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Chapter 7

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University of Guelph
Marketing and Consumer Studies
MCS 2100

Chapter 7 Finances of Housing Evaluating Housing Alternatives Your Lifestyle and Choice of HousingEvery buying decision is a statement about your life o Lifestyle needs desires and attitudes reflect choicePersonal preference are foundation financial factors modify final choice o Spend no more then 2530 of take home pay on housing Evaluate income living costs and other financial obligations to determine amountOpportunity Costs of Housing Choices You may have to give up something common tradeoffs are o Interest earnings lost onused for down payment or security deposito Time and cost of commuting to work o Loss of equity growth when renting city apartment o Time andspent to repair and improve lower priced home o Time and effort involved building house to specific specificationsRental vs Buying Housing Lifestyle and financial factorso Mobility with renting permanence from buying o Renting is less costly in short run home ownership longterm financial advantagesEvaluating Housing AlternativesType Advantages DisadvantagesRenting Easier to move Limitations in remodelling Apartment Fewer maintenance responsibilitiesRestrictions regarding pats and activitiesMin financial commitmentMore frequent moves more costlyRenting Easy to move less maintenanceHigher utility then apartment House More room Limitations in remodelling Min financial commitment Owning New No previous owner Financial commitment House Pride of ownership Higher living expenses than rental Capital gains exemption on sale Limited mobility Warranty in some provincesPay GSTOwning Pride of ownership Financial commitment previously Established neighbourhood Possibility for repairs or replacement owned house Capital gains exemption Limited mobility Owning Fewer maintenance responsibilities Less privacy then house Condo then house Financial commitment Good accessibility to recreation and Uncertain demand affecting property value business districtPotential disagreements with condo rules Capital gains exemption Monthly condo fees OwningOwnership in form of nonprofit Difficult to sell Cooperative organization Potential disagreements among members May have to cover costs of unrented units Owning Less expensive than other ownership May be difficult to sell Mobile Home Flexibility in selection of home Financing may be difficult to obtain features and appliances Construction quality may be poor Asset depreciates in value RentingMany rent when first on their own or later in lifeo Want to avoid maintenance activities Pay for right to live in residence owned by someone elseSelecting a Rental Unit The searcho Geographical and rental cost for your needs o Compare costs and facilities in comparable unitso Talk to current and past residences Before signing a lease o Make sure lease starting date costs and facilities are clearly presentedo Talk to lawyer about unclear aspects o Note in writing signed by owner condition of rental unito If two names are on lease one can be held responsible for full rent Living in rental propertyo Keep all facilities and appliances in good conditiono Contact owners regarding repairs o Respect the rights of others o Obtain renters insurance At the end of the leaseo Clean apartment leave in same condition as when you moved ino Require any deductions from security deposit to be documentedAdvantages of Renting Mobility o When a location change is necessary or desirableo Easier to move Fewer responsibilitieso Do not have to be concerned with maintenance or repairs
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