Why Rent When You Can Buy

Dated: 03/18/2019

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Why Rent When You Can Buy?


Deciding to purchase your first home is major decision (obviously). The question you're asking is, should I buy a house or keep renting?  And the answer you receive will depend on who you ask.  Ask a real estate broker, a mortgage broker or a financial guru, they will say, Yes, absolutely buy a house to start building equity & stop paying someone else’s mortgage with your monthly payment.

 

But ask your bank account, your sense of freedom, or your roommate.  You may get a different answer.

 

The truth is there are many factors contributing, many are financial, but some are personal.  Below we discuss the financial and emotional implications of the decision.

Financial Considerations

 

From a simple, analytical point of view you need to consider all the financial implications of buying versus renting.  These include the initial costs, recurring costs, and net proceeds of both buying and renting.  Then, you’ll compare the two & make your decision.

Use the comparison calculator here to run some numbers.

 

Initial Costs

 

Buying: The cost incurred when you close on your property, including down payment, closing costs, and other fees.

 

Renting: The cost incurred for security deposit and move in fees.

 

 

Recurring Costs

 

Buying:  Monthly and yearly costs associated with owning a home.  This includes the mortgage payment, interest, homeowners insurance, and property taxes.  These are the expenses most people consider.  What is often overlooked are the costs of property maintenance & repairs, both major and minor.

 

Renting: This includes rent payment and renter’s insurance.

 

Net Proceeds

 

Buying: This is the amount of money you’ll get when you sell your home, minus the initial and recurring costs totaled together.

 

Renting: This includes the return of your security deposit.

 

an american familys net worth.jpg

 

Personal Considerations

 

Maybe you’ve calculated that it may make more financial sense for you to keep renting, but you have personal and/or emotional reasons for wanting to buy a home.  These include wanting to have a personal yard for a pet or your love of gardening. Perhaps it’s the desire to design and renovate a one of a kind home, just for you.  Or perhaps it’s simply the life long dream of homeownership and pride that comes with it.  If these considerations are worth it to you, go forth, you only live once.

 

On the flip side, if you’ve determined that buying makes more sense financially, do a quick reality check. We may be one of the only real estate teams out there providing the following list.  Here are the reasons you should rent instead of buy:

 

No Down Payment

 

Having a downpayment is beneficial because you start off with equity in the home. It also decreases your monthly payment while making your offer on a home more appealing to a seller. If you don't have all of the funds necessary for a downpayment, there are other options to consider. There are loan programs that will assist with the downpayment necessary to complete the transaction. Ask your Real Estate Broker and Loan Officer for more information for these programs, if needed.

 

Uncertain Location

 

Do you know for sure that you want to stay put for the next 5 years? Are you secure in your job?  If you want to move to another city in the next 5 years (and prefer not to be an out of the area landlord), you should probably hold off on buying.  In a similar vein, how secure is your job?  If you decide to quit or are forced to leave via lay off or being fired, are you confident you will be able to secure another job in this area?  Would this limit your job search?  Depending on where you are in your career and your industry, it may be wiser to keep location options flexible.

 

Life Style

 

Honestly, most people can afford to rent a much higher lifestyle than they can afford to buy. Think about it, if you rent a place in Seattle for $3200/month, that’s a very nice place in a convenient location. That same payment will buy you a place for ~$450,000, which at the time of this writing will get you a decent townhouse or condo, much smaller and in a less desirable location.  

 

Conclusion

 

Unfortunately, no one can tell you what makes more sense for you, your finances, and your personal feelings toward the issue.  Buying a home is very much a financial decision, a financial decision that influences nearly every other aspect of your life. Ultimately, you will have to decide what is more important to you and your future. No one can make this choice for you.

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Marco Murad

Off Market Specialist. Specialties: Buyer's Agent, Listing Agent, Relocation, Commercial R.E. I'm a real estate consultant who's made a career of an excellent track record of outstanding results an....

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