A lot of people think about the question of whether they should rent or buy. And a lot of answers are offered that frame the question as if it’s about investment first and foremost. But the truth is that if it’s your primary residence, you should be considering much more than the factor of buying a home to sell later on. Here, we’re going to take a much closer look at the question of renting a home and why it may be more worth it than many readers believe.
Know what you can afford
When it comes to buying, the question of affordability is often framed as being solely about the price of the home or even just the down payment. However, the services rendered (such as property attorneys, home inspections, estate agents) and the ongoing costs of the mortgage catch people by surprise. If you think you’ve just about got the position that you can afford to buy a home, factor in these additional costs and what standard of living you’ll be able to afford while paying a mortgage. Naturally, when renting a home, you will almost always be paying less in rent than you would if you were paying off a mortgage on top of the other homeowner costs.
Know the market
Markets bounce up and down, depending on location and the behavior of the people in those markets. Check out the home rental ads as well as the to-buy price listings regularly and start identifying trends on when costs increase or decrease. In a buyer’s market, you can often get much more home for your money, meaning you have the potential to buy a better house to live in as well as one that could sell much better when the market turns. If you need a home in a seller’s market, however, you’re rarely going to get a deal in your favor.
Know your options
It’s not always a clear-cut definition between buying and renting, either. Recently, the rent-to-buy approach to homeownership has become a lot more popular. People who can’t afford to buy a home outright might instead gain ownership slowly by paying for it with a portion of each rent payment. It takes a longer time to buy, but it offers some security for those who aren’t in a position to start owning a home straight away.
Know your investments
When it comes down to it, property as a primary investment isn’t always the smartest move. If you have only enough money to invest in a home, you are putting all your financial growth eggs in one basket. Renting, as it’s cheaper, allows you to diversify your investments and find other opportunities, such as stocks, bonds, small business investing, and more. Everyone looking for investment growth should be trying to spread out their cash so that if the market flips on one investment and you end up losing, it doesn’t affect the potential growth of your other investments.
Renting a home isn’t “throwing money away”. It’s a chance for many to afford a much better home than they might be able to buy with enough income to spare to explore other investment opportunities. Just because you’re not going to eventually 100% own a home doesn’t make it a safe investment.
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