The rent versus buy housing equation is changing
Knowing when to rent a home and when to purchase a home is a huge decision - and while every situation is unique, there are some basic guidelines that I have learned over my years of experience that typically hold true for families looking to decide.
It’s long standing knowledge that buying is a better investment than renting, but in today’s economy, knowing your area and how the market aligns with your personal needs is an important step. Today, let’s discuss three common myths on renting vs. buying and how the current market has changed these ideals for the better.
• If you buy, you have to stay put long term. While this was a very true statement in the past, the current real estate climate lends itself to more flexibility than ever. If you choose to purchase a home and then wish to travel, have a job location change, or just want to up and move somewhere else, the current housing shortage will make it much easier to sell your home than in previous years. But, if you don’t want to cash out on your investment just yet, renting your home is another great option and could not only
solve your living situation, but can pay your mortgage for you and potentially set you up with rental income in the future. In fact, renting your current home is a great way to have someone else pay off your mortgage while providing financial security in the future for
you and your family. You will have residual income for as long as you rent the home after the mortgage is paid off.
• It is cheaper to rent a home. Is it? While many people become bogged down by the downpayment requirement of purchasing a home, the monthly mortgage payment of buying a home has been shown to be over 37 percent cheaper nationwide. In some areas,
like Miami, it is over 53 percent cheaper to buy, according to Trulia. While there has been a gradual interest rate increase, the rising cost of homes is more concerning. While this leads to an urgency for current homeowners looking to purchase, those who have already taken the plunge will be happy to see their investment continue to rise in value.
As rental spaces become
less and less available, rent prices will continue to go up and, as discussed, most people will find that their mortgage payment will be significantly less than they have been paying in previous rent. Options such as renting a room, finding property with a garage or barn to rent out can also be a great way to offset a mortgage and help to pay if off sooner, or even to leverage your property into extra cash to payoff debt or travel. Owning your own home gives you the freedom to use it as you choose and that is a luxury renting will never provide. On another note, when renting, landlords don’t typically spend extra money for things like new heating and air conditioning, energy efficient windows, etc and you could end up paying hundreds of extra dollars every month in utilities because of old or faulty equipment.
• Renting is less risky than buying. Obviously there is financial risk any time you choose to invest a large sum of money. If you are purchasing a home, a wise and experienced realtor is a must - they can help you make sure the home you are choosing is well priced for the area and has the potential to make big cash on resale. But you should also ask family members or friends for their advice. Have a contractor friend give the home a once over. After you have done your due diligence, negotiated well using your realtor’s skills, you are on your way to having a real investment that can set you up for future cash in the bank. While there is still manageable risk in owning, your options are so much more varied and full of potential. In my opinion, renting can have it’s own risks as you are at the mercy of your current landlord and their choice to continue renting or maintaining the property.