The question is as old as real estate: Should you rent your home, or buy it? You’ll find strong arguments for both sides, and more than a little bit of heated emotion (just look at online message boards debating the topic). The reality is that the question is not so simple, because the answer is not the same for every person.
The common-sense logic behind buying
The conventional wisdom has it that buying a home is a better choice than renting, and it’s not hard to see why. When you pay rent, you swap money for a month of shelter. When you pay a mortgage, you get the same thing and a whole lot more. Mortgage payments go toward paying off the debt on your home. Eventually, you’ll own the place free and clear. And if you sell it at any point, you can pay off the mortgage and pocket the difference. As a homeowner, you have a valuable asset that could even go up in price (assuming the real estate market cooperates — and, so often in history, it has). It’s a no-brainer, right?
In many parts of the country and under many circumstances, it is. But there are a few other factors to weigh.
The rent-versus-buy debate
The reason such a debate exists around renting and buying is that the answer is not the same for everyone. In fact, some people consider the whole debate silly. Sometimes it’s better to rent, and other times to buy, so neither is really “better,” right?
Here’s one reason it might be better to rent: Closing costs. It costs money to buy a house — not just the cash you swap for the property, but the price of actually competing for the opportunity to purchase, too. Over time, a mortgage’s advantages over rent will more than make up for closing costs. If you move out next year, you’re not going to have been living there long enough to recoup the closing costs. That’s why even the richest people don’t buy homes to live in while they go to college or work out of town for a year or two. It’s not worth it.
Another thing to consider is what else you could do with the down payment. Is the stock market booming? Could you build your wealth faster by investing the down payment, collecting interest, and just paying rent? It’s a risky move, to be sure, but some people prefer it.
And then there’s the fact that not all housing markets are created equal. A row house in Manhattan will cost you millions while similar square footage in rural Texas could cost you tens of thousands.
A personal decision
So should you buy your home, or rent it? Well, that’s up to you, we’re afraid, but asking the right questions can help you arrive at the answer.
Where are you in life? Will you be living in the area for a while? If you’re staying for years, buying starts to make a whole lot of sense. If you’re settling down, you’ll probably want to buy sooner rather than later.
And where are you in the world? Real estate, after all, is all about location, location, location. If you live in an area where everyone rents, there’s probably a reason. Experts with land for sale in nc explain that buying is generally the way to go in most places. Real estate can be affordable and it’s also a growth area. In other words, you could land a great property for less and see it grow in value while you own it.
Vacation properties and rental properties are less essential than homes, but they can be wonderful things for you and your family and can also be great investments. Owning a vacation property, for instance, saves you a bundle on vacation rentals and may even allow you to be the one making money in rental transactions.
It’s easy to see why the conventional wisdom still reigns in so many places, despite some exceptions. If the math works out for you, you’ll find that the home you live in could become your most important and most valuable investment.