1 Personal Finance 6.03 Understand options and practices for meeting housing needs

1

Personal Finance

6.03 Understand options and practices for meeting housing

needs.

2

Essential Questions

• What are the options for meeting housing needs?

• What are advantages/disadvantages of renting and things to look for before signing a lease?

• What are advantages/disadvantages of buying and procedures in buying a home?

3

Review Info

• Renting a Place to Live

• Buying a Home– Handouts Available!

4

My Dream Home —Journal Entry

• You have just landed your first real job in an area where you have always wanted to live.

• Think about the type of housing you will need, then think about things you would like to have, but could live without.

• Use the Internet and locate three types of housing that fit your needs and, hopefully, some of your wants as well.

• Create in Word - Print

5

Intro

• The four major expenditure areas for individuals and families include housing, transportation, insurance and food.

• Of these four, housing is the largest. There are many housing options to choose from, starting with the decision to

• rent or buy. 90% of households headed by persons younger than 25 years old rent their homes.

6

How to Locate a Living Space

Handout Available

7

Needs and Wants

• Amenities include heat, electricity, garbage, water and other features like Internet and telephone.

• A landlord is a person who owns the rental unit.

• A tenant, or renter, is the one who rents the property.

8

Determining Housing Costs

• Spending plan is a financial statement individuals use to assist in money management and aids in tracking income and expenses.

• Rent is a payment made in exchange for occupying another’s land or property.

• A property manager is a person who works for the owner in regards to finding and screening tenants, collects rent, maintains and secures the property, and responds to tenants’ needs.

9


• A security deposit is money paid in advance of moving into a living space to the landlord to be used for repairs and damages beyond normal wear and tear.

10

Housing Options

• Houses– Single housing units usually surrounded by a yard and varying in size

• Apartments– Sets of rooms on one floor of a building used as separate residence spaces

• Studio apartments– Usually one room with a separate space for the kitchen and bathroom

• Mobile homes– A manufactured home that is capable of being moved from one location to another

11

Housing Options

• Condominiums– A single apartment in a multiple housing structure that can contain multiple stories, garages, yards, and other amenities

• Duplexes– Two apartments that are like two separate houses situated side by side

• Rooms– Private rooms located within another structure such as a house, hotel, or other facility

• Residence halls– Usually located on a college or university campuses, include shared or single rooms and are usually available for school terms only to attending students

12

Locating a Living Space

• Friends and family members– If in the area you wish to inhabit

• Newspaper classifieds– Obtain these as soon as possible from the newspaper. An individual has increased opportunities and chances to get the living space they want when the respond quickly to these ads

• Bulletin boards– Many home owners and property managers post listings this way

• Internet– Great way to start a search from a distant location, many large cities have search sites

13


• Yellow pages– Search under “Apartment Rentals” and call apartment management or property management offices

• Local Chamber of Commerce– A valuable resource when relocating

• Rental agencies/real estate agencies– Hold postings for rentals

• In front of the living space– Owners often post a sign when spaces are available

14

Reading an Ad for aLiving Space

• BR– Bedroom• BA–Bathroom• W/D–Washer/Dryer (there may be

machines or hookups)• DW–Dishwasher• NS– No Smoking• NP– No pets (may be negotiable-you may

pay more)• F/P– Fireplace• AC– Air conditioner• W/S/G– Water, Sewer, and Garbage

© Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 15

How to Locate A Living Space

16

1.9.2.G1

© Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home – Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Introduction Needs and Wants Determining Housing Costs Housing Options Locating a Living Space Reading an Ad for a Living Space Rental Search Checklist Completing an Application form

17

1.9.2.G1


Needs and Wants Space Location Amenities Parking Miscellaneous

18

1.9.2.G1


Space How many rooms are needed?

Will there be roommates? Monthly charges are typically more affordable when people share the cost

Size of the rooms (total square feet) Number of bathrooms Garage

What is the size of the garage? Storage Space Yard

19

1.9.2.G1


Location Distance from work, schools, shopping,

laundromat Consider the walking/biking distance from

school or work Minimize transportation expenses

Neighborhood Safety Quality of schools, streets, and homes Presence of police, fire, and emergency services

Geographic location Urban vs. rural

20

1.9.2.G1


Amenities Amenities include utilities like heat, electricity,

garbage, water, and other features like Internet and telephone service

Heat- Examples include electric, gas, and radiant Different heating sources cost different amounts of

money Power- Examples include solar, gas, electric, and wind

Different power sources cost different amounts of money and have different affects on the environment

Who is responsible for paying each bill? Landlord is the person who owns the rental unit Tenant, or renter, is the one who rents the property

21

1.9.2.G1


Parking Location/size Number of vehicles allowed (for self and

guests) Permits needed

22

1.9.2.G1


Miscellaneous Washer and dryer

Are hookups or machines provided? Dishwasher

Are hookups or machines provided? Smoking Pets Fireplace Hot tub Snow removal and lawn maintenance

23

1.9.2.G1



Important to choose a rental unit one can afford Create a spending plan

Spending plan is a financial statement used to assist in money management and track income and expenses

Based on this, determine what can be spent on rent and amenities

Rent is the payment made in exchange for occupying another’s land or property, usually paid to landlord or property manager Property manager is a person who works for the

owner to find/screen tenants, collect rent, maintain property, and respond to tenants’ needs

24

1.9.2.G1


Housing Costs continued

General rule: Households should spend 30% or less of their net income on housing, not including amenities

Things to keep in mind when determining costs: Determine maximum monthly amount

(including amenities) you can afford and stay below that

Compare the costs of living spacesOne space may not include amenities in the

rent, where another space will. Add in expected costs to compare the two

25

1.9.2.G1


Housing Costs continued

Compare one time costs, like security depositsSecurity deposit is money paid in

advance of moving in to be used for repairs beyond normal wear and tear

26

1.9.2.G1


Housing Options Houses-Single housing units usually

surrounded by a yard, varying in size Apartments-Sets of rooms on one floor or a

building used as separate residence spaces Studio apartments-Usually one room with

separate space for kitchen and bathroom Mobile homes-Manufactured house that is

capable of being moved

27

1.9.2.G1


Housing Options Continued

Condominiums-Single apartment in a multiple housing structure, that can contain multiple stories, garages, and yards

Duplexes-Two apartments, situated side-by-side

Rooms-Private rooms located within another structure

Residence halls-Usually located on college or universitycampuses and available for attending

students

28

1.9.2.G1



Friends and family members- If in the area you wish to inhabit

Newspaper Classifieds-Obtain these through newspapers as soon as possible for increased opportunities for the living space you want

Bulletin boards-Homeowners and property managers post listings this way

Internet-Great way to start searches from distant locations

29

1.9.2.G1


Locating a Living Space Continued

Yellow pages- Search under “Apartment Rentals” and call apartment or property management offices

Local Chamber of Commerce- Valuable resource when relocating

Rental agencies/real estate agencies- Hold postings for rental spaces

In front of living space- Owners often post a sign when spaces are available

30

1.9.2.G1


Reading an Advertisement For

a living Space Abbreviations are often used in

advertisements for living spaces BR-Bedroom BA-Bathroom W/D-Washer/Dryer (may be hookups or

machines) DW-Dishwasher

31

1.9.2.G1


Reading an Advertisement

Continued NS- No smoking NP- No pets (may be negotiable-you

may pay more if you have pets) F/P-Fireplace AC- Air conditioner W/S/G-Water, Sewer, and Garbage

32

1.9.2.G1


Rental Search Checklist

Helpful to take a checklist while walking through rental units

Makes it easy to remember what was liked and disliked from place to place

May be difficult if one is not able to take a walk through

A person may be able to take a virtual tour and use the checklist

33

1.9.2.G1


Completing an Application Form

If an individual locates a living space they would like to rent, they should complete an application form

An application form is a document used to determine if a person’s credit history, financial stability, and references make them a worthy candidate

All information on this form should be truthful, factual, and answered completely

34

1.9.2.G1


Application Form continued

Before returning the application, a person should ask some questions: Is there an application fee? If there is a fee, how much is it? Will this fee be returned if the application is

denied?

35

1.9.2.G1


Conclusion Prioritize needs and wants Determine housing costs Locate a living space Get ready to move in!

36

Journal Entry• Case Study: • Mr. and Mrs. Brown have one child, a five-year-old

boy. • They are expecting another child, a girl, in three

months. • Mr. Brown has taken a new job in another state. • He will be in a position to entertain at home, and

likes to jog in the afternoons and on weekends. • Mrs. Brown runs a small craft business from her

home that she wishes to continue. • They have two cars and need space for the five-

year-old to play. • They want to live in an area close to schools and,

possibly, a park or recreation area. • What type of housing would fit their NEEDS and

WANTS?

37

Activity

• Complete – How to Locate a Living Space– Terms Involved in Renting

• Class– Reading Living Space

Advertisements

38

Renting vs.

Owing a Home

Handout Available

39

Journal Entry

• Draw a T in your Journal.

• On the Right side list reasons why people would own a home.

• On the Left side list reasons why people would rent a home.

Renting vs. Owning

Family Economics and Financial Education Take Charge of your Finances

1.9.3.G1

© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Introduction

Housing is the largest personal expenditure.– About 1/3 of a person’s income.

Choosing where to live is based upon a person’s goals, values, needs, and wants.

Places to live include:– House, apartment, condo, mobile home, etc.

1.9.3.G1


Reasons for making a housing choice

Personal and financial goals Personal values, needs, and wants Amount of money available for housing

costs Financial resources and readiness Credit history Real estate prices Location preference Expected length of stay in particular place

1.9.3.G1


Costs of renting

Monthly rent Security deposit Utilities – electricity, water, garbage,

etc. Renter’s insurance

1.9.3.G1


Renting

A lease is a legal contract between the tenant and the landlord, specifying the responsibilities and rights of both parties.

– Identifies the rent amount, security deposit amount and specifications, payment for utility bills, late payment penalties, length of lease, eviction terms, etc.

– This is between the landlord and the tenant Landlord

– Owner of the rental property.– May perform management duties or hire a property manager.

Property manager - may charge a fee to the landlord to perform the management task

– Duties may include: – May collect rent and deposits, pay utility bills, complete repairs and

maintenance, watch over the property, respond to tenant complaints, assign new tenants, etc.

1.9.3.G1


Renting continued

Tenant (renter)– The person who rents the property.

Renters are generally– People who choose not to own a home.– People who cannot afford to own a home.

The tenant pays rent to the landlord which allows them to live in the rental property. – Rent

The cost of using someone else’s property.

1.9.3.G1


Moving into a rental

Upon moving into a new place, people are usually required to pay a security deposit and sign a lease.

Security deposit– An advance payment to cover anything

beyond normal wear and tear on the unit.

1.9.3.G1


Advantages of renting

Low move-in costs Fixed monthly expenses Easy to move Location choices (may be

close to work or school) Less maintenance and

repair work Fewer responsibilities May offer extra

amenities such as a tennis court or pool

Typically less expensive than home ownership

May be able to save for other wants or needs if renting a less expensive apartment

Other expenses may be included in rent payment such as electricity, water, sewer, and/or garbage

1.9.3.G1


Disadvantages of renting

Subject to terms of a lease

Rent may change with little notice

Less privacy and transient neighbors.

Restrictions on noise level, pets, etc.

Fewer opportunities to upgrade apartment such as new carpet, paint, or wallpaper.

When leaving a property, no equity is returned as it would be if selling a home.

No tax deductions May lose rental if the

property is sold.

1.9.3.G1


Costs of ownership

Monthly mortgage payments Down payment (one time cost) Closing costs (one time cost) Utilities – electricity, water, garbage, etc. Homeowner’s insurance Real estate property taxes Maintenance

1.9.3.G1


Home ownership

Home ownership - the buyer has purchased a housing unit as property– Goal of many Americans– A large financial decision

Owning a home is an investment because if a person sells a home for more than what it was bought for, the person makes money. This is called equity.

Financial planning and savings can assist a person in planning for the benefits of home ownership later in life.

1.9.3.G1


Purchasing a home

90% of buyers take out a mortgage– A home loan in which the real estate is the collateral– Collateral is an item promised to the lender if the

borrower does not pay back the loan, usually the home. Down payment

– Amount of money paid on the home at time of purchase – Typically 10 – 20% of the purchase price of the home

Recommended purchase price amount an individual should pay for a home– 2 ½ times their annual household income

1.9.3.G1


Advantages of ownership

Build equity which can be borrowed against if necessary

Pride of ownership Feel more comfortable

and have more privacy Stable mortgage

payments More room and

storage Improvement of

buyer’s credit rating

Income tax deductions for property taxes and mortgage interest

Potential for property to increase in value

Free to make home improvements and have pets (items typically not allowed in rentals)

1.9.3.G1


Disadvantages of ownership

Large down payment Move-in costs Insurance costs Possible for property

to decrease in value Time, money, and

energy commitment Repair and

maintenance costs

Property taxes can raise substantially

Money is tied up in the home

May take several months to sell a home if trying to relocate

1.9.3.G1


Keep In mind. . .

People are always paying for a home. It’s just a matter of whether it is

for themselves or their landlord.

1.9.3.G1


Activity

Complete:– Renting vs. Owning A Home-P7

– Renting vs. Owning A Home-P8

56

Activity

• Make a Math-to-Life Connection

• Complete Appendix 6.03G, “Deposit and Interest.”

57

Popcorn Review in Journal

• Summarize what YOU have learned from this objective study that YOU think will most benefit YOU when YOU begin to live on YOUR own.

Documents

1 Personal Finance 6.03 Understand options and practices for meeting housing needs