Should you buy or rent a home? The common theory is that owning your home is cheaper then renting a home or apartment.. True or False?
DESPITE WHAT YOUR REAL ESTATE AGENT TELLS YOU OR WHAT YOU SEE ON TV, PRICES MAY GO LOWER OR… THEY MAY GO UP. IT DEPENDS ON NUMEROUS FACTORS – NONE OF WHICH ARE GUARANTEED. DO YOUR OWN HOMEWORK, MAKE YOUR OWN DECISIONS.
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It depends on a number of factors, the most important being the total cost of buying vs. the cost of renting the same or similar home. Local Market conditions determine price while your personal needs and goals also come into play.
Questions about Owing vs Renting
1. How long do intend to live in the area?
2. Your family status – are you single, married (with children or planning to have)
3. What is the local market conditions – for both renting and buying.
4. Why would you buy vs rent ?
5. Are you looking at it is an investment for yourself (move in, then sell in a few years)
6. Are you looking at it as an investment to buy an rent to someone else – now (and you use later) or later (and you use now)?
7. Job status- are you comfortable in your job – stability no relocation etc.
CHEAPER TO RENT – Indicators
How can it be cheaper to rent vs buy?
Carrying Costs are costs associated with financially maintaining a property. Costs typically INCREASE each year or so should the amount you allocate for future costs. The include but are not limited to:
- Real Estate Taxes
- Utilities (Gas or Oil, Electric, Water, Sewer, Garbage, Cable / Internet) Note: Some of these costs may be absorbed by a landlord in their lease. You can always ask for a “gross” lease. Gross means everything included.
- Lawn Care
- Condo or Association Dues (if a condo or association managed)
- Other Fees, Permits etc
The larger the home, generally the greater the carrying costs, giving you, the renter, more power in getting the best deal. IT NEVER HURTS to offer LESS then the asking price – whether you rent or buy – unless the market conditions are real hot.
You should also find out WHY the home is on the market for rent. Are there marital problems forcing them to rent, a job transfer, death in the family etc. The more you know, the greater your chances are of getting the best deal – whether buying or renting.
Buy vs. Rent Comparison Chart (from Ginnie Mae)
|Buy||Property builds equity||Responsible for maintenance|
|Sense of community, stability, and security||Responsible for property taxes|
|Free to change decor and landscaping||Possibility of foreclosure and loss of equity|
|Not dependent on landlord to maintain property||Less mobility than renting|
|Rent||Little or no responsibility for maintenance||No tax benefits|
|Easier to move||No equity is built up|
|No control over rent increases|
|Possibility of eviction|