Is it better to buy or rent?

The question of whether it is better to buy, or rent, will always exist. This is because the answer has a lot more to do with each individuals unique situation and their personal goals. We have composed a list of a few considerations that you should consider.

Supporters of buying a home point out you are making an investment. This is because not only are you paying down your mortgage total with each additional month you live in your home, but homes also typically increase by 5% each year in value.  Combine the two together and you can quickly build wealth in equity. Additionally, if/when you decide to rent out your home your renters are essentially paying your mortgage. When you no longer have a mortgage, you will have positive cash flow every month.

Advocates of renting claim that the additional costs that accompany owning a home, such as taxes, interest payments, maintenance, unexpected repairs, ect. can add up rather quickly. They point out that there is no guarantee that those expenses will be regained when it comes time to sell the home. Rather than investing in a home, you might consider investing in stocks, bonds, and other financial securities.

Either way you are paying somebody’s mortgage until the home is paid off.

How long do you plan to stay in the home?

If your intention is to reside in the property for no more than five years, renting may be the more financially prudent choice. This is because the upfront costs associated with homeownership are typically spread out over the duration of a mortgage loan. Conversely, the longer you anticipate living in a home, the more advantageous it becomes to buy rather than rent. Therefore, if you’re prepared to commit to a residence for 7 to 10 years, purchasing a home is likely the optimal path. Over this timeframe, there’s a strong likelihood that the property will appreciate in value, offering potential financial gains in the long run.

Consider the Market Where You Plan to Live:

Every market is unique. It’s important to know what is happening in real estate on a national scale, but local as well. When purchasing, it is of the utmost importance to pay close attention to what is happening in the local markets. What is happening in one city might be drastically different than what is happening in another.  Remember, when evaluating housing expenses, it is essential to consider the current market conditions in your city and even neighborhood, rather than relying on nation expenses. Look both at home prices and rental rates.

Consider the Cost of Buying and the Cost of Renting:

There are costs associated with both buying and renting. When you rent you typically need to pay upfront, your first and last month’s rent and a security deposit. This could be a hefty upfront cost. When buying your first mortgage payment often isn’t due the first month. However, there are escrow fees, closing costs and downpayments to consider. Be sure to talk to your lender so this doesn’t come as a surprise. If you plan right, you might even be getting back your security deposit from your previous rental that can help cover any costs. Your lender can help you determine if buying is right for you. They can provide options you might not have thought of. You might discover that you can buy a home for a monthly payment that is close to what you might rent for. Keep in mind when you buy, each payment made increases your equity.

Lifestyle:

When it comes to lifestyle differences between buying a home and renting one, ownership offers distinct advantages. Homeownership often means greater flexibility and freedom in personalizing your living space. For instance, homeowners have the liberty to make renovations, upgrades, and alterations to suit their preferences and needs. This includes options like painting walls, landscaping the yard, or even adding additional rooms. Additionally, homeowners typically have more flexibility in keeping pets, as they are not bound by the restrictions often imposed by landlords in rental properties. These aspects contribute to a sense of stability, security, and personalization that renting may not always offer.

Repairs and Improvements:

Keep in mind, when you are a homeowner you are responsible for the costs of repairs and maintenance. When looking to buy, it is important to get an inspection to have peace of mind that you are purchasing a sound home, or that you are aware of the costs associated with needed repairs and have taken them into consideration.

Can the home create an alternative revenue stream?

When making your considerations, be sure to weigh the potential opportunity for additional streams of income with the purchase of a home. Homes and properties have the potential to serve as valuable assets beyond just providing a place to live. They can also be sources of additional income streams. One way to generate extra revenue is by renting out space within the property, such as a spare bedroom, basement, or even an entire accessory dwelling unit (ADU). This can be particularly lucrative in areas with high demand for rental housing. Additionally, homeowners can utilize their property as office space for side jobs or small businesses, saving on external rental costs. For those interested in sustainable practices, properties with ample outdoor space can accommodate activities like beekeeping, gardening, or even hosting events, which can provide supplementary income while also contributing to environmental conservation efforts. By leveraging their properties in creative ways, homeowners can unlock various opportunities to generate additional revenue streams.

Do you have alternative investment opportunities available to you?

Under the right circumstance purchasing a home can be an easy way to invest. You can create significant savings while living in your home. However, for others renting an apartment and investing savings in stocks, bonds, and other financial securities is better for their circumstances.

Speaking with a financial advisor about your specific financial situation can help. A financial advisor can break down what you need to do to get the best return on your investments. They can also see the big picture for your unique situation when it comes to your money.

One Last Money Saving Consideration:

One significant benefit to buying is that if you can pay extra towards your monthly mortgage, you can knock years off the life of the loan. For example, if you pay an additional $300 a month towards a 30-year, $300,000 loan, you will take eight years off the life of the loan. You reduce your final bill by more than $63,000. That is savings you would never see if you rented. Additionally, every time you make that extra payment your equity in the home also increases.

For a unique look at your situation connect with your trusted Realtor. If you do not have one, connect with one of our experts. They can provide guidance in navigating your findings, analyzing additional factors, and exploring various home options. Click here to connect with a knowledgeable professional who can provide personalized assistance tailored to your unique needs and preferences.