Putting a Roof Over Your Head: The Case for Buying or Renting

One of the basic human needs all of us have is "to provide a roof over our heads" so to speak. How we do that is a very unique, individual choice. We may choose a loft dwelling, apartment, farm house, igloo, hut, or even a flat in the Trump Tower. The question facing everyone at various points in their lifetime is: "Should I rent my next home, or should I buy"?

With the run-up in appreciation in residential property values during the latest real estate boom, it became a commonly accepted belief that if you were not a homeowner, renting created a lost opportunity for you.

Here are some tips to help you figure out the pros and cons of buying or renting.

  • Weigh your housing priorities — Consider how long you expect to live in the house you want to move to. Many experts say if you expect to reside in a property for five years or less, it often makes just as good sense to rent.

    Perhaps you need a bigger space and more living area than a rental property in your area can provide, and you need to buy.

    Perhaps you'd prefer not to have the "worry" of home ownership, and you decide to rent.

  • Evaluate the cost/benefit of home ownership — Fully explore not only what your initial outlay will be for purchasing a home, but go beyond your down payment, closing costs, and monthly payment including property taxes. Also take into consideration needed improvements to upgrade the property to your standard as well as maintenance over time. Many websites provide a lease versus buy analysis that will help you with the calculations.

  • Examine if it is the "right time" to buy — Be sure to inquire with the local experts about sales trends in your new neighborhood to give you guidance. Consider also the median time it takes for houses to turn over. That's a good indicator of the local market and how close the asking price may be to market value.

  • Some reasons to rent may include:

    • You do not have the down payment accumulated to purchase a home
    • There is significant downward pricing pressure on the local market, and you are fearful about overpaying
    • You want the amenities some rental properties afford such as club house, tennis courts, swimming pools, playgrounds, etc.
    • You expect to live in the property five years or less
    • You like the freedom of not having to maintain a property and can call the landlord when repairs are needed
  • Some reasons to buy may include:

    • You have the financial resources to cover the down payment and closing costs
    • Few rental properties are available which meet your housing needs 
    • You prefer to lock in a monthly payment and do not want to leave yourself vulnerable to rent increases after the end of your lease
    • You desire to have the tax benefits home ownership affords through the property tax and mortgage interest deductions
    • You want access to better schools
    • Buying a home affords the opportunity to build equity for long-term investment (asset appreciation)
    • Eventually you may be able to own the home "free and clear" with no monthly payment
    • You think the market has bottomed out and it's a great time to buy
    • You want a better quality of life than renting can offer
    • You desire pride of ownership and the ability to make any changes you wish to your home
  • Things to remember when buying:

    • Don't pay more than you can afford (preventing from losing the house by not being able to make payments).
    • Don't pay more than the home is worth - this is where a good real estate agent who specializes in the local area can help you assess value before making the purchase.
  • You decide to buy, so "now what"? You have looked at all of your options and it's clear you want to buy. Hire an experienced, professional real estate agent. Look for an agent who works full-time, has several years of real estate experience, and has successfully sold homes in the area you wish to buy. Additionally, some agents specialize in working with renters, so ask if that is part of their service.

    Ideally a buyer's agent specializes in the local area, is a strong negotiator and a good communicator. Interview several agents before choosing one. Be sure to select someone you think you can work well with and suits your business style. For a list of interview questions, visit http://www.homegain.com/tool_center.
No matter what decision you make, there is generally some risk involved regardless as to what route you take. Do what makes sense for you and your family given your personal circumstances.

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