Written by Lake McGill
With the housing markets rebounding after the recent 2008 financial crisis, individuals and couples across the nation are plagued with the same question: should I buy or rent my next place? A seemingly simple question on the outside can be much more complicated when one sits down and tries to hash out the financial implications of their decision. What is there to consider when trying to decide whether to buy or rent? With a little bit of “TLC” understanding, a new home seeker is poised to make the right decision.
Time: How long are you planning on living in this property? The longer you plan on staying, the better off you are by buying. There are many costs associated with buying and selling a house. Between taxes, realtors and repairs, living in a house for only a couple of years can be very costly. The longer you stay the more years these costs can be spread out over. Would you be alright if circumstances made your stay longer or shorter than expected? You may want to reconsider rushing out and buying a place with the expectation of quickly moving in a year or two. If the housing market declines, you might be stuck living and paying for a place you’re not in love with.
Loyalty: Is your job outlook for the next five years positive or negative? Is there a chance you will need to re-locate for a promotion or new job? Are you loyal to someone else? What are the chances a significant other needs to move, or you might need room for new additions? The more stability one has in their life, the better off they will be in buying a house. Renting offers much more flexibility and a less costly way to move from place to place.
Cost: Obviously this is the thing that most people are worried about. What is the difference between the monthly cost of mortgage payments and upkeep on a house compared to that of rent payments? Remember that home ownership often comes with more costs including: property taxes, insurance, homeowner fees, lawn and garden maintenance, utilities, and waste removal. Often overlooked, these are the type of costs that make uneducated buyers bankrupt. However, housing deductions on your tax returns can help put some of that money back in your pocket. Do you have significant savings and income to fund household repairs? Everyone’s least favorite task of home maintenance can often be very costly. Without the right insurance, homeowners are often left to bear the brunt of these costs. Without enough savings to do so, you might find yourself living in a leaky, squeaky house. Renting often shifts this burden from the tenant to the owner, and as a renter you would likely be able to avoid these exorbitant burdens.
Even with all questions above answered, often times it is still not explicitly clear whether one should rent or buy. Websites like http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html and http://www.trulia.com/rent_vs_buy allow users to input all of their specific housing and renting numbers into a mathematical program in order to receive a clear cut “renting is 18% cheaper than buying” answer. These are great for strictly dollars and cents comparisons but fail to capture some of the unquantifiable values of home ownership and renting. With a little TLC analysis, a prospective new home dweller is much more equipped to make the best financial decision.