In this ever-changing housing market, the decision to rent or to buy can be as confusing as ever. Remote work, climbing mortgage rates, rent increases and changing lifestyles are all now factors to be considered when making this critical decision.
When it comes to the most significant touch points for deciding to rent or buy, some you may have already considered, but others may be factors to add to your thought process. Here’s what you should think about:
— Financial considerations.
— Lifestyle considerations.
— Personalization and customization.
— Personal investment.
There are obvious financial benefits to owning your home: You can write off a portion of your mortgage payment as a tax deduction. Consider the tax laws in the city or state where you want to purchase. Changing tax laws, such as those in New York City, now limit the amount you can write off and may impact your decision.
Rising mortgage rates will have an obvious impact on your ability to buy, as well as the required amount you must put down upon purchase. However, other financial considerations for a home purchase include property maintenance or upkeep costs.
Your overall outlay goes beyond your mortgage payments and local or state taxes. When owning a home, you are responsible for everything. Is there a large lawn to be maintained? Is there a pool that needs regular servicing? Do you need to pay for garbage removal? Will you need to pay for snow or leaf removal? Will the roof need replacement in the coming years?
There are also costs you cannot plan for: a falling tree, a malfunctioning septic system, storm damage and more. Evaluate the complete range of ongoing and one-time fees involved in owning the home.
Renting can eliminate those costs, as many times the rent includes maintenance expenses such as appliances breaking down, leaks and garbage removal; however, it does not shield you from all costs. Find out in advance what services are and are not included in your monthly payments. In addition, find out what protections are in place regarding rent increases.
Your landlord might significantly increase your rent when your lease is up for renewal, or simply decide not to renew your lease. You are beholden to the landlord each time your lease is up for renewal, as well as reliant on them to handle any required repairs. While it might not cost you anything if the plumbing leaks, you may end up waiting weeks for the landlord to send someone for repairs. You don’t get to control the situation.
If possible, find out from other renters who have worked with the landlord in the past, and find out how responsive they are to requests for repairs.
With more people working from home, they now have more flexibility than ever regarding where they live. If you are no longer required to commute to a job, renting might make more sense. You can try a location and still have the flexibility to consider a move if you want to try another location when your lease ends. Renting provides much more flexibility.
However, if you have returned to the office, either full-time or partially, and assume you’ll remain in your current job for a few years, then buying might be wiser. A common rule of thumb is if you plan to stay in the home for five to seven years, then buying is a good option. Anything less than that may make it a less optimal investment.
Stage of life is another significant lifestyle factor to consider. For those with young children, buying a home and putting down roots is a major driver. Once you find a city or town you like and a desirable school district, becoming a part of the community is important. You don’t want the upheaval of a massive rent increase or a non-renewed lease to impact your sense of stability. Of course, you can consider renting for a year to be sure you like the town or city, and then look to buy.
On the flip side, empty-nesters who sell their homes and decide to move to downsize or move to a new location should consider renting first. Despite having the financial resources of a home sale, renting provides the necessary flexibility this stage of life might require.
Before investing in a new home, renting allows you time to ensure the new location is the right fit, realize you’ve downsized too significantly or decide you would rather split time in two or more locations. It provides some breathing room before making another significant investment.
Personalization and Customization
One of the biggest differences to consider between renting and owning is the ability to make the place your own. When you own real estate, you can do anything from upgrading appliances to a complete gut renovation. If you purchase in an apartment building, inquire about any building construction or renovation restrictions, which may limit what you are able to do.
Renters, in most cases, are very limited in terms of changes. Most are only able to paint and must have the place returned to its original condition and color scheme when moving out. If you have a strong design sense or a desire to customize your home to your distinct needs, then you more than likely need to buy a home. With rentals, what you see is what you get.
Buying a home is likely the largest single purchase you will make in your lifetime. There are many factors to consider when making such a large investment, from ongoing costs to location and more. Keep in mind, however, that buying a home is not solely a financial decision. If this is the place where you want to settle down, raise your children or set down roots, a community you want to join and a property you can customize and make your own, then you should not worry about timing the market perfectly.
If you can see yourself being happy there for many years, the profit you make on the sale sometime down the road becomes less important.
Renting is a great option if you are unsure about the location, want more flexibility based on where you are in your life or simply do not have the time or money to invest in homeownership and all the upkeep it involves.
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