Choosing to rent or buy a home is one of the biggest decisions you can ever make. This can greatly affect your future lifestyle. A huge portion of your salary will go towards real estate so it is important that you take this seriously. The best way to know if you can afford where you want to live is knowing which way of living you can afford. For starters, you can distinguish what you can and can’t afford starting from the location you want to live in. Real estate, whether it be renting or buying can differ in pricing depending on which state you want to reside in. Some states are cheaper, and some, like the bigger cities, can be a little bit more pricey. This can be a tough one to decipher but luckily, a home lending advisor can help you determine your financial situation and recommend areas and homes you can afford.
Moving out for the first time, you might ask yourself “how much cash do I need to buy a house?”. This might be a stressful thought, as money doesn’t just grow off trees- though don’t you wish it did? Before you make a decision, it is best to differentiate the difference between owning and renting to determine what you can afford at the moment. Owning a house is everyone’s dream, but depending on your financial situation, you may want to hold on to that dream for now. If real estate is a first for you, then this article might just help. This article will differentiate renting or buying so that you can determine what fits you. Read more to find out.
Renting vs. Buying
Before anything else, you should know the difference between the two. Renting is the act of paying the owner of the home, whether it be weekly or monthly, so that you may use or live in the house that they are renting off. Buying, on the other hand, is the act in which you pay to own the home in which you can either reside or invest. Both of these options have pros and cons, but it really comes down to what you can afford. Still, having a difficult time picking which is the right option for you? Here is a list of pros and cons which can help you weigh out to the right decision:
Renting – Pros
- Best for Nomads – Most of the younger generation would much prefer to rent out properties; renting out can mean that there is no long-term commitment. This way, you can travel from one place to another without the hassle of caring for a property that you don’t own.
- Minimal Costs – Renting out properties can be less of a responsibility. Since you are renting out, you won’t have to pay for any unexpected expenses.
- Fewer Responsibilities – Compared to owning a home, renting a property is so much easier because the homeowner is responsible for the maintenance. The only responsibility you are entitled to is paying off your rent.
Renting – Cons
- Not Permanent – This may be a pro or con depending on your situation, but if you are thinking of settling down, then this option might not be for you. Looking from a long term perspective, renting out a home can be much more costly in the long run.
- Rent Price is Not Fixed – Real estate prices can go higher each year, which means your rent may not stay in the same price range as it did the previous year.
- Pets May Not Be Allowed – If you have a furry friend, renting out condominiums or apartments may not be the right choice. Many of these real estate properties do not allow pets in the building.
Buying – Pros
- A Good Investment – Real estate can appreciate in value per year. Especially in very good locations. If you decide to move out, you can use this home as an investment and can earn extra income.
- Ownership and Stability – Though it can be much pricier, one of the biggest perks of buying a home is knowing that you own the property. Looking at it from a long term perspective, you may be able to save more than renting.
Buying – Cons
- High Upfront Cost – Aside from paying for a downpayment of 2-5% of the property price, there are expenses such as property taxes, insurance, and many more that you can consider.
- Property Value Can Depreciate – Depending on the location, your owned property might not actually appreciate in value.
- Maintenance Costs – Owning a house means owning it for many many years. The things in and out of the house need to be maintained after a long time and this can be costly to fix or replace.