Should you rent or buy your next home?

Michelle —  December 3, 2012 — 4 Comments

Buying a home is definitely a large investment. There are a lot of things that should be thought about, but what if renting your home is actually a better investment for you and your family? And what if buying your next home is clearly the better and wiser choice?

We bought our house when we were very young. We were 20 and had rented a house for a little over 2 years before, but knew we were ready. Buying a house was nearly the same amount as renting an apartment, and it was actually CHEAPER than renting an actual house in the area.  Luckily our house is worth nearly the same amount of what we bought it for a couple of years ago and hasn’t bit hurt too badly by the housing market.

However, it did hurt some areas of our lives in that dreams of traveling constantly were definitely put on hold. We do wish we would have waited a little longer, just to find the perfect house instead of being rushed by our lease being up.

Here are some factors which should be considered:

How long do you expect to live there?

How long do you think you will stay at this residence? If you are going to buy a house, it is generally said that you should try and live there for around 5 years or longer in order to make it valuable and worthy as an investment. If you are only going to live somewhere for a couple of months or even just one year, then renting is probably a better bet. This is because the cost of buying and selling would be too high if you don’t live i n a house long enough.

If you buy a house and don’t expect to live in that city long, it can also hurt or delay your plans. There is a lot less flexibility if you want to switch jobs or anything else. If you want to travel the world, then a house might hold you back because you will always have that mortgage to pay (which means you would have two residences to pay for at once).

Costs

Where I live (the Midwest), the cost of buying your own house and renting an apartment are nearly the same. The cost of living and housing is very cheap in the Midwest, which makes buying your house almost always a better bet.

Of course there are cheap apartments, but when you are comparing buying versus renting a home that are similar, then that’s where you might be able to see the value in buying instead of renting.

However, as we all know, there are many areas in the world where the cost of housing is very high. A house here in the Midwest might be very nice and big and only cost $250,000. Whereas this same house might cost $800,000 or more in a different area such as Los Angeles.

All costs should be thought about when you decide to buy a house. Will you be able to afford it still if something goes wrong? Something such as a furnace might cost over $5,000 to fix. Then there is also the roof, mowing the lawn, fixing broken windows, repairing driveways, and so on. The list of possible maintenance is endless.

The other costs included are home insurance and property taxes as well. Our property taxes are over $200 per month (we pay it annually though), so it definitely adds up quickly.

If you rented instead, then most of these costs and maintenance would just transfer to your landlord and the worries of something breaking would not be yours.

Would you rent or buy your next home?

What are your reasons?

Michelle

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Michelle is the founder of Making Sense of Cents, a personal finance and lifestyle blog about budgeting, traveling, life, and student loans. Read further on her story and life, and you can also connect with her on twitter.

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