Factors to consider before deciding whether to rent or own a home
Buying a home is way too expensive, rent instead! You’ll get more for less.”
“Forget renting, buy a home! Renting is just throwing away money.”
If you have ever been faced with the task of acquiring accommodation for yourself and your family, you will realize that there comes a time when you get to this all too familiar cross-roads: should I buy or rent? Many people will seek to offer you various opinions as to which accommodation arrangement better, but we need to realize that either can be an advantage or disadvantage depending on your peculiar situation as a person looking for a home. So before you decide whether to click on our home rental page or home purchase page, here are some factors to consider:
What kind of financial commitment can you make?
How much money do you have at the moment? How consistent do you expect your inflow to be? Is it going to appreciate over time, depreciate, remain stable, or fluctuate? You need to have a clear understanding of your financial situation and assets, and be able to make projections as to how it is going to change in the future.
You must assess objectively whether you have or will have enough to purchase a home at once, or at least make a down payment and keep with mortgage payments consistently. Or does what you have only afford you the luxury of renting? Typically, rent prices are known to be about 5 to 10 times less than what home purchase deposits and mortgage prices are. However, these deposits and mortgage payments stay relatively stable, while rent prices are more susceptible to instant increase. Be sure of which situation your pockets can commit to, before you sign the papers.
In which location is the property?
Many people do not realize this, but real estate prices are as diverse as income variations out there. There is a rent price for every type of pocket, and so is there a home purchase price. These differences are mainly based on the location in which the property is situated; what we call “location value”. Real estate prices tend to peak the closer you get to city centers, and fall when you move towards the outskirts of town.
If you’re looking to move away from the urban areas and to the more sub-urban parts of town, you may actually be able to afford to purchase your home rather than rent. More people also find it advisable to stick to renting when they move closer to the center of the city, in order to spend less. However, here is the catch: home purchase helps you build equity, and it is better to invest where your money will grow faster than where it will grow in trickles, no? Decisions, decisions, decisions!
What type of flexibility are you looking for?
Life is by no means stagnant, and our lifestyle and tastes are subject to change, whether by our own intentions or due to external factors. The key is to know the range of flexibility your life is likely to function in, at the time you are looking to buy or rent. How stable is your career? Does your job require you to change location every 6 months?
What is your lifestyle like? Are you a traveler?
For options like these, it would be more advisable to rent a home because you most likely are not going to stay there for long. On the other hand, there is a benefit of purchasing a home if you’re hardly going to be living in it: you can put your real estate property up for rent to other people and make some money while you are away! People with a more “stable” lifestyle lean more to the option of owning a home, because their stay is long term. With regards to the property itself, there are flexibility options as well. When it comes to design and remodeling, a lot of rented homes have strict rules; it is difficult to effect certain changes to the property. However, a home that is owned can be remodeled in any way that the owner deems fit, with no restrictions.
What are your long term plans?
This may or may not be directly related to the property you are deciding whether to rent or own, but it sure is an important influencer of your decision. Picture yourself 5 to 10 years from now; what are you doing? Which places are you going? Where do you call home? Now, picture yourself 30 to 40 years from now, answering the same questions. Do you see much of a difference in your living situation?
That is one indicator as to the whether the property you are looking at can possibly stick with you for the long haul, or will just be your home for a while. Long term decisions like growing a family, travelling round the globe, etc. can help you know which decision is best in the short term. Also, other long term plans like investment strategies can influence your decision to buy or rent.
If you want to invest in something that will yield some returns somewhere in the future, and real estate is one plausible avenue for that. A piece of property can be an appreciable or depreciable asset in the long term, depending on the commitment you can afford towards maintaining it. You want to be sure that this is a sustainable venture for you before you put your money towards it.
Beyond these, there are more factors that can influence your accommodation decisions, and may be peculiar to your unique situation as an individual. The main thing to remember is that you do not want your money to be sucked away from you without giving you the satisfaction you require at a particular point in time. When you are done considering the factors, feel free to sign those papers!