Something that is rarely discussed in the “Renting vs. Buying” equation
Forget about a math for awhile, and rather answer the following questions:
- For how many years I do anticipate/plan to live in the property?
- Do I have the job that requires prolonged business trip?
- Is my job stable enough or my business skills are in relatively high demand, so I can stay in this area for a long time?
- Am I ready to incur the upfront expenses if I buy the house (down-payment, settlement fee) and use my savings? (Hopefully you have the emergency funds and won’t touch them).
- Am I planning my prospective house to appreciate in value over the years? Did I do the thorough research about the housing market in general in the chosen area? Does it have the potential or it can deteriorate due to political or economic changes?
- Am I ready to be a homeowner and face all maintenance issues and expenses?
Some of you may be not ready to answer some of the questions. It is understandable. Let me assist you.
Obviously, if you don’t know your time horizon in the chosen neighborhood or it will be relatively short, the is no reason to go big. Rather, rent the property and see how it goes later. Your situation can be changed in the nearest future.
Some people are making a mistake when they need to move to a new place and don’t know if they will be comfortable with everything out there. It makes perfect sense to rent first, get familiar with a neighborhood, surrounding, shopping, neighbors, schools (if you have kids), etc., and only then make a decision if it makes sense to buy a house.
Why is this so important? If you are a house owner, your property should be maintained 365 days a year. It means any possible roof leaks, humidity in the basement, electrical power failures (I just had one right on the electrical meter attached to my house), possible floods, storms, and even hurricane. You can’t afford to expose your property to all those misfortunes and no one is watching your property.
Don’t you think that renting is safer with less headache?
My first mistake as a townhouse owner years ago was a hope that me and my wife will have the jobs for the long time without interruption. We were out luck when we both lost the job almost at the same time due to recession. I had to deliver pizza for almost two years while I was learning my new profession, and my wife had to get multiple side jobs just to keep our bills paid. Needless to say, we did not have any emergency funds (and did not know we need them!).
So, don’t repeat my mistake. Make sure your skills are in good demand, and you may get another job not so far away from your house.
My point is that buying a house requires hard cash up front. The amount of money is varying. If you are the first-time buyer, here, in the U.S. you have the privilege to put the down payment only 5% from the cost of the house. However, as a common requirement, you have to be ready to put down at least 10% or even 20% (if your credit score is not so good) of your after-tax money.
Make sure you have made your calculations. Don’t strip out your saving fully. You may regret later. Perhaps, do not touch your emergency money (6-12 months of living expenses).
My son just bought his first house. Expensive but in a nice area with good schools. When he was considering his options, he has included into consideration the potential increase in value as his first priority.
So, I have asked him a question #5. He said that that house is for many years to live. So, what was point to discuss the future value (who knows when)? I said, buy the house and enjoy and don’t worry about its value in the future.
Another story if you want to buy the property that will be sold in the nearest future with appreciated value (like I did last year), you want to make sure that your due diligence will support this goal. Location, location, and location – the first priority when buying the house.
Many folks are dreaming about owning the house. It’s a common American dream. Unfortunately, many of them get frustrated when they are faced with outgoing maintenance problems when they need to take care about the things that have never could imagine.
The house I sold in one of the South states taught me that better due diligence pays off in the long run. When I was planning and doing various calculations, I had no clue about few additional expenses (and headaches) I had to incur.
Beyond common maintenance (plumbing, lawn moving, etc.), I had to take care about the trimming the palm trees that were on my property (once in 3-4 months, $250 each); replacing one palm tree ($1,500) because the small pests have decided to create the nest inside the tree; pay for 365 days protection against ants, $200/year); cleaning the tiled roof at least once in 3-4 months (humidity made it look dirty, $250 each), and having a headache with a local Home Owners Association that was like a local police trying to see what can be done to hurt home-owners (something like: you have to paint your driveway, your grass is too dry!).
Don’t get me wrong, being a homeowner has its rewards and moral satisfaction. However, it doesn’t hurt spending more time on due diligence before you are making a decision to buy or rent.
This site is for informational and educational purposes only and should not be construed to constitute professional advice. Nothing contained herein shall constitute a solicitation, or endorsement. I am not affiliated with, nor do receive compensation from, any company. My apologies for any spelling mistakes (although, I have used the spell checker) or my writing style if it is not up to your taste.