WHICH IS RIGHT FOR ME?
Do you remember the sugar coating we promised to avoid? The question to buy or rent is one of those conversations, and the answer to this question is completely circumstantial and will be different for everyone. Let’s imagine that you have read every other “Buy vs. Rent” article or blog that a google search will yield and that you already understand the basic pros and cons of buying and renting. For instance, when you buy you are putting money into an asset, your home can appreciate and net you a substantial return upon the sale there are also tax benefits to homeownership. On the contrary, when renting, you save on interest and taxes, you avoid paying out-of-pocket for most repairs and maintenance, and the commitment level is low.
These are all valid issues that need to be considered, but we want to take you a step further. You may come across individuals that are steadfast in their position that because they have a great experience as a renter or owner, whatever they are doing is absolutely the correct step for everyone, however that is just not true. There are many variables at play that can make either decision the right one for you. Also the market can always shift and make either position more appealing. To make the best decision for you and your family, you will need to look at your individual circumstances. For instance:
Is it currently a buyer’s or seller’s market?
You may choose to rent because the houses in your area are too expensive to reasonably afford, and conversely, you may choose to buy if renting is a popular option in the location you wish to live. If the latter is the case, the cost of rent will naturally be higher than average and may put you in the right position to buy.
How long do you plan to stay?
Homeownership becomes more affordable over time. The longer you stay, the longer you get to spread out the costs of ownership. If you plan on moving within 5 years, the high upfront costs of homeownership may prompt you to rent until your plans are more concrete. Many buyers that buy under the FHA loan program may be disappointed if they decide to sell their home within 5 years because they may have to pay out of pocket to sell, if they have not incurred enough equity to cover their costs.
What are the opportunity costs?
When you purchase a home you will be responsible for your down payment, closing costs, taxes, and insurance. You have to take into account what else could be done with that money to help you reach your individual goals before you take the leap.
Obviously, the question of whether to buy or rent will be different for everyone and for many different reasons. Other factors to consider may have to do with school districts, how much home you can afford, your career path and the development of the area you are living in just to name a few.
In some cases it will be smarter to rent and others to buy. Whichever path you decide to embark on, make sure your decision aligns with your goals and always remember to do what feels right for you.