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Wednesday, April 23, 2014

Buying vs Renting Your Golf Home: Financials, flexibility tilt the decision

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        If I knew I was going to move from the next house I buy within a year or two, I'd strongly consider renting it. And if the rental was furnished in a way I could live with, all the better; I'd put my own stuff in storage and pay for the storage fees from what I save (temporarily) in long-distance moving costs.

        But most baby boomers relocating to the South are in it for the long haul, and so the question is whether renting a house for the long term make sense. There are a few reasons why it may not.

➢ Addition by Deduction. Over time, the tax deductions you receive from owning, especially if you have a mortgage, enhance the benefits of owning compared with renting, which offers no such benefit (count on your "landlord" building his tax burden into your rental fee). Even if you don't finance your home, you still get a rebate in the form of a tax deduction on local property taxes. (And if you use your home only a few weeks per year, and rent it out to others, the depreciation helps save additional dollars.) 
➢ Forced Savings. Most folks are going to pay for their home before they think about buying a new pair of shoes or going on vacation. And, notwithstanding that awful five-year period that started in 2008, homes appreciate over time, and when you sell in 10 years the one you buy next month, you are going to make money. And you will have had the use of a beautiful home for a decade. Sweet.

➢ Tear Down That Wall. Sometimes we love our new home –- except for that kitchen with bad flow, or that bathroom that is missing the soaking tub, or that rotting deck. If you rent a house, you may find the odd (meant in both senses) landlord who will permit you to make structural changes, but it will be at your expense. And unless your lease allows for you to rent for, say, 10 years, you will never get your money back in fair use. But when you own a home, you have the right to paint it black, put clouds on both sides now in your bedroom, and build your soul kitchen. (Sorry, hit by the '60s/'70s music bug temporarily.)
➢ What Goes Up. When you purchase a home, your costs are –- more or less –- fixed (assuming that if you take on a mortgage, you avoid the adjustable variety). Your municipality may raise your taxes, but that will rarely be by a large amount, and part of the increase is deductible. But a landlord can raise the rent as he sees fit. And that may not be by a reasonable amount. As people age, it is more important to have predictability in their expenses. Owning a home provides more of that than renting.
➢ Sorry, Folks, Ya Gotta Go. The landlord has the right to sell his home whenever he wants with a proper amount of notice to you, the renter. But 60 days or so doesn't give you a lot of time to find another place to live. Especially later in life, who wants to be in that position? When you own your home, you control where you will live 60 days forward.
➢ Price Is Right. Real estate prices in the best golf communities started to level off and turn upward within the last two years. Our contacts throughout the South report much increased sales traffic and low-to-moderate inventories of homes for sale. That combination argues for increasing prices which, therefore, makes this a good time to consider a purchase of a home. The pricing of rentals, however, does not always obey the laws of supply and demand. The safe play is to take advantage of current prices that are likely to be the lowest for the foreseeable future and, if you have to finance your purchase, interest rates that are still low (but seem poised to rise as well).
➢ Golf Clubs Have Short Memories. After the recession of 2008, private golf clubs took a hit, losing members who suddenly saw a round or two each weekend as a luxury they could not (or were unwilling to) afford. The clubs lowered their initiation fees in a knee-jerk attempt to fill the newly opened holes in their membership rosters. It did not work all that well, and most of those member discounts remain. But for how long? If membership lists grow to their former sizes, count on clubs in the more stable golf communities to begin to charge more in the way of initiation fees and dues. Now may be the best time to sign up.

        In fairness, renting "short-term" (a few months) can be a great way to kick the tires in a golf community and decide if you are comfortable there. However, you will have to make a commitment of some duration because most golf communities do not permit their residents to rent out their homes for any term less than six months, and in many cases not less than a year. Also, if the homeowner you rent from does not possess a private golf membership, or has one that does not permit unaccompanied guest play, you may be out of luck on the golf end.

        There are ways to get to know a golf community well over a long-weekend visit if the community's real estate office, or a local Realtor, sets up a comprehensive discovery tour for you. We can help. Contact us for a personal discussion about your interest in a golf home. Or better yet, as a first step, fill out our Golf Home Survey, indicating your requirements for your next home. We will provide you with some initial suggestions and, from there, we can work toward an itinerary of visits. Click here for access to the Golf Home Survey.

Read 3778 times Last modified on Wednesday, 30 April 2014 12:52
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Larry Gavrich

This blog was conceived and is published by me, Larry Gavrich, a former corporate communications executive who founded HomeOnTheCourse, LLC, in 2005.  Our firm advises baby boomers and others seeking a lifestyle in which golf is a major component.  My wife Connie and I own a home in Connecticut (not on a golf course) and a condo at Pawleys Plantation in Pawleys Island, SC, on a Jack Nicklaus layout.  We began our search for our home on the course more than 15 years ago, and the challenges of the search inspired me to research golf communities and write objective reviews of them.

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