Figuring out whether to rent or to buy property is a big and important decision. Each of these options have their advantages and disadvantages. Before you decide which option to choose, you have to take some time and evaluate each option.
The decision might affect your lifestyle. For instance, if you decide to buy property instead of renting it, you won’t be able to spend as much as you did before. It requires saving some sum of money, so it will affect your everyday expenses. But you will spend money once, and you won’t have to pay each time for the rent. Plus, a lot of people see it as a good investment.
As for renting property, it has its own advantages. For instance, you won’t impact the taxes you have to pay that much. And this is an affordable option. A lot of people want to wait, so they could afford a house in a certain neighborhood instead of buying a cheaper one somewhere where it is less comfortable. But overall, when people rent for too long, they spend much more money than those who have already bought a house.
This article is supposed to help you to make your decision. You should ask yourself several questions related to your potential purchase. Here you will find some answers to your questions. Plus, you can consider the pros and cons of each option.
How To Make A Decision
Before you start evaluating and considering the pros and cons of buying or renting the house, answer these questions:
- How much you can spend?
- What is your goal – having stability, or being able to afford changes?
- Are you planning on staying for good in the city?
- Your financial situation, is everything OK?
- Is affording the maintenance of your purchased home (including repairs and design changes if any) something you could do?
It is one of the common tips most people give – what is your budget. Whenever you decide to spend something, ask yourself what is the sum you can spend. In this case, you can calculate how much you already have and how much you need to save. Calculate how much money each month you have to save, and whether you can afford that. If not, perhaps, renting will be a better option. Or if you are ready, you might start saving.
As for the goal, do you want to have some stability in life? If you have a job in a city you live and you won’t move out since you are focused on your career, you might need a home. Plus, if you have a family with kids, it might be more reasonable to spend once on a house. Kids need a lot of things and you might prefer buying more things for them rather than always paying the rent.
As for how long you are planning to stay, do you have a stable career? Are you sure you won’t have a better option in another city? You don’t need any changes in your life? If the answer is “no”, you might consider buying land. If you are not sure, you could still be better off by paying the rent of the house.
Purchasing a house is a big deal. What is the current situation with your career? Is it stable? What about your family? Can you afford purchasing a house? And what about your other expenses on the house? Could you afford the maintenance. Answer these questions as well. If your financial situation is stable, then it would be more logical to buy property.
Each year you spend on the rent. Years go by and if you make some calculations, you see that the sum you have spent is equal to the sum you need for a house. If right now your financial situation is OK, you can afford to save each month to accumulate more, then certainly, it is better to buy a house.
Purchase vs Rent
There are some differences you need to consider. Apart from the amount of money you spend, you should think about some other things.
When you buy a house, you build the equity. Over some time, your house might increase in price. You can buy it at a lower cost and later sell it at higher cost to purchase a bigger house. The good news is that borrowing money is easier than ever at this moment. So instead of overspending on renting, you might even gain more by buying land.
The maintenance and replacements of broken things are included in the cost of the rent. So if you rent property, you don’t have to be worried about a broken washing machine or other equipment. That is something an owner should be thinking about. If the land is yours, everything is at your expense.
Make sure you can afford such expenses. If you are determined to buy your own home, then keep in mind one important thing. Make sure you examine carefully a house you are about to buy. If it has some flaws and might need repair soon, the price should be lowered. Or you could find a better house.
Before the purchase, try to figure out whether you can deduct the mortgage. This option might be extremely helpful in terms of saving some money. But you should be careful, this option is not always available.
Free to Move Out
If you are thinking about changing your job, or you are not sure whether you will stay in the current city, you should consider renting. If your financial situation is not stable, the best way not to get in trouble is to postpone your decision about buying a home.
Pros and Cons of Purchasing a House
- It’s an investment – you can always sell it if you need money. And don’t forget about building equity. Over time, your house will increase in price.
- Stability – you won’t be relying on the landlord. You won’t have to suffer from increased rent costs, you won’t have headaches while seeking a place to rent, etc.
- Tax benefits – you might have some perks. For example, if you could deduct the mortgage, you won’t have to pay that much. But only if it is possible, not all situations allow accomplishing that.
- The privacy – renters don’t have that much privacy, and they can’t make some decisions without consulting the landlord.
- You can do what you prefer. You might want to change something in your apartment, and you won’t have to ask anyone’s approval on those changes.
- The cost is high – if you don’t have the needed sum of money, you will have to borrow it. The closing costs on mortgage very from 2 to 5 percent from the overall price. Plus there are some taxes you should pay.
- Less flexible than when you are renting. If you want to move out, it will be a problem.
- You won’t be able to sell your house fast. Typically, it takes time to sell a house. All this time you will still be paying the mortgage costs.
These are some advantages and disadvantages of purchasing a home. Consider them before making a final decision.
Pros and Cons of Renting
- You won’t lose flexibility. You are moving to another city? Changing your job? You won’t have to worry about anything since you can simply rent a house in another city. If you’re moving to Alabama for your new job, you can easily find Birmingham apartments for rent at a reasonable price. You may try searching online first and list the ones that fit your budget and the amenities you prefer to have.
- You don’t have to pay for any repairs. It is the responsibility of your landlord. The cost of the repairs of broken items is included to the cost of rent. So no additional expenses.
- Rent costs are lower. It depends on the area you live, on the block, and on other factors, but you can rent an apartment or even a house at a cheap price. But don’t forget that in some areas the rent costs are so high that it is better to purchase a house.
- No changes – even if you badly want them. If you want to expand a backyard, or to buy a deck, etc., you won’t be able to do that. It is not your property and you are not the one to change anything. Even cosmetic improvements are not available.
- You are spending, but not building equity.
- The rent price might increase.
- You don’t gain any credit score improvements.
And these are the disadvantages.
To Sum Up
You should consider several factors before you decide to buy a property. You need to know exactly how much you can afford, whether you can afford all related expenses, to save enough to accumulate a sum of money as the initial payment, etc. If you can afford that, then certainly it will be better to buy a house.
About the Author
Daniel Wanderson is a professional journalist from Des Moines, Iowa. After obtaining her Master’s degree, she’s launched her career and over its course, Sandra was contributing to popular publications and now she develops her blog datingjet.com.