Renting vs. Buying Your Home: 5 Things You Must Consider First

The age-old question for adults everywhere is, “Should I buy or rent a home?” While renting has always been a popular alternative to homeownership, there are more renters now than ever. Is this increase due to preference or necessity? Buying a home is usually considered the preferred option, but it may not be the best choice for all in today’s economy. Is renting or buying the best decision for your needs? You’ll need to consider a few things before making a solid choice.

Your Financial Preparedness

Buying a home is a major financial investment. You will need to pay not only your monthly mortgage but also property taxes, repairs, and homeowner’s insurance. You will usually need a significant down payment, traditionally 20% of the home’s purchase price. So, for a house that costs $500,000, you’d need over $100,000 for the 20% down payment and closing costs. Not many people have these kinds of funds in their bank accounts. While many buyers put down less than 20% these days, you’ll be subject to mortgage insurance with a lower down payment. There are also closing cost or down payment assistance programs depending on location, but not all buyers will qualify. You’ll need to evaluate your monthly income, living expenses, and debt to determine if you’re financially ready to purchase a home.

The Real Estate Market

Arguably, the most important factor to consider before you rent or buy is the location’s real estate market. A highly competitive market will likely mean you’ll pay more to get a home, and it’s going to be more difficult to secure a home you’re looking at. On the other hand, if you need to sell, a competitive market can work in your favor. You will also need to compare the average costs of buying versus renting to make an informed decision. Renting is usually cheaper when you factor in property taxes, insurance, and home maintenance costs. However, when you buy, you’re paying into an investment that will usually appreciate over time. 

Dallas, Texas

Dallas is a popular city with plenty of employment opportunities in technology, construction, and other trades. It’s considered a somewhat competitive market, receiving only two offers per home on average and selling for an average price of $395,000. While this is a much more affordable price compared to other cities, renting may be more attractive for single, young professionals or frequently moving families.

Denver, Colorado

In this beautiful and popular Colorado city, you’ll see a pretty competitive market. Home prices are higher—over $500,000 on average—and popular homes will sell quickly. You’ll need to consider your budget and long-term goals before buying near here. You may be able to sell your house fast in Denver in the right neighborhood, but other locations have spent months on the market on average without the right offer. If you’ll need to sell soon, you will want to consider this.

San Francisco, California

California is known for its costly real estate, but offers higher salaries and plentiful employment opportunities in return. San Francisco is home to some of the largest companies, and is in close proximity to Silicon Valley, one of the most famous tech hubs in the world. Homes sell incredibly quickly, and they’re expensive—an average of $1.25 million. You’ll need significant financial preparedness for this purchase, and you will definitely want to stay in the city for the long haul to handle the competitive market.

Long-Term Plans

If you only plan on staying in a location for a short while, you’re likely not going to get much value out of buying a home. On average, homebuyers stay in their home for about thirteen years. If you want to leave a city or aren’t in love with it, you’re likely better off renting. Some down payment assistance programs or mortgages have an occupancy rule where you need to live in the home for a fixed time (usually, five years) before you can sell it. Make long-term goals and plans for yourself and any family you may have. Do you plan on staying in the home’s location for a long time? Will you have long-term employment and income?

Maintenance Responsibilities

When you rent a home, the property owners or managers will replace appliances and make costly repairs at no additional cost to you; these repairs are included in your rental payments. When you’re a homeowner, you’ll need to pay your monthly mortgage as well as any repairs. Replacing a water heater alone can cost thousands of dollars. Roofing or HVAC installation can easily cost you five-digit figures. You’ll also be responsible for arranging these repairs; no one will do it for you unless you hire professionals. Homeownership may grant you more freedom and control over what is done to the home, but it will come out of your pocket and schedule.

Your Lifestyle

Buying a home isn’t for everyone. Renting is a more attractive solution for those who don’t want to or can’t afford extensive home repairs. In the long term, renting is technically more affordable, especially for single people who don’t need a lot of space. If you’re single, don’t care about home customization or control, and don’t need a lot of space, you may see more value in renting. If you have a lot of kids or pets that can affect your security deposit, homeownership may be more attractive. If you want a space that is entirely your own without having to worry about landlords or leases, buying is definitely a more solid choice.

Conclusion

No one can make the decision to rent or buy for you; it’s a complicated choice that involves many factors. While buying a home is a significant investment, it typically provides more space and customization that will appreciate over time. Renting is the price of convenience when it comes to maintenance and repair, but you won’t have an asset in the form of property. Families, people who want a customized space, or those with more financial freedom may opt to buy a home. Single people or small families who prefer a more affordable lifestyle may find renting more attractive. Research the market, your finances, and long-term goals to determine if renting or buying best meets your needs.