Buy or Rent?
Are you tired of renting? Do you feel like you’re ready to buy a home? There are many advantages of buying a home, but with home ownership comes a lot of responsibility. For starters, you’ll have to mow your own lawn and do maintenance when things break. If you’re like me who has trouble doing both, then you can always hire help.
Before you make your decision to buy you should consider whether that decision is right for you. Is your family growing and you need more space? Are you financially able to purchase a home that you will be happy with? When it comes down to it, having the finances to purchase a home is probably the single most important factor when buying a home. The costs involved in buying a home typically separates those who can and cannot. You have to consider the down payment, closing costs, moving costs, etc. that come with buying a home because that amount will determine if you’re making a sound investment or not. Sometimes these costs can be in the thousands of dollars, so you have to ask yourself if it is worth it to you.
To find out if it is worth it, you should ask yourself how long you are intending to live in the home. Home ownership is not for someone who expects to move in less than two years. If you purchase a home, make sure it is a place where you’ll live there for three to four years, or more. There is a couple reasons for this: 1) If you move within 2 years, you probably spent more money on the initial transaction costs (closing costs, down payment, etc.) than what you’re getting back from the sale of your home, which means you’re losing money and 2) If you sell your home less than two years from the date you bought it you’ll be subject to capital gains taxes (If you own your home for 2 years or more then you can pocket any profit you make in the transaction up to $250,000 for individuals, or $500,000 for married couples, and it’s tax free!).
If you’re planning on going back to school, or if your in a transitional part of your life (new job, fiance, quarter-life crisis etc.) then maybe it makes more sense to rent. Another question you have to ask yourself is if it costs more to rent or own in your area. Many real estate professionals say the rule of thumb is that if you pay 35% less in rent than you would if you owned a home (make sure to include your mortgage, HOA fees, property taxes) then it might be smarter to continue to rent.
If you want to see visually whether it’s worth it to buy or rent, check out this interactive graph I found which gives you an idea of how long it takes buying a home worth it vs. renting. Almost always, when buying, the longer you stay in a home, the better your overall savings will be. When you’re ready to buy, give me a call!