Renting vs. Purchasing

Although owning a home will usually provide greater stability and financial security, in some situations, renting may be advantageous, at least initially.

Then, if you decide against renting or are ready to move out of a rented facility into a home, the first decision is who will actually own the home. There are several options with advantages and disadvantages to each.

Renting

Advantages Disadvantages
  1. Lower entry costs (than a mortgage)
  2. Allows time to save money and establish credit
  3. More predictable monthly expenses
  4. Landlord is responsible for major repairs
  5. Fewer resident maintenance responsibilities
  6. Easier to move
    • Less financial risk
    • Good if residents have ambiguous feelings about living with others, the location, or living away from family.
  7. Amenities—Swimming pools, party rooms, etc.
  1. Cannot build equity
  2. Less stability—Landlords can terminate leases & change policy
  3. Rent will likely rise over time
  4. Landlords control exterior/interior design (hard to renovate for accessibility/personal preference)
  5. More restrictions (parking, pets, decorations, etc.)
  6. Frequent changes in neighbors may make it difficult to establish & maintain natural supports, acceptance, or community connections
  7. Fewer financing programs for rentals (than home ownership)

Considerations When Renting

  • Know how involved the landlord needs to be regarding support services and needs.
  • Renter’s insurance needs to be figured into the monthly costs.
  • The lease agreement, building rules, and restrictions must be understood by all parties.

Home Ownership

Be sure to discuss all ownership options with all interested parties, including your lawyer.

Occupant-Owned

Owning a home of one’s own is widely considered to be the most secure option and the best financial investment. You might assume that home ownership is not an option for your child because his or her government benefits will be at risk. This is not necessarily true. SSI and Medicaid, for instance, do not consider a home that an individual lives in as a countable asset when determining eligibility. You may also assume that if your child has a low income, he or she cannot afford to purchase a home. Nevertheless, some programs make home ownership possible for people with modest incomes.

Advantages Disadvantages
  1. Child feels great pride of ownership
  2. “Good Debt”: Ownership often increases the owner’s net worth
  3. Resale value usually increases
  4. Stable living environment
  5. Child has maximum control of the home
  6. Many financing programs available for people with disabilities to reduce cost of ownership (e.g., Homestead Exemption)
  1. High initial costs: Down-payment and monthly mortgage payment may be higher than rent
  2. Many credit restrictions to get a mortgage
  3. Child legally responsible for total maintenance of property. Budgeting for maintenance services may be needed
  4. Stability for housemates is at risk if owner wants to move
  5. More ways for government benefits to be affected. See Considerations below

Considerations Before Your Child Purchases a Home

Guardians:

If your child has a court-appointed guardian, there may be some road blocks to home ownership. Typically, a person with a legally appointed guardian can own a home, but the guardian would be responsible for managing it, thus minimizing the owner’s control. Additionally, a guardian may need approval from the probate court, such as for selling the property or making major renovations. The rules concerning guardianship vary, and specific court processes are up to each county probate court. Specific rules and procedures are available at a county probate court or from an attorney.

Ways Ownership Can Affect Benefits:

  • Charging Rent: Collecting rent to cover expenses in the home in which one lives is not usually considered taxable income. However, if the amount of rent being collected exceeds the actual expenses by a large amount, it could be subject to income tax. This income could affect benefits. Consult a tax professional before charging rent.
  • Selling/Moving: If the home is sold, any gain may be taxable and will be considered a capital resource impacting government benefits. Similarly, if the homeowner has to move into a different setting, such as a nursing home, the house can be considered a countable resource impacting eligibility for SSI and Medicaid.
  • Saving for Repairs: Saving up large amounts of money for renovations or repairs could also affect government benefits. Note: This may be offset by creating a capital reserve account or escrow account with the mortgage company.

Parent or Relative Owned

If you, as the parent, are more financially secure than your child, it may seem best for you to purchase the home.

Advantages Disadvantages
  1. Better finances and credit history to obtain and pay for mortgage (than the child)
  2. Parents have greater control of the home as an asset
  3. More stability for the child of the homeowner
  4. “Good Debt”: Home ownership often increases the owner’s net worth
  5. Resale value usually increases
  6. More financing options than renting
  1. Home and stability at risk if owner experiences financial hardship
  2. Parent/relative who owns the home assumes liability
  3. Could increase tax liability
  4. Owner is responsible for maintenance even if they live far away. Budgeting for these services may be needed.
  5. Residents without any ownership interest may have less stability.

Considerations for Parent or Relative Ownership

Assets:
The house is an asset for the owner. It’s at risk in the event of lawsuits, divorce, bankruptcy, etc. It also applies toward need-based benefits, such as Medicaid.

Rent:
Rent received from the residents is taxable income for the owner. A tax professional should be consulted.

Contracts:
A written agreement about expenses (repairs, taxes, and so on) is essential, especially if only one parent or family member owns the home and other occupants are renting. (Example: Who is responsible for accessibility renovations?)

Other Options for Home Ownership

Other home ownership options to discuss with an attorney chosen by your family are:

  • Joint Ownership
  • Trust Ownership
  • Corporate Ownership
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