Thursday, January 9, 2014

Should I Rent or Buy My Next Home?

Regardless of whether you’re just about to break out on your own after college, or a retiree looking for a downsized place to park your stuff while you see the world, you’re going to run up against that immortal question: should I rent or buy? Unfortunately, the answer isn’t an easy one to give, because more than anything, it depends on just how you want to live. After all, an apartment, a condo, and a home all have very different needs that must be met. If your life is more globetrotting adventurer than stay-at-home dad (or mom,) then the choice shouldn’t be that hard to make, since apartments require no maintenance on your part to keep them looking good. A home, on the other hand, requires daily attention to ensure that everything looks good, performs well, and returns your investment to you should you decide to sell. 

What are the upsides of renting?

Renting, in a nutshell, is the easiest way to live. You (generally) don’t have to deal with lawn maintenance, leaky pipes, or old roofs. You simply ensure that your rent is paid up every month, and your landlord takes it from there. Depending on the location, you have the benefit of living close enough to other tenants that someone’s bound to notice if someone decides to plunder your place for everything they can carry off. Additionally, there may even be multiple levels of security to protect you, depending on how upscale your apartment is. This means that you’ll be more able to travel, if that’s your thing, without having to worry about your abode.

Unfortunately, renting also comes with its share of downsides. First off, you are literally inches from where your neighbor sleeps. Seriously. If she’s got a snoring problem, you’d better get used to it or figure out some sort of music to put you to sleep, because that’s going to be your cross to bear every night until you move out, or she does. On the financial side, renting an apartment means that you won’t be able to deduct your interest expense as you can with a home purchase. Additionally, when you rent, you don’t build equity. If you’re retired, that may not be a priority for you, necessarily, but if you’re just starting a family, that really is something to think about. You might be surprised the sticky situations that you can get out of by using a home equity loan or line of credit.

So, What about Buying?

If you choose to buy your home, there are upsides, but be wary of the downsides, as well. If we’ve learned anything since the 2008 financial meltdown, it’s that home values go up, and they come down too. If you think for even a minute that you might not want to stay in the house for more than a minimum of five years (but 10 is a more adequate number these days,) then don’t buy the house. You could end up losing tens of thousands of dollars if a job offer in another city takes you away and you have to sell. Additionally, you’re on the hook for all the maintenance, fees and taxes that go along with home ownership. That can often mean a substantial extra amount tacked onto your mortgage payment each month. 

On the positive side, though, buying your home can mean lots of benefits. Sure, there’s the difference between a house and a condo, wherein you may or may not have to deal with maintenance, depending on the contract you sign when you buy. Also, there are loads of tax deductions and incentives that are provided for home buyers, particularly in the shadow of the meltdown, when the federal government has been incentivizing home ownership. There is a sense of permanence and structure that a family can enjoy together, and really, nothing beats having really great neighbors that become really great friends!

When you ask yourself, “Should I Rent or Buy my next home,” make sure to take into account all the different facets of home ownership versus renting that you’ll run into. That way, you’ll be able to make the right decision when the time comes, and avoid making mistakes that could cost you money and aggravation in the long run. 


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