Three Things to Consider
Chances are–that if you live on your own–you have at one moment or another weighed the option of renting vs buying a house and the pros and cons associated with both. In the past, the decision for renting vs buying a home was more clear cut. It was almost like a natural right of passage, moving from renting to owning a home in the average American nuclear family. However, as more and more young adults begin to migrate back into the city and remain single longer, the answer to this age old question is less…well…clear cut.
So…without further ado, here are three things to consider when contemplating buying a house vs renting an apartment.
Consider Your Budget – Renting vs Buying a House
When considering renting vs buying a house the variables can be innumerable. So, we’re going to focus only on a few key factors.
You need to find the perfect real estate agent and budget is key. One thing we all learned from the subprime mortgage crisis of 2008 is you need to be like “Invictus,” becoming ‘the master of your fate’ by making sure you understand exactly how much you can afford. Maxing out your cost of living on a projected increase in salary is never a good idea; thus, living beneath your means is always the wisest decision.
Furthermore, you need to understand all the added costs of owning vs renting. Although a rental property lease can differ greatly from lease to lease, often costs of sewer and water are built into your monthly rent. These will 100% be your responsibility as a homeowner which can amount to hundreds of dollars in additional costs each month. In addition, all repairs are generally covered by your landlord or the property owner while renting. That broken fridge or stove you experienced in college…it’s now your problem. Again, all repairs will be your responsibility as a homeowner and–depending on the age of your home–can be substantial. So if you don’t have a significant extra income month-to-month beyond your monthly housing allotment, renting a property could be in your best interest.
If you are considering transitioning from renting to buying a house, we recommend using the financial calculator created by the New York Times in 2014. It is an incredible tool designed to help you understand just how much money you’ll be spending each month. In addition, it’s wise to find out how much the local taxes are in your area of interest and how often do they increase in that district. In 2018, the Coatesville area school board increased school taxes by 5.27%. Those costs are absorbed by the homeowner. Thus, if you live on a very tight, strict budget renting may be your best option and can provide a lot of additional benefits, including flexibility.
DO YOU WANT FLEXIBILITY? THEN RENT!
The fact of the matter is buying a home is a major investment, not only financially but also on your time, mental health, and overall quality of life. More than likely your mortgage will be between 20 and 30 years; meaning, you are certainly tied down and planning to stay put for a long time. Of course you always have the option to sell, but you are forfeiting the closing costs on the property and the costs of inspections.
Also, age is a distinguishing factor when considering renting vs buying a house. According to the Bureau of Labor and Statistics, Americans between the ages of 25 and 34 are only staying at an employer on an average 2.8 years. So, if you are unsure of your career, or feel like your current position is simply ‘a stepping stone,’ then renting is your best option as lease agreements are generally for 12 months with the option of renewal.
As you can see, renting has its many benefits; however, there are some strong reasons as to why purchasing a home can be truly beneficial.
ARE YOU INTERESTED IN BUILDING EQUITY? THEN BUY!
Many will say, “renting a property is like throwing money out the window.” That couldn’t be further from the truth! You are 100% being provided something for your money; a roof over your head is an absolute necessity that needs to be afforded by whatever means. Nevertheless, if you are looking to build equity within your living arrangement then buying is definitely the way to go, especially if you’re looking to purchase a home in an area that is ‘up-and-coming’ or historically experiences significant home price growth rates.
SO, “SHOULD YOU RENT OR BUY?”
As mentioned in the first of paragraph in this blog, the answer to this question isn’t as clear cut these days. You have to weigh your options and discover which path you want to pursue. In addition, there is also the “rent to buy” option which are rarer but a very distinct option and opportunity. Historically, the rent is higher in these opportunities than the going rate for the area which is designed to make up for the rent credit you receive. Nevertheless, it is an option and could provide you with a happy medium when considering renting vs buying a house.