However, if the recent housing crash taught us anything, it’s that buying property isn’t right for everyone.
Deciding to buy a house is a big decision, probably one of the biggest decisions you’ll ever make. It’s also sure to be one of the largest purchases you’ll ever make, so it’s not a decision to take lightly.
Don’t get me wrong– buying a home can be a wise investment and help you build equity if you find a great deal, but it can also become a financial burden if you buy before you’re ready.
When I worked for a mortgage broker, there were so many times I saw new clients come in and thought that their mortgage was a foreclosure waiting to happen.
Some of them had gone out to view properties with a realtor and gotten caught up in all of it. They were starry-eyed over granite and stainless steel, while others were trying to mortgage investment properties because they thought it would be an easy way to make money. (Spoiler alert — it’s not!)
Sometimes, it makes more sense to continue to rent instead of buy. Don’t let anyone try to convince you that buying is always the best choice because you can build equity, or that it’s simply a “wise investment.”
The truth is it’s not always a wise investment, and even if it was, it may not be wise for you. The only prudent decision you can make is the decision that best suits your needs.
If you are on the fence between buying or renting, consider these points first.
A Home is an Investment
What other single thing do you spend so much money on? Buying a home is an investment, but it’s not like contributing money to a 401k or savings account.
Instead, your money is tied up in an asset that’s not liquid, so it’s not something to dive into if you may need that money quickly in the future.
Your home is considered an investment simply because you spend so much money on it. It’s likely to be the biggest expense in your lifetime, so you should research it just like you would any other investment.
Are You Ready to Settle Down?
When I ask if you’re ready to settle down, I’m not necessarily talking about getting married, starting a family, or adopting pets. (Although that’s definitely something to think about if those plans are in your future.) Rather, are you ready to have a little bit of permanence in your life?
A home is a huge responsibility. You’re stuck with the house you purchase in its original location. You’re stuck with all of its problems, its layout, and the neighbors around you. You’re stuck if your job relocates or if your needs change because of family.
A house can be sold, but it takes time (in some cases many months), and a ton of effort and money. House showings, open houses, constant upkeep, and the ability to run out at a moment’s notice are all required if you need to sell your house. That’s not ideal if you need to sell in a hurry.
You could always rent out your home if you needed to, but it’s not fun to be a landlord if you never planned on it, especially if you’re moving out of the area.
Remember that selling a house is nothing like selling a car. You can’t exactly list it on Craigslist or the classifieds and have it sold in a week.Selling a house isn't like selling a car. To be prepared to buy, you need to be prepared to stay… Click To Tweet
Renting is Expensive, but Flexible
Many times, rental amounts are higher than mortgage payments, and part of that is because you aren’t just paying for a roof over your head. You’re paying for maintenance on the property, a landlord to call when you need them, and for the freedom of being able to move out when you want (or as soon as your lease is up).
Renting allows you to keep your freedom — your freedom from home maintenance and from being trapped in a specific location. If an up and coming area of town starts trending, that’s great! You can go find a new house or apartment that you like better, with no repercussions.
That kind of freedom and flexibility is worth a lot of money to some people, so you need to decide if it’s right for you. If it is, keep on renting! There’s nothing wrong with it, and many financially savvy and secure people choose to rent.
The Downsides of Renting
There are many downsides to renting as well. For one, you typically can’t alter your rental in any way. Some landlords don’t even want you to paint, which can make many rentals feel generic. You might have to think creatively if you want your rental to feel like home.
There’s also the possibility of having to share common walls with neighbors you may not like. I still cringe when I think about some of my old neighbors that lived next to me in a duplex. They were hoarders and not very clean, which attracted roaches and mice. I decided it was time to move when a snake got into my apartment (a snake that I’m sure was attracted to the mice).
You can’t exactly choose your neighbors when you are buying a property, but when you have to share a wall with them in a rental, it makes it much harder to ignore if living next to them becomes a problem.
The other major downside of renting is that your rental amount can increase and probably will each year. Even if you sign a lease, that lease will eventually end, and you could be facing finding a new place to live or paying a higher premium for the same rental.Renting can be worthwhile for flexibility, but you might pay more for that luxury. Worth it? Click To Tweet
Consider Location, Location, Location
If you decide you do want to purchase property, it’s important to make sure you like the area you live in, so ask yourself these questions first.
- Do I love the city I currently live in?
- Can I see myself in this city long term?
- Is the real estate market stable right now?
These are very important questions if you’re thinking about buying a home. If you haven’t lived in the area long enough to decide, absolutely rent for a while before making any big decisions.
Do You Have Enough Saved for a Down Payment and Emergencies?
If you’re dead set on buying, do you have a sizable down payment for your new property? While there are 100% financing options available for qualified borrowers, I’m not sure it’s in anyone’s best interests if you can’t save even a small down payment to purchase a home.
Why? Because unlike renting, there are more costs associated with home ownership than just the mortgage. Things in houses do break. Your home may eventually need major repairs — a broken air conditioning unit or a new roof can set you back $5,000 in a hurry.
That’s why I always recommend that home owners save up a couple of thousand dollars to have on hand in case something major breaks. After all, if you have a leak in your roof or a broken heater, those aren’t repairs that can be put off for very long without bigger consequences and (very often) more money. If a major repair is needed, it needs to be fixed relatively quickly.Repairs on a home can be costly. Factor them in when considering your new housing budget. Click To Tweet
If you can’t save for a small down payment or an emergency fund strictly used for home repairs, it’s probably a good idea to wait and rent for now. Make saving for both a priority in the meantime!
Are You Handy?
When you’re renting, all maintenance to the property and the yard is covered by your landlord. If you decide to purchase your own home, you won’t have a landlord to call at 3 am when your water heater bursts.
It’s always wise to have a little base knowledge in easy home repairs, such as knowing how to turn off the water to your house in case your water heater starts a flood.
Knowledge of simple repairs isn’t a requirement for home ownership, but it could save you a lot of trouble and money if you learn. The solution to many home repair tasks can be found by a simple Google search or YouTube video. It never hurts to have a little preparation in case something goes wrong.
What’s Best For You?
Buying a home is a huge commitment, and one that can’t easily be undone. It may not be permanent, but when deciding to rent or buy, buying should be considered a long term decision.
Unlike getting out of a lease or moving out of a rental, buying a home is not a decision that’s easily reversed if you change your mind down the road.
You’re the only person who knows what the best decision for you is. Everyone has different needs, and yours are what should determine if buying or renting is the best decision for you right now.
How did you make the decision between buying or renting? Do you regret buying a home, or were you sick of renting?