Whenever the subject of renting comes up, there will inevitably be people who caution against it. Renting gets a bad reputation for being a short-term solution with no immediate permanent assets.
However, the idea that buying a house is the best long-term investment isn’t necessarily true anymore. In fact, studies show that real estate only outpaces inflation by a very small margin over time and might not be the best place to invest your money (if that’s what you’re going for).
The real problem with renting vs. buying arguments is that there are so many details to consider when weighing the pros and cons of each. While there’s no simple answer, there are a few things you can look at to determine whether renting or buying is the best choice for you.
Look at how much rent is rising in your area.
In many instances, people choose to rent because buying a house costs much more money up front. Problems arise when rent continues to rise year-over-year, though, while a mortgage will stay fixed. However, taxes can go up regularly which will change your monthly mortgage payment. However, there are factors that make renting much more viable if you live in a city with relatively stable rent. In these cases, you can often negotiate longer leases with fixed monthly rent prices and search around for better deals.
Decide how much maintenance you can afford.
While tax credit does offset some of the costs of owning a home, you should also be aware that maintenance is a huge cost that can come with owning a home. Being able to choose your own paint colors and rip out ugly flooring is one of the reasons most people dream about owning their own place, but homeowners are also on the hook if a plumbing issue damages those freshly-painted walls and expensive new floors.
Make sure you’re not forking over all your income to buy a home and leaving your savings account empty. If you don’t have at least six months of expenses saved up, consider renting and investing some extra money while you work towards owning a home.
Check your timeline.
Most people don’t stay in one house their entire lives, so it’s crucial to consider the costs of selling before you even buy a place. Most financial advisors suggest that you should plan on staying put for at least five years or you will most likely end up losing money.