To Buy or To Rent???

That is the true question…

A lot of people struggle with determining whether they should continue to rent or they should bite the bullet and purchase a home obtaining their first mortgage. A lot of people are unaware of how to make this decision, and whether, it will impact them short-term versus long-term, well I’m here to tell you that no right or wrong answer is renting a home may be exactly what you need for your current situation. So, let’s take a look at when renting is favorable. 

Usually, if you travel a lot if you move a lot owning a home may not be the best idea for you renting provides that short-term commitment. Sometimes you can find months. Sometimes you can find six months. Sometimes you can rent a room. You have different options when it comes to renting your space for shelter, and a lot of time a financial decision. Say for instants you can only afford $800 a month for rent if you’re on a tight budget having your rent set in stone at least for the duration of your lease can help you financially better position yourself for your goals. 

There’s an argument that when you’re renting, you’re still paying a mortgage and partially that’s about 85% true however the other expenses that come with homeownership typically don’t fall on someone that is locked in a lease, now the risk of renting is that your rental agreement is at the discretion of your landlord and the governing bodies. 

There is typically a clause in your lease that allows the landlord to terminate it with a notice so an example of a time, when a landlord could terminate your lease is if he goes into foreclosure even then you can stay on the property but that doesn’t necessarily mean that the new owners are going to honor your lease as that’s not a typical sell of a subject property. If your landlord’s circumstances change and they may become homeless, so they need to move into their rental property. They could also argue that with a judge, which can ultimately win in their favor, and leave you having to find another place for you to reside. 

Then you have what we love to call the Market the Market in the laws helps determine rental amounts. So if your lease is up where you’re doing a month to month and your landlord decides hey, I want to go with the market rent and this is what I’m going to increase it to. You don’t have much of a negotiation at that point you either buy by the new lease in terms or you have to relocate from the premises because U2 cannot Agree. And on the flipside home ownership is important and as much as people say, creates to ask that it is an asset, but it also creates a liability. 

For starters, a lot of people do not own the home outright so you have a lien on your deed which is typically by the mortgage company, or whoever you’re financing with, which means you have to pay them in full before you can claim 100% free and clear ownership of your home the average mortgage is anywhere from 15 to 30 years that’s more than half of the life expectancy in the United States. On home isn’t bad though, because you have options, say for instance, if you can’t pay your mortgage there are programs and room for negotiation with your mortgage company that may allow you to go into forbearance for financial hardship. You may make smaller payments to make it in full you can sell your home and take some equity, or you can do a HELOC which just provides you the extra equity. It does increase your monthly payment, but it may help you financially get re-stable to move forward. The liability of homeowner’s expenses things breaking things, not working, natural disasters. It can be expensive if you don’t have the proper tools in place, so if you do not have insurance or warranties on your home, you will be left with that bill and that is something to consider when debating whether you should purchase a home rather than renting. 

Sometimes having a family may push you toward owning a home for the space for the yard for not being connected to a neighbor to be able to have pets on your own without really having to abide by someone else’s rules and regulations of how you occupy the premises. But then there are some instances where you have a homeowners association that regulates what happens on the outside of your home the color whether or not you could have certain plants whether not you can have a basketball hoop in your driveway for one life within a HOA known as a homeowners association that does regulate things like that and we do need permission to do add-ons to our home, and you can be fined and homeowners associations can put a lien on your home and force you into foreclosure 

Understanding the pros and cons of both renting and owning is very important before you make a financial commitment of 15 to 30 years of hundreds of thousands of dollars of debt for living. Just because something isn’t a good idea today doesn’t mean it might not be a good idea tomorrow and just because it’s a good idea today may not necessarily work for you down the line, setting the goal, setting the budget, and educating yourself on the pros and cons can help you put yourself and your family in a better predicament.

 Yes, I agree with the world that real estate creates wealth, generational wealth, and you can pass it along, but you also must understand that it could be a liability that she passes along as well. I can’t imagine leaving behind a half $1 million home to 17 or 16-year-old children who now must take over the mortgage or buy it out or sell the home that’s a lot of pressure so part of the responsibility of owning a home is also having documentation in place for when you are gone and what to do with your debts. That’s another conversation on another day with another writer. 

My thoughts you’re wondering. Do what works for you you’ll figure out what works for you by taking the time to do the research and taking the time to write down exactly what your goals are. Goals without a plan is just a dream so to put something into the place you need to take at least 30 to 45 minutes of your time and just jot down what it is that you’re looking for once you figure that out and you write out how to team that goal, you’ll figure out whether or not renting versus homeownership is the right path to choose.

Some questions I recommend asking yourself when you’re put in this position to make this type of decision are the following: 

a)    What is your financial health? 

b)    What is your financial budget for housing alone? 

c)    Do you have enough money saved for the closing cost and down payment of purchasing a home?

d)    Do you have enough money saved for the financial expense of owning a home? 

e)    Does your lifestyle suit a rental residency currently? 

f)      What are your short-term goals versus your long-term goals? 

g)    Lastly, how do you obtain any of your goals? What is it going to take? 

Starting with these couple of questions, may not give you all the answers, but I get you on the right path to figuring out exactly what you need to do. And if you’re ever in a situation where you don’t feel like you have enough information, always be wise enough to reach out to a resource go ahead and have that conversation with the loan officer and speak with a real estate agent some of them assist with helping you find rental housing. 

If you have a CPA reach out to your CPA. Let them know what you’re trying to do and see if they can offer any financial advice for you. W weigh your options, and everything will fall into place.