many professionals need to be mobile to compete for the best positions and salaries. Many of my friends in IT and Tech report dusting off the resume after they have reached the 6-month employment milestone. Having geographical mobility is essential in competing for the best jobs.**Liquidity in difficult times**Renting can often be cheaper than buying. Some rents even include utilities, and when things break, it’s not your problem, call the landlord – it’s their problem! That means you have more available cash. Don’t forget that life is unpredictable and things change. Perhaps your income goes down, unexpected bills occur, your mom falls in the shower and can’t get up, or your deadbeat brother-in-law hears of the rental properties you are picking up and needs a place to hang out and join your family. The beauty of renting is that if your financial circumstances change, you have the option of moving to a cheaper property without too much difficulty instead of selling the home in a fire sale due out of distress.**Credit ratings**Not everyone has a perfect credit history. Experts estimate that around a third of all American adults have a credit score below 601 (How Many Americans Have Bad Credit?) and so are considered a poor or bad risk. This greatly reduces the likelihood of qualifying for a regular home loan, meaning that borrowers would have to pay higher interest rates on any borrowings. If you fall into this category, buying is unlikely to be worth the expense.Note: Don’t let real estate or lending brokers trick you into using the “scarcity tactic trick” where they say interest rates are at all-time lows! Buy now because it’s not getting any lower! Remember they get paid when you buy or originate a loan. Locking in a low-interest rate is a poor reason to go into a 30-year commitment for something you should not buy in the first place, even at a 0%.**Buyer’s remorse**A survey by *Trulia * (https://www.trulia.com/blog/trends/regrets-2017/)found that 44% of American homeowners had some form of buyer’s remorse, and around a fifth had actually been prevented from changing their situation because of making a mistake when purchasing a home. With renting, if you’re not happy, you’re free to move at the end of your lease. Paying a couple of dudes to move your stuff from time to time is pretty cheap in the grand scheme of things.**Local costs**If the area you live in has high property taxes, high insurance costs, or low rent-to-value ratios, then the math on renting makes sense. The rent on identical properties can vary hugely based simply because of their location, for example a $100,000 house might be leased for $500 a month in one town but $1,500 in another. Where rent to ratio values are low, renting is the savvier decision. Often primary markets such as San Francisco, Seattle, Los Angeles, New York, Washington DC, Honolulu, (are cool places to live but) have low rent to value ratios, as a result of too much wealth living there driving up the overall market. Investing in secondary and tertiary markets where the rent to value ratios are high means that the income more than supports the mortgage and expenses, for positive cashflow. Examples of these locations are Atlanta, San Antonio, Houston, Indianapolis, Birmingham, Memphis, or Kansas City. In these areas, it may make sense to buy a primary residence to live in.**The disadvantages of renting**Of course, while there are many advantages to renting, there are also drawbacks that can’t be ignored, and each individual needs to decide if the benefits outweigh the disadvantages.**Not feeling at home**Tenants are rarely allowed to decorate the property the way they would like. Decor is usually neutral and can feel clinical. Personalization is usually limited to putting up pictures and damage caused by doing so must be rectified before the tenant leaves. If personalization is important to you, then get over it… nah just kidding**Rent Increases**Rents usually rise annually. In some areas, rents increases are limited by local regulations. In most instances he landlord is free to increase it by as much as they like. In areas that are very popular, rent rises can be a significant increase to reflect increasing market demand.**Lack of security**While renting offers flexibility, it also lacks security. Your landlord might decide that they want to sell the property or have someone else live there. If you’re on a month to month lease, typically your landlord only needs to give 30-60 days’ notice.Moving residences costs money, and you’ll need to find a deposit plus up to two months’ rent in advance for a new property, alongside the fees listed below. And that’s all before your landlord returns your deposit.Tip: Building a relationship with your landlord could be invaluable. If you are renting a home in a primary market where the numbers don’t make sense, then chances are that you’re dealing with an amateur landlord. Often amateur landlords just want reliability and rent paid on time, as opposed to top dollar. You may be able to sign a longer rental agreement or just be given a further heads-up if the landlord is looking to make any moves with the property. They may need you more than you need them so try to negotiate a lower rent by signing a longer rent or a fair rent escalation factor.**Lack of tax breaks**Homeowners brag about claiming extra tax write offs on their mortgage interest against their tax bill. This is true that tenants can’t claim anything against their rent but this argument is a very weak one and likely dogma created by brokers to motivate you to create more transactional commissions.Spending 100 dollars’ interest to deduct it on your taxes is actually one of the dumbest pieces of financial advice I have ever heard. They’re basically telling you to incur expenses to save a fraction of it. The tax benefits that you get as a real estate investor will blow the mortgage interest tax deduction out of the water due to taking other expenses as and operational business, depreciation, and not to mention the overwhelming greater return on investment if you bought a rental property than buying a primary residence to live in. And if you have seen the 2018 new tax laws it’s just a matter of time until the tax deduction for the regular person is going to be phased out. The middle-class just can’t catch a break!**Additional costs**Taking out a new lease incurs a number of costs. These can vary with state and your circumstances, but typically include:* **Broker’s fee**: whether or not you need a broker will depend on where you want to live. In many big cities, landlords or property managers frequently won’t consider any applications that haven’t come through a broker. Typical fees vary between one month’s rent and 15% of the total annual rent. However, this is not the case in most circumstances but I’m just trying to be a good journalist here.* **Application fee**: this covers the cost for credit and criminal background checks. Usually cost between $35-75 per person.* **Security deposit**: we’ve already mentioned this, and it’s generally set at one or two months’ rent. However, some property types, especially condominiums, charge a move-in fee as well. This covers the charge of updating mailboxes, reprogramming buzzers, etc. This can range from $100-$200.Based on a $1,000 monthly rent:**Fee type****Minimum****Maximum**Broker’s fee$1000$1800Application fee$35$75Security deposit$1000$2000Move-in fee$100$200**Total****$2135****$4200****What about my furry friend?**Many rentals will charge a cleaning fee or surcharge for a pet. Due to people abusing the “service animal” loophole this is usually at the landlord’s discretion. However, more and more people are single or don’t have a roommate, landlords are becoming more accepting of our four legged friends. In fact, many landlords including myself see your pet ownership as a sign that you are more of a dependable long term tenant – minus the crazy cat lady/man with more than 3 cats.**But my spouse wants to buy our own home?**If you are in a Primary market the prevailing market rent to value ratios under 1% usually means that if you rent you will be able to live in a much nicer home than if you bought, assuming you had the same PITI mortgage payment.Say you are looking at a $1,600 mortgage on a $350,000 home (typical 20% down payment). Now consider taking that same $1,600 monthly payment you will be amazed that you would be able to live in a nicer home. This does not even take into account the hidden costs of homeownership that we will talk about in a bit – and you can dive into the numbers with the accompanying spreadsheet (Is a Home a Good Financial investment).And by the way, have you ever driven a rental car? It’s a lot more fun when you are not worried about a dent or paint chip here or there.**Purchasing a home**Now we’ve looked at the pros and cons of renting, we’ll do the same for purchasing a home or property, what to consider when taking out a mortgage, and how your home could be used to finance purchasing a property to rent.Supersize me “homeowner style”Average sizes of homes have increased according to the U.S. Census Bureau. In 1973 the average home was 1,525 sq. ft. Today that number approaches 2,500 sq. ft. That’s almost a 64% increase in square footage on the average home!Despite the average family size decreasing from 2.9 persons per household in 1973 to 2.5 persons today, kitchens have doubled in size in those 4 decades along with the average ceiling height in a home rising by more than a foot. But more space in a home ultimately means more space for “things” and the increase in maintenance costs. Add to the mix cheaper and faster construction methods and you have the beginnings of a bubble.The graph below illustrates Robert Shiller’s data. Shiller, a Yale University Economics Professor, shows how housing prices have changed over time using an arbitrary starting point of 100 adjusting for inflation.**Difference between a home and a property**This might seem like a strange concept, but there is a difference between a home and a property. Why? A home is somewhere you live, where you invest emotionally as well financially. It’s your anchor. A property can be anything from a piece of land to a luxury penthouse, but where you don’t intend to live and is purchased as an investment.Buying a home is a huge commitment. No-one can argue with that. While home ownership is usually associated with stability and security to many, that stability and security can be a double edge sword become if your circumstances change.When our parents and grandparents bought their homes, they probably expected to stay in the same area, near their families, working for the same employer for most of their life. If they wanted a new job, chances were that they’d find one in the same area. People didn’t often move away from their roots.Employment trends have changed where very few jobs are for life anymore. And many people – especially professionals – find themselves looking further afield for work. Perhaps the perfect job is on the other side of the country. What do you do? Being tied into owning a home can restrict where you can work and, therefore, your earning potential.Homeownership also ties up your cashflow, and the more expensive your property, the more that’s true.The biggest mistake I see young couples make is not having a personal balance sheet that has a net positive cashflow. This cashflow is the oxygen for investing and learning about investing. Along with just plain overspending, buying a house is the biggest cashflow suck in the middle-classes’ budget.For an analysis of the opportunity costs – check out the accompaniment spreadsheet that outlines the numbers.**The Big Questions**Before deciding to purchase your home, you need to understand what your priorities are. Without understanding these, you could easily make a costly mistake. Let’s call these The Big Questions, and they are:* What do you want your financial situation to be in five or ten years’ time? What would your desired savings be? Are those savings realistic and achievable if you purchase a home?* What space do you consider essential? How much do you own? Are you willing to downsize and declutter if necessary? Are you someone who likes to be able to get away from the other people in the house and have your own space? Would you be prepared put your ego aside to live with a smaller home if this gives you financial freedom?* How much time are you prepared to spend on renovation, repairs, and maintenance?* I know what you young parents are thinking… and I ask you do your kids really need a yard? They’re on their electronics all the time anyway. And with you taking that higher paid job to afford the mortgage they will never see you.**The advantages of homeowning*** Depending on the area, mortgage repayments *can *be lower than rent.* Unlike renting, where a landlord can decide not to renew your contract, you can live there as long as you like as long as you make your monthly payments and ever-increasing property taxes.* A fixed rate mortgage means that your costs are predictable.* The interest and property tax on the mortgage are tax deductible. Note: BS Flag!* For those who struggle to save, a home is a forced savings plan.* The value of the home *may** You have an asset you can sell or refinance if you need access to cash.**The disadvantages of home ownership*** It’s a very long-term financial commitment. How many of us can imagine where we’ll be in thirty years? 5 years even?* Mortgage payments may not be cheaper than renting. And purchasing a property requires a down payment plus considerable closing costs. Money today is more valuable than in the future especially if you can invest and make 10-20% per year.* Any maintenance and repairs are your responsibility. There’s no way to predict what might go wrong, and costs can add up.* Should you want or need to move, selling a home can take some time, making you less mobile.* The value of your home may fall, depending on the economy.* You can have terrible neighbors who start a side business selling Meth or, potentially more impactful, have the next door teenager start their own garage band.* If your life circumstances change, e.g. your wages fall and you can’t afford the mortgage, then you’re stuck in the situation until you’re able to sell.* Have you ever seen those scummy “buy your home for cash” ads? It works because everyday people run into problems and one day it might be you. (Sorry, that was a low-brow sales technique!)**The History of a Mortgage**Majority homeownership in the United States is mostly a recent phenomenon. Until the mid 1940’s, most Americans did not own their places of residence.Big banks and their activities could be argued to have been the catalyst for the “American Dream” of homeownership becoming the majority statistic post-1950. The National Bank Acts of the 1860’s kick-started this gradual change. US Treasury securities now backed the US National Currency and standardized practices of US national banks. And by the 1890’s, American banks saw the popularity of Mortgages rise.These early mortgages at the turn of the 1900s were in stark contrast to those that we see today. A typical homeowner in 1916 would pay up to 50% down with a 5-year interest-only-structure whereas a typical homeowner will save for 20% with the standard 30-year plan.Amortized interest front loads the fees and interest in the beginning of the terms and greatly advantages the bank instead of the homeowner. For more discussion on this phenomenon check out this webinar (https://simplepassivecashflow.com/home)on the topic to pay your mortgage off much faster with instead of simple interest.**What to consider when taking on a mortgage**The vast majority of people purchasing a property, whether it’s for their own use or to rent, will need a mortgage. A mortgage is a long-term commitment, typically thirty years in the USA. Fifteen years is the next most popular option. On average, most people now occupy the same home for around nine years (How Long Do Most Families Stay in Their Home?).Purchasing a home isn’t cheap. Lenders typically require a 20% down payment, which immediately reduces your available funds. You’re then tied into an ongoing financial commitment that reduces your cashflow for years to come. Even though the high level of competition in the mortgage market means that interest rates are generally competitive, mortgage payments are still a significant chunk of your income.If you are also a real estate investor looking for additional income be mindful that one of the biggest factor’s in getting a loan is the debt-to-income ratio. Having a large mortgage (loan) without the income coming in from your primary residence will greatly impact this ratio.**Fixed rate mortgages vs adjustable rate**We all know that interest rates vary. Most Americans opt for fixed interest mortgages, preferring to know what their costs will be for the foreseeable future. The downside is that any drop in rates can be taken advantage of only through refinancing, which incurs additional costs.While Adjustable Rate Mortgages (ARMs) are available, and often have lower interest rates initially, rates can rise dramatically if the economy changes, making them a higher risk. However, homeowners can always refinance.**Costs of taking out a mortgage**As mentioned above, there are a number of costs associated with securing a mortgage, which can become significant. Although they can vary depending on the state and municipality, these costs, typically are:* **Mortgage application fee**: around 1% of the total loan, payable on the application even if the loan isn’t approved. This is why it seems like everyone is trying to give you a loan because it’s really profitable to be a lending broker.* **Home appraisal charges**: even if you stay with the same lender, they may want to appraise your home to confirm the current market value. Charges vary between $225 and $700.* **Loan origination fees**: a charge applied by the lender for processing the loan, before the application is sent to the underwriter. Usually between 0.5% and 1%. The smaller the loan, the higher the percentage is likely to be as both require the same amount of work.* **Documents preparation fee**: a charge for preparing key documents, including the refinance mortgage, note, and truth-in-lending statements. Typically, $200-500.* **Title search fee**: before lending, the lender wants to check that the home’s title is free and clear of liens and encumbrances. It’s usually carried out by a separate company which will check court records, prior deeds, and property databases. Usually $700-900, which includes insurance to protect the borrower against any losses caused by legal issues relating to the search.* **Recording fee**: set by local or State government, these are the fees for recording the refinancing publicly. Varies between $25 and $250.* **Survey fee**: to ensure that the property boundaries are followed and are not being encroached on by adjacent properties. Usually between $175-300.* **Inspection fee**: not always necessary, but some lenders require an inspection of the home’s plumbing, electrical and HVAC systems and roofing, and check for potential infestation. $175-300.* **Attorney fees**: again, not always required, but some states require attorneys for both the borrower and lender to confirm that the closing documentation is correct. Typically, $500-1000* **Flood certification**: if a property is in a federally-designated flood zone, homeowners may be required to add flood or life of loan insurance coverage. Certification costs between $50-150.**Fess on a $100,000 mortgage:****Fee type****Minimum****Maximum**Application fee$1000$1000Home appraisal$225$700Loan origination fees$1000$1500Document preparation fee$200$500Title search fee$700$900Survey fee$150$400Inspection fees0$300Attorney fees0$1000Flood certification0$150**Total****$3275****$6450**These are all in addition to a 20% down payment.While these costs may be negotiable to an extent, they still add up. It may be possible to roll the costs into the loan, but will then attract interest alongside the capital amount, and may push up the interest rate.**Choosing a home**Part of the purpose of this guide is to help you achieve financial freedom. Choosing the right property will make a real difference to the possibility of doing this, so careful consideration needs to be given when purchasing a home. Remember you are competing with other emotional buyers. It’s a race to the bottom, and based on the “greater fools theory” where there will always be a greater fool paying more.**Property size**When buying a home, people often choose to buy the biggest and most expensive home they can afford. A logical fallacy is to think “this is my forever home where my 5 kids and grandchildren will hang out!”It’s not surprising as homeowners want the best for themselves and their family. But purchasing the best home on the market and being financially solvent is mutually exclusive. Instead, buyers should consider taking on a smaller, cheaper property. Not only will mortgage costs be lower, so will maintenance and taxes, and you’ll have better cash flow which can be the foundation of your financial freedom.**Apartments vs houses**Apartments offer a number of benefits. Again, they are usually cheaper than houses and are easier to maintain. Even better, emergency costs are shared by all the residents in the building, reducing the cost of repairs.As investors, we like investing in apartments as opposed to homes. Simply put tenants can only screw up 6 sides of the property in an apartment (ground, ceiling, and 4 walls) whereas a home has a total 10 sides and a yard at their disposal. Factor this into your decision as you evaluation the hidden maintenance cost.**Cheaper properties**A cheaper property means the down payment needed is smaller. If you have a large enough amount, the funds could be used as a down payment on two or more properties for an immediate investment. Alternatively, as lower costs free up cash, these savings can be used to purchase another rental property which is proven to snowball into more and more investments.**The problem with a fixer-upper**If you’re buying a home, you want it to increase in value. Taking on a fixer-upper can seem like a way of guaranteeing this, which is why it’s become a very popular option with people who can’t afford a decent house in a good area. But while taking on a fixer-upper can seem attractive there are a number of common mistakes that inexperienced buyers make which end up costing them money rather than making it. These are:* Rushing into a purchase without fully costing out the necessary work or considering all the holding and sales costs.* Buying an overpriced value home rather than a fixer-upper. A true fixer-upper should be around 10-20% under the local market value.* Not checking the floorplans and layout to ensure that they’re accurate and workable, leading to considerable expenditure to correct it.* Finding out that the property has foundational or structural issues.* Underestimating the cost of repairs.* Underestimating the work required.* Not considering whether it’s an area that people are likely to want to live in. This is especially true if adjacent properties are boarded up or also require extensive work.* The repairs are NOT financed, so require more funds out of your pocket, which again cripples your precious investment capital. In terms of the finances and return on your equity this is where you hurt the most.**Using your home to purchase other properties**Another way of purchasing other properties is to use the equity you’ve built up in your home. This can be done by a complete refinance of your home or you could consider taking out a HELOC (Hacking your debt with a HELOC - Simple Passive Cashflow).HELOC stands for ‘home equity line of credit’ or, more simply, ‘home equity line’. In some ways, it’s similar to a mortgage, as it is a debt secured against your property. It differs from a mortgage in two significant ways. These are:* A home equity *loan* (mortgage) is a lump sum, paid at once. A HELOC allows homeowners to borrow or draw money on multiple occasions usually over a period of 5-10 years, as the need arises, up to a maximum amount.* As mentioned above, a home equity loan usually has a fixed mortgage rate, while a HELOC normally has variable interest rates linked to Bank Prime.Typically, during the first 5-10 years, borrowers need to pay back only the interest on the sum(s) they have borrowed. Repayment periods begin after the borrowing period and are usually between 10-20 years. The repayment amount is calculated by dividing the capital accessed by the number of months in the repayment period. However, borrowers should be aware that some lenders require the capital to be repaid in its entirety at the end of the drawdown period.Some lenders won’t allow a second charge to be secured against properties, so borrowers should seek permission from their mortgage company first.**Advantages of HELOC*** HELOCs are a convenient way of funding one-off needs, such as a down payment on a second property, or renovation.* Interest is paid only on the sum borrowed, and during the drawdown period, borrowers can repay just the interest.* Upfront costs are very low. The cost for taking out a $150,000 HELOC loan is typically less than $1000 and may be paid by the lender without a rate adjustment.* Some HELOCs can be converted into fixed-rate loans when a drawdown is taken.**Disadvantages of a HELOC*** HELOCs are adjustable rate mortgages (ARM) but are much riskier than a standard ARM thanks to the way the interest is calculated. If the interest rate increases on 30 April, then the HELOC rate will rise on 1 May. There are also no interest rate caps.* Ensuring that the HELOC is repaid can require considerable financial discipline, especially if the capital must be repaid at the end of the drawdown period.**Buying a property to rent**As fewer people are buying their own home, there is a strong demand for rental properties across the country. This demand has been fueled by factors such as the 2008 economic crash, the high number of people with poor credit ratings, stagnant wages, rising house prices, and the increased mobility of the workforce.Owning one or more rental properties can be a good investment in your financial freedom. But it requires careful consideration. It’s not like buying a home. When you buy your home things like space, schools and amenities will be your primary focus, and you’re likely to spend more to get your perfect house.When choosing a rental, you need to look at the local market. Check with local real estate agents what type of properties are in demand and choose accordingly. It may be that single bed apartments are snapped up, or that there’s a shortage of family homes. Buying in the best locations with the best school districts will lead to more competition and overpaying for the asset and its income stream.If you do your homework, buying a property to rent can be profitable over time. It’s a way of generating a passive income, while also building up savings through increasing the equity in the property. In many cases, renting will cover the mortgage and the taxes, if not generate a small profit on top.**Renting out your home**Should you want to relocate or want to improve your cashflow, renting out your own home is a possibility. However, this option comes with a number of potential complications – both financial and emotional – that need to be considered.Financially, you’ll need to inform your mortgage company when your home stops being your residence. Different mortgage lenders have different rules for borrowers who convert their homes into rental properties. It’s common for them to require you to live in your home for at least two years. Typically, interest rates for buy to rent properties are higher because of the increased risk to the property, and you may need to refinance.When you purchase a home, you invest in it emotionally as well as financially. You decorate it in your preferred style. You make memories there. You have a connection. Then strangers live in your home. Perhaps they’ll be good renters and take care of it as if it were their own. But perhaps they won’t and seeing what was once your home damaged can be a devastating experience. Even if you find good tenants, seeing someone else in your home can be an emotional experience. With a property bought purely as an investment, it’s much easier to be dispassionate and deal calmly with any issues.**Factors to consider when buying a property to rent**Just as with deciding whether to rent or buy your home, deciding where – or even whether – to buy to rent needs to be carefully considered.**Rent to value ratios**The Rent-to-Value Ratio is a quick calculation real estate investors run to determine if a property will cashflow. Take a $100,000 home that rents for $1,000 a month, the Rent-to-Value Ratio would be 1% ($100,000/$1,000). One of the biggest factors to consider when buying a rental property is the rent to value ratio. In some areas, such as Seattle, Los Angeles and the East Coast, properties are expensive to buy, but rents are relatively low. In these areas, rent to value ratios (c:\Users\emmat\Downloads\Simple Passive Cashflow - Simple Passive Cashflow\rv) can be less than 0.75%, meaning that there is little chance of even covering the costs, making purchasing a property a poor decision. In areas where housing is cheaper to buy and rent to value ratios are much higher, then it makes sense to purchase a property and rent it out. Some markets you can find these Rent-to-Value Ratios over 1.5% in solid areas.**Type of property**As already mentioned, knowing the local market and which type of properties are in demand is important. A property sitting empty is costing you money, not generating it. However, even knowing that, there is still the decision as to whether it’s better to take on a more expensive property that will attract a higher rent, or two or more smaller ones that may have a higher rent to value ratio even though the rents are lower.**Location**In real estate, the mantra is ‘location, location, location’, and that’s just as true for rental properties. Getting the location of the property right is just as important as choosing the right property type. If the market wants apartments in the city and large houses in the suburbs, buying an apartment in the suburb could be a costly mistake.Location opens up other possibilities such as vacation properties. These can range from city apartments, beach or lake-front houses, to near big tourist attractions, anywhere that people are keen to visit. With the development of sites such as AirBnB, it’s easy to advertise properties for short-term rentals. While the property is likely to be empty at times this could easily be offset by the higher amounts that you can charge, and you can get to enjoy the property too.**Resources**Hopefully this guide has given you plenty to think about, and you now feel confident that you’re in a position to make decisions that will benefit your financial future. However, the right decision needs the right information, and so we’ve included these rent-vs-buy calculators from *Find Real Estate, Homes for Sale, Apartments & Houses for Rent | realtor.com®* (Rent Vs. Buy Calculator) and* Real Estate Listings, Homes For Sale, Housing Data* (Rent vs Buy Calculator - Is it cheaper to buy or rent) to provide a personalized breakdown to assess whether buying or renting in your neighborhood of choice is most financially beneficial option for you.**Closing**The wealthy (not necessarily the rich) believe that *home* is not a *place* or *house*. It is the people that make a *home*. All too often a big house (the dream) is paired with long commutes and stressful jobs which minimizes the time away from home and what really matters.The wealthy don’t attempt to keep up with the Joneses. They keep things simple and spend their resources (time and money) on the essentials and make sound financial decisions.On an emotional note, although buying a home goes against everything from an investment standpoint there is something to be said about the security of owning especially if you have a family with kids.